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Dr. Daniel Chandran, UTS 1
Knowledge based assets for competitive success
Session 1
Dr. Daniel ChandranFaculty of Engineering & Information Technology
University of Technology, SydneyAugust 2009
Dr. Daniel Chandran, UTS 2
Objectives
• What is Knowledge?• What is Knowledge Management?• Why Knowledge Management?• Why KM fails?• Business Strategy Map• KM Implementation Strategy
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Question - 1
• If you were asked to detail your specialist knowledge, how would you describe your knowledge?
• Have you ever thought of the market value of your knowledge and what this may be?
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Question - 2
Given that there is a competitive market for your knowledge and skills, how do you ensure that your knowledge is state-of-the-art and kept up to date?
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Data, Information and Knowledge - Distinction
• Data are the raw material of which Systems are built -a number, a word, an image, a picture
• Information is processed data (for a purpose) or value-added data– Aggregation of data that makes decision making easier
• Knowledge is understanding what the information means or implies– Refers to information that enables action and decisions
(Info with direction)– Key resource in determining competitive advantage and
marketplace success
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Knowledge TypesKnowledge Types
• Explicit Knowledge – Expressed into words and numbers – Can be shared formally and systematically. – Explicit knowledge is codified and digitized
• Eg.manuals,drawings, video tapes…• Tacit Knowledge – includes insight, intuition and hunches
– Difficult to express and formalize and difficult to share – Based on personal experience– Best communicated through dialogue and scenarios with use of
metaphors– Personal, hard to formalize and complex– Chunking knowledge – knowledge stored in an expert’s memory as
chunks• Characteristics of Knowledge
– Can be Born, Die, Owned and Stored
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Explicit and Tacit knowledge
Oral Communication“Tacit” Knowledge
50-95%
Information Request “Explicit” Knowledge
Explicit Knowledge Base5 %
Information Feedback
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Definition
From a practical business perspective: “KM is a deliberate, systematic business optimisation
strategy that selects, distills, stores, organises, packages and communicates information essential to the business of a company in a manner that improves employee performance and corporate competitiveness”.
Bergeron, B.2003
It is a systematic approach to managing intellectual assets for competitive advantage
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Knowledge Management: Benefits
People more productive
Quicker to prepare outcomes
Better quality outcomes
Reduced cost in producing outcomes
Revenue
People costs
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Overlapping factors of KM
PEOPLE(Workforce)
TECHNOLOGY(IT Infrastructure)
ORGANIZATIONALPROCESSES
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Knowledge Derivation
• Customer Knowledge – their needs, who to contact, customer buying power, etc
• Product Knowledge – products in the market place, who is buying them, what prices they are selling at etc
• Financial knowledge – capital resources, where to acquire capital and at what cost
• Personnel practices Knowledge – expertise available, the quality service they provide, how to go about finding experts etcIndicators of Knowledge: thinking actively and ahead; not
passively and behind
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THE KNOWLEDGE ORGANIZATION
KnowledgeOrganization
Collect
Organize
RefineDisseminate
Culture
Leadership
Techno-logy IntelligenceMaintain
Competition
KnowledgeManagementProcess
KM Drivers
Create
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KNOWLEDGE MANAGEMENT & INNOVATION
PEOPLE
KnowledgeBase
OutsideEnvironment
Existing methods/processes
Learning
Newideas
Conversion
Insights
KnowledgeCreation
OrganizationalBenefits
Codified Technology
• New products• New markets• Smarter problem-solving•Value-added innovation•Better quality customerservice
•More efficient processes•More experienced staff
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KM Life Cycle
Four-Process View of KM:• Capturing – data entry, scanning, voice input,
interviewing, brainstorming• Organizing – cataloging, indexing, filtering, linking,
codifying• Refining – Contextualising, collaborating,
compacting, Projecting, mining• Transferring – flow, sharing, alert, push
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Business Strategy drives KM
• Understand business strategy in order to develop KM strategy
• Balanced Scorecard Strategy Map– To align business activities to