19
Knowledge Sharing vs. Knowledge Partitioning By Mr S. Phull 20 th April 2001 © 2001 Mr Satwant Phull

Knowledge Sharing vs. Knowledge Partitioning

  • Upload
    sspbstl

  • View
    138

  • Download
    4

Embed Size (px)

DESCRIPTION

This is an assignment I wrote at university in 2001 for my undergraduate degree which received top marks from my lecturer. Having used various knowledge management systems in my career over the last 10 years, I believe that most companies (I've worked for many large American IT companies) do not have any idea how to best manage their information and capitalise on it. Most knowledge is still shared on network drives and folders!

Citation preview

Page 1: Knowledge Sharing vs. Knowledge Partitioning

Knowledge Sharing vs. Knowledge Partitioning

By Mr S. Phull

20th

April 2001

© 2001 Mr Satwant Phull

Page 2: Knowledge Sharing vs. Knowledge Partitioning

Over the last two decades, the availability of data and information has increased considerably due to the

availability of computers. As a result, consumers have become more sophisticated and companies have

had to constantly improve the quality of their goods and services in order to meet those demands.

However, the levels of differentiation between goods and services has been reduced to such an extent that

firms have had to look to other ways of sustaining competitive advantage and increasing profitability.

One of the avenues that organisations are pursuing is that of knowledge management. Information i.e.

the mere accumulation of data by itself is rather meaningless unless it can be collected, structured,

organised and made available as knowledge. Knowledge sharing has recently been widely adopted

because it is seen as highly synergistic and difficult to imitate. However, there is also an argument for

partitioning knowledge because knowledge sharing is seen as a way of reducing or eliminating

competitive advantage.

In this paper, the author will critically assess the arguments that exist around this strategic tension. In

order to do this the author will firstly define what knowledge and knowledge management is and explain

why they are important. Secondly, the author will discuss the various advantages and disadvantages of

knowledge sharing and partitioning. Thirdly, the author will discuss the key issues and questions

surrounding knowledge sharing. To conclude, the author will explain why knowledge sharing will be the

more dominant form of knowledge management strategy in the future.

Knowledge has various definitions. According to Nonaka & Takeuchi

(1996) it is “justified true belief”. According to Davenport & Prusak

(1998) 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”.

There are two main Ways that knowledge can be classified:

1) Tacit — This is knowledge that cannot be articulated, “it is

embedded in organisational routines, so that no one person understands completely” (Nelson & Winter,

1982). Therefore, it is often learnt through practice.

2) Explicit — This is knowledge that can be articulated quite easily and captured in an organisational

memory e.g. intranet.

INTRODUCTION

WHAT IS KNOWLEDGE?

Page 3: Knowledge Sharing vs. Knowledge Partitioning

Knowledge management is still a relatively young field, with new concepts emerging constantly.

According to Donoghue, Harris & Weitzman (1999) “Knowledge management is complex and

multifaceted; it encompasses everything the organization does to make knowledge available to the

business, such as embedding key information in systems and processes, applying incentives to motivate

employees and forging alliances to infuse the business with new knowledge”.

Knowledge flows differently within organisations and this flow is influenced by an organisation’s

knowledge generation, sharing and learning characteristics.

Knowledge is a current area of concentration for large organisations due to several reasons:

1. It is a response to failure in implementation of strategy.

2. It is a response to difficulties in managing situations of high uncertainty, risk and complexity.

3. The inadequacy of approaches based on traditional Management Information Systems.

4. Knowledge is one of the few remaining sources of sustainable competitive advantage in today’s

highly competitive business environment.

There are many underlying drivers for knowledge management. Knowledge can enable an organisation

to catch-up or leapfrog its competitors. Knowledge based strategies are an excellent alternative to

traditional market-based strategies which a) firms often rely upon, b) frequently fail and c) can be copied

by most competitors and therefore do not offer sustained competitive advantage. Effective knowledge

management can also speed the transfer of information into the public domain.

There are also drivers related to an organisation’s external environment. Knowledge management

improves an organisation’s ability to predict where the market may be heading and what customers may

want. It also enables an organisation to identify patterns of information flow. This is an advantage where

the superior flow of information in one division can be transferred to another division that is less

profitable or competitive, for example.

Knowledge sharing is a form of synergy and therefore it should contribute towards the greater good of an

organisation. It is argued that by sharing knowledge, companies should increase their innovative

capacity, efficiency and profitability. It is also argued that knowledge sharing is mainly about building

WHAT IS KNOWLEDGE MANAGEMENT?

WHY IS KNOWLEDGE MANAGEMENT IMPORTANT?

KNOWLEDGE SHARING

Page 4: Knowledge Sharing vs. Knowledge Partitioning

core competencies. Core competencies - “those capabilities fundamental to a firm’s performance and

strategy” (Hamel & Prahalad, 1990), are extremely difficult to replicate, especially in the short-term.

Competencies are likely to be heterogeneous, immobile and difficult to imitate. As knowledge possesses

these three attributes, it is easy to see why core competencies are associated with knowledge. Therefore,

knowledge sharing should help a firm to sustain its competitive advantage. There is now more emphasis

on competencies rather than industry structure. “Knowledge has become the key economic resource and

the dominant - perhaps even the only source of competitive advantage” (Drucker, 1990). A firm’s

relative capability differences can be built from knowledge resources such as tacit knowledge and

organisational routines. According to Spender’s Taxonomy1, tacit organisational knowledge is the most

important type of knowledge to companies and strategists because it is the most difficult to share and it

significantly contributes towards sustained competitive advantage. Knowledge sharing is also about

Generalists not Specialists. Generalists are employees within a firm that take part in cross-functional

teams and often have different roles and tasks to perform. Therefore, knowledge sharing is much easier

for them.

Knowledge is heterogeneous i.e. it occurs differently in different organisations. This creates uniqueness

and differentiation from competitors. Sharing heterogeneous

knowledge enables firms to sustain their competitive advantage.

BMW bought Rover in 1994 in order to acquire knowledge from

its Land-Rover and Range-Rover division so that it could

develop its own 4x4 vehicle. BMW knew that it would be

cheaper2 to buy the knowledge and transfer it to its own

engineers in Germany. Subsequently, the BMW X5 was

developed in record time.

Knowledge is imperfectly imitable (Dierickx and Cool, 1989). Employees are often

worried that sharing knowledge with others may harm the firm because competitors

may uncover that knowledge. However, those fears are usually

unfounded because it is very difficult for a competitor to imitate the

benefits of that knowledge. To bring miniaturisation to its products,

Sony ensures that its technologists, engineers and marketers have a

shared understanding of technological possibilities and customer

needs. Sony’s knowledge in rniniaturisation simply cannot be

replicated overnight by a competitor; it is non-transferable (Dierickx

and Cool). A rival may acquire some of the technologies used to manufacture products like Sony's range

1 See Appendix 1 for Spender’s Taxonomy 2 BMW did not envisage the subsequent problems with the Rover Group at the time of the acquisition.

Page 5: Knowledge Sharing vs. Knowledge Partitioning

of portable Minidisc players, for example, but will find it more difficult to duplicate the more or less

comprehensive pattern of internal learning, co-ordination and all of the knowledge on miniaturisation that

Sony’s highly skilled engineers and technologists possess. In addition, knowledge and other intellectual

property associated with products such as Sony’s are highly protected by patents and copyrights. So even

if a competitor uncovers knowledge, it must pay for that knowledge through licensing/royalties etc. Sony

leverages its knowledge to sustain competitive advantage and increase profitability.

Banks are another industry which profit immensely from knowledge sharing. If a bank enhances its

knowhow in evaluating credit risk, it should result in reduced loan losses.

Knowledge partitioning is about specialisation. It is often associated with restricting, withholding and

protecting knowledge. It mainly occurs where expertise needs to be protected. Knowledge is often held

by employees that have trained for years and dedicated their lives to specialise in their field (e.g.

physicists, engineers and technologists).

As access to information has increased significantly over the years,

knowledge partitioning (or protection) has become a critical issue.

Knowledge partitioning is mainly used by firms when the need for secrecy is paramount and fundamental

to sustaining competitive advantage. Knowledge partitioning mainly occurs in R&D departments within

organisations. But knowledge partitioning is also essential for

certain industries, such as Aerospace & Defence. An example is

that of the development of the F-117 Stealth Fighter by

Lockheed Martin. Ben Rich (formerly head of the ‘Skunk

Works’ Black Projects division of Lockheed Martin) gives an

insight in his book ‘Skunk Works’ into the knowledge

partitioning that took place while the Stealth Fighter was being

developed under his leadership. Firstly, the main concern was

for secrecy “For security, all those working on the airplane were jammed together in one comer of the

building” (Janos & Rich, 1994). These aircraft design engineers were not allowed to talk to other design

engineers within the company. This meant that their expertise could not benefit the development of other

Lockheed aircraft while the F-117 was being developed. Other employees who were involved in the

manufacturing of parts for the aircraft were put into ‘ice boxes’ i.e. they worked in remote buildings far

from the main action, assembling innocuous parts. Lockheed was deliberately creating big problems in

terms of efficiency and logistics, “I had no choice, I had to tuck away workers so that they could not

KNOWLEDGE PARTITIONING

Page 6: Knowledge Sharing vs. Knowledge Partitioning

guess what they were really working on” (Rich, 1994). The admission that efficiency was reduced as a

result of knowledge partitioning proves that ultimately, knowledge sharing is synergistic and beneficial.

Knowledge partitioning can be used to gain geographical and product mobility advantages. If a firm is

successful in expanding into a new country or market, for example, it is vital to protect that knowledge

from competitors that have not entered. Not only does this reinforce first-mover advantage, but it allows

a firm to introduce new products more quickly and easily.

Knowledge partitioning creates many problems for organisations. The biggest problem lies in retaining

knowledge workers. When individuals who possess tacit knowledge3 leave a company, they take all of

their knowledge with them and this is often disastrous because it is not documented anywhere. This

knowledge can be priceless to a competitor and may potentially destroy the original competitive

advantage. Although this is an extreme situation, it can easily happen if an employee is disgruntled for

some reason. Employee revenge is now easier and more effective thanks to internet.

Knowledge partitioning can also occur against a company’s wishes. Over the last two decades, job

insecurity has risen considerably. As a result, employees have resorted to withholding knowledge from

colleagues in order to enhance their promotion prospects and/or reduce the odds of being made redundant

by trying to increase their knowledge superiority. However, this kind of activity reduces a firrn’s

performance and would also magnify difficulties faced by a firm during a serious economic downturn or

recession. Besides, withholding knowledge is probably more likely to get an employee fired.

Levels of co-operation between companies through joint ventures, alliances and

outsourcing have increased considerably over the last few decades and this has

necessitated the sharing of knowledge between partners. However, this has also meant

that firms’ boundaries have increasingly become blurred in these types of ventures.

Therefore, these firms have had to protect certain knowledge from leaking to the other

party as they are often a competitor as well as a partner. An example is the relationship

between Hewlett-Packard and Intel. These two companies formed a joint venture to design the new 64-

bit Intel Itanium processor because both companies had vital knowledge on advanced semi-conductor

design. However, both companies also compete head-to head in the corporate server market4 and neither

company could afford to leak knowledge in this area to the other.

3 The “Automatic” box in Spender’s Taxonomy represents individuals that possess tacit knowledge.

4 In addition to other markets. The corporate server market is simply one of the biggest markets they both compete

in.

USING KNOWLEDGE SHARING AND KNOWLEDGE PARTITIONING SIMULTANEOUSLY

Page 7: Knowledge Sharing vs. Knowledge Partitioning

Locating and Valuing Knowledge Assets

According to Davenport and Prusak (1998), knowledge “originates and is applied in the minds of

knowers. In organisations, it becomes embedded not only in documents and repositories but also in

organisational routines, processes, practices and norms”.

Companies can perform intellectual capital audits, but in most organisations there is often reluctance to

adequately resource investigation into intangible assets that require careful auditing and monitoring.

Protecting Knowledge Assets

As mentioned earlier, knowledge assets are protected by:

• Property rights (patents, IP)

• Embedded routines

• Retaining knowledge workers

Leveraging Knowledge Assets to Achieve Sustainable Competitive Advantage

It is all very well having knowledge, but it can become trapped within ‘knowledge silos’ especially

within firms that have many divisions.

Organisational Rigidity

Companies must change over time, or their core capabilities may become core rigidities that lead to

obsolescence. As companies strive to move in new directions, knowledge-management systems will

need to change as new capabilities will be required.

The Internet. Intranets and Extranets

Knowledge can ultimately be derived from data and information. However, “radical changes in the

business environment have suggested limitations of the traditional information-processing view of

knowledge management” (Malhotra, 2000).

The internet has enabled knowledge sharing to become much easier, quicker and cheaper. Many firms

now use the internet for knowledge sharing (in addition to e-commerce) and it is considered to be such an

important resource that companies have taken the technology one step further and have developed and

deployed intranets and extranets which will now be discussed.

Intranets allow people within a firm to access corporate information through a web browser. The

difference between the internet and an intranet is that only people within the company can access

KEY ISSUES IN KNOWLEDGE SHARING

Page 8: Knowledge Sharing vs. Knowledge Partitioning

information through an intranet5. The

standards as the internet and so it is very easy to publish

intranet. Firms are now able to ensure

that they may need such as legal, health &

cost effective to give every employee this amount of

looked at. Training is also commonplace

tests. This provides HR and employees with instant

knowledge, competencies and methods of good practice

of those messages becoming distorted as they used to in the

misinterpreted or altered as they were fed down the hierarchy.

all forms of knowledge are shared within or

has been reduced by many orders of m

An Extranet is a business-to-business intranet that allows limited, controlled, secure access

company‘s intranet and designated, authenticat

benefit for organisations that have fo

to each other’s sensitive data about what

time they need to protect the rest of

sophisticated extranets on the Itanium project.

on chip design, specifications and software compatibility.

The Ford Supplier Network (FSN) extranet is part of

effort to reduce cycle time and inventory requirements

information about business processes with supplie

consumers. “Our suppliers were telling us that

streams of information coming at them that they needed to have tied together in some

said Ford CIO Bud Mathaisel (lnternetweek Online, 1999).

(discussed later), FSN is in the ‘Combination’ box

Such is the importance of intranets/extran

(appendix 2) have been formed who will design a complete knowledge

that simply do not have the time or the expertise to do

rising importance of sharing knowledge. A

Lucent Technologies and BAE Systems. How

companies like Autonomy fail to combine and integrate basic human

knowledge management systems because they are purely focused on

5 This restricted access is achieved through the use of

. The advantage of an intranet is that it is based on exactly the same

it is very easy to publish, maintain and update materia

Firms are now able to ensure that their entire workforce have access to all of the inform

that they may need such as legal, health & safety and pensions etc... Before intranets, it was simply not

cost effective to give every employee this amount of information in print because it would hardly ever be

so commonplace on intranets through on-line learning materials, assessments and

tests. This provides HR and employees with instant feedback. Intranets allow corporations to ensure that

knowledge, competencies and methods of good practice can be shared with all employees

of those messages becoming distorted as they used to in the past when communications were

ey were fed down the hierarchy. Intranets have revolutionised the way that

re shared within organisations. This is because the cost of knowledge sharing

been reduced by many orders of magnitude and secondly the efficiency of firms has

business intranet that allows limited, controlled, secure access

company‘s intranet and designated, authenticated users from remote locations. Extranets are a huge

that have formed alliances with each other. Such firms obviously require access

sensitive data about whatever product/service they may be working on, yet at the same

protect the rest of their confidential information. Intel and HP have been using

Itanium project. Their extranets are essential for exchanging in

ns and software compatibility.

The Ford Supplier Network (FSN) extranet is part of Ford’s ongoing

ime and inventory requirements by sharing

about business processes with suppliers, dealers and even

“Our suppliers were telling us that there were so many

streams of information coming at them that they needed to have tied together in some

Bud Mathaisel (lnternetweek Online, 1999). According to Nonaka and

FSN is in the ‘Combination’ box i.e. explicit→explicit knowledge sharing.

Such is the importance of intranets/extranets/internet that specialist companies such

(appendix 2) have been formed who will design a complete knowledge management

that simply do not have the time or the expertise to do so. Firms like Autonomy only exist because of the

rising importance of sharing knowledge. Autonorny’s clients include Merrill Lynch, General Motors,

t Technologies and BAE Systems. However, some argue that even knowledge

like Autonomy fail to combine and integrate basic human interaction and contact into their

ge management systems because they are purely focused on technology. “Effective

ved through the use of firewalls and secure computer networks.

n intranet is that it is based on exactly the same

update material that is put onto an

orkforce have access to all of the information

Before intranets, it was simply not

information in print because it would hardly ever be

line learning materials, assessments and

Intranets allow corporations to ensure that

can be shared with all employees with no danger

past when communications were

revolutionised the way that

of knowledge sharing

has increased.

business intranet that allows limited, controlled, secure access between a

Extranets are a huge

firms obviously require access

ever product/service they may be working on, yet at the same

Intel and HP have been using

Their extranets are essential for exchanging information

streams of information coming at them that they needed to have tied together in some productive way”

to Nonaka and Takeuchi’s model

sharing.

that specialist companies such as Autonomy

management solution for firms

Firms like Autonomy only exist because of the

Merrill Lynch, General Motors,

argue that even knowledge management

interaction and contact into their

“Effective knowledge

networks.

Page 9: Knowledge Sharing vs. Knowledge Partitioning

sharing requires a combination of many organizational elements - technology, human resource practices,

organisational structure and culture - in order to ensure that the right knowledge is brought to bear at

the right time” (Donoghue et al).

Effective knowledge sharing

Although knowledge sharing is important, it presents many problems for organisations. An indirect

result of knowledge sharing is that knowledge becomes commoditised more quickly. Therefore, the way

in which different types of knowledge is created and shared is an important consideration because it can

have many implications. These problems shall now be discussed by using the ‘Four Modes of

Knowledge Conversion’ model6 (Nonaka & Takeuehi, 1995) and in general.

Externalisation (Tacit→Explicit)

Nonaka & Takeuchi believe that tacit knowledge can be converted into explicit knowledge. Although

this seems illogical, let’s assume that it is possible. Once this type of knowledge is in explicit form, it can

no longer be a source of sustained competitive advantage. On the other hand, if this knowledge cannot be

converted into explicit knowledge then it is not possible to share this knowledge on a large scale.

Socialisation (Tacit→Tacit)

Sharing tacit knowledge with others usually occurs when people become socialised within an

organisation e. g. when employees join a company they will learn many things from colleagues. A firm’s

culture is a major influence in this learning process. However, only a limited amount of tacit knowledge

that can be shared in this way because the interactions between employees within an organisation will be

limited the departments/divisions in which those employees work. Therefore it is not possible to share

tacit knowledge on a mass scale.

Technology

Intranets can be a complete waste of money if a firm’s knowledge sharing strategy is wrong. Many

companies have implemented sophisticated intranets, common repositories and other systems, largely

ignoring the complex cultural issues that influence the way people behave around knowledge. “By and

large, those companies have seen little improvement in their ability to manage knowledge. Too often,

companies implement state-of-the-art technology and then discover that culture and behaviour are slow

to change” (Donoghue et al).

6 See appendix 3

Page 10: Knowledge Sharing vs. Knowledge Partitioning

Although there are many benefits to sharing knowledge, the fundamental thing that firms need to do

before they formulate knowledge-management strategy is to assess how knowledge-intensive their

industry is. Knowledge sharing is hugely beneficial to firms such as Microsofl, Sony, HP and Intel where

knowledge and intellectual property are paramount to their success. Employees within these firms

discuss the projects they are working on and solutions to problems they have encountered etc... Once this

knowledge is shared, it can be used to improve innovation, efficiency and productivity within the firm.

However, knowledge sharing would not benefit firms within the water industry as much, for example7.

There is only one type of water and new product development is non-existent. Even if all employees

within a water company knew everything there is to know about water it would make very little

difference to corporate performance and profits. Therefore, prioritising knowledge sharing within

industries such as this would be pointless as no competitive advantage would result from doing so.

Donoghue et al have devised a Knowledge Management Framework that helps firms to devise effective

knowledge sharing strategies. Their first grid (appendix 4) shows that it is the nature of the work that

determines the appropriate knowledge-rnanagement approach. Their second grid (appendix 5) shows the

appropriate knowledge managernent strategies that are required for the different types of work. The latter

grid shows that the ‘Collaboration model’ is where knowledge sharing is most critical and the ‘Expert

model’ is where ‘Capability Protection’ (effectively knowledge partitioning) is required. Appendix 6

shows the challenges faced in each model.

Successful knowledge sharing also depends on the problem solving culture of the organisation and its

employees. According to Dorothy L. Barton, organisations that regularly face and solve problems are

good at knowledge creating and diffusing activities (see appendix 7).

Other important points for firms to consider are how threatened they are by the erosion of differentiation,

competences and competitive advantage in advance of industry commoditisation. Intel is a company that

is facing such challenges. In the silicon-chip industry, the design of new microchip manufacturing

processes has always been considered something of an art - a collaborative model type of effort involving

a small group of experts, extensive experimentation and rapid learning to get it right. Now, however,

most PCs sell for less than $1,000 and therefore chip makers need to move to lower-cost approaches and

to an integration model of knowledge management, where the focus is on standardisation, repeatable

work and continuous improvement.

7 That is not to say that there is absolutely no knowledge sharing within water firms.

QUESTIONS SURROUNDING KNOWLEDGE SHARING

Page 11: Knowledge Sharing vs. Knowledge Partitioning

Senior Wall Street Analysts have also commented in the past year that microprocessors are on the verge

of becoming a commodity as volumes are so high (thanks mainly to the success of Intel’s rivals AMD

and VIA).

There is no one-size-fits-all way to effectively tap a firm’s intellectual capital. To create value,

companies must focus on how knowledge is used to build critical capabilities. Knowledge management

is “based on the premise that the focus should be placed on the way knowledge is used to build the

critical capabilities a company needs in order to succeed - on the core processes and activities that

enable it to compete” (Donoghue et al, 1999). As a result of the ‘Information Age’ in which we live,

there is no question that knowledge sharing will become critical in future in order to sustain competitive

advantage and increase efficiency and profitability. Knowledge partitioning will increasingly be limited

to the protection of core competencies and where technological secrecy is paramount in protecting a

company’s competitive advantage. In the future, a firm’s ability to change its knowledge sharing strategy

will be critical to its success “evolutionary ability will become increasingly important in the coming

years, as the demands of new markets and new competitors drive continuing shifts in corporate

strategies. To support those strategies, companies will have to build new capabilities more and more

rapidly – and so the ability to manage and share knowledge to support that change will be critical”

(Donoghue et al, 1999).

CONCLUSION

Page 12: Knowledge Sharing vs. Knowledge Partitioning

Grant, R.M Contemporary Strategy Analysis: (Blackwell Business, 3“ edition, 1998) Joachim, David (1999) Ford Rebuilds Extranet As Supplier Portal, InternetWeek URL: http://business.highbeam.com/138350/article-1G1-54650607/ford-rebuilds-extranet-supplier-portal Johnson, G & Scholes, K (1999) Exploring Corporate Strategy, Prentice Hall Europe Leigh P. Donoghue, Jeanne G. Harris and Bruce E. Weitzman (1999) KnowIedge management strategies that create value, Accenture URL: http://www.accenture.gr/SiteCollectionDocuments/PDF/knowledge2.pdf Malhotra, Yogesh (2000) Knowledge Management and New Organisation Forms: A Framework for

Business Model Innovation, Idea group Publishing Mintzberg, H. et al, The Strategy Process (Revised European Edition): (Prentice Hall, 1998) Nonaka, I & Takeuchi, H (1995), The Knowledge Creating Company, Oxford University Press Rich & Janos (1994) Skunk Works, Warner Books Ryan, Jerry (2000) The Strategic Benefits of Knowledge Management URL: www.techguide.com/ent/sec/benekm.pdf

BIBLIOGRAPHY

Page 13: Knowledge Sharing vs. Knowledge Partitioning

Appendix 1

Spender’s Taxonomy

Individual Organisational Explicit Tacit

Conscious

Scientific

Automatic

Communal

Page 14: Knowledge Sharing vs. Knowledge Partitioning

Appendix 2

Autonomy Autonomy Corporation develops and produces software, focusing on desktop solutions, data search applications, knowledge management and media server products, which are based on its own Dynamic Reasoning Engine (DRE) technology. The company has its main operations in the UK and USA. Competitors Autonomy operates within the pre-packaged software sector. It has 3 main competitors in the UK:

1. Macro 4 Plc 2. Eyretel Plc 3. Northgate Information Solutions

Sales Sales increased substantially in 2000 and they totalled £98.9m. This is an increase of 499% versus 1999, when the company’s sales were £16.5m. This was the 4th straight year of sales growth at Autonomy. The company’s sales increased faster in 2000 than at all three comparable companies. The company currently employs 93 people which means that sales per employee totalled a staggering £1,068,760 in 2000. Profitability In 2000, earnings before extraordinary items were £22m, or 22% of sales. The profit margin is an improvement over 1999, when the profit margin was -6.8% of sales. The company’s return on equity in 2000 was 102.6%. This was significantly better than the -5.1% return the company achieved in 1999. SWOT Analysis

Strengths

• Knowledge Management software is critical for firms wishing to increase their competitive advantage

• Pre-packaged software (rather than bespoke) means there is a huge market for products

• Market leader in the UK

• One of the few tech companies that has actually made a profit

Weaknesses

• Volatile share price

• Risk profile

• Highly capital intensive

Opportunities

• Expansion into Europe

• Expansion into Asia

• Online software sales to reduce costs and improve efficiency

Threats

• Continued slowdown in the tech sector

• Slowdown in the global economy

• Companies may delay investment into knowledge management systems in an economic slowdown

• Serious competition from Indian software firms who are entering the knowledge management software sector

Page 15: Knowledge Sharing vs. Knowledge Partitioning

Appendix 3

Knowledge Creating Process – The For Modes of Knowledge Creation

To

Tacit knowledge Explicit knowledge

Tacit knowledge From Explicit knowledge

Socialisation (sympathised knowledge)

Externalisation (conceptual knowledge)

Internalisation (operational knowledge)

Combination (systematic knowledge)

Page 16: Knowledge Sharing vs. Knowledge Partitioning

Appendix 4

Each model presents its own distinct set of knowledge-management challenges:

• Transaction model, in which there is a low degree of both interdependence and complexity. Work is

typically routine, highly reliant on formal rules, procedures and training, and depends on a workforce

that exercises little discretion.

• Integration model, in which there is a high degree of interdependence and a low degree of

complexity. Work is systematic and repeatable, relies on formal processes, methodologies and

standards, and depends on tight integration across functional boundaries.

• Expert model, in which there is low interdependence and high complexity. Work requires judgment

and is dependent on "star performers".

• Collaboration model, in which there is a high degree of both interdependence and complexity.

Work involves improvisation and learning by doing, and relies on deep expertise across functions and

the use of flexible teams.

Page 17: Knowledge Sharing vs. Knowledge Partitioning

Appendix 5

Page 18: Knowledge Sharing vs. Knowledge Partitioning

Appendix 6

Page 19: Knowledge Sharing vs. Knowledge Partitioning

Appendix 7

Knowledge Creating and Diffusing Activities

D. Leonard-Barton

Core

Capabilities

Problem

Solving

Implementing

and

Integrating

Experimenting

Importing

Knowledge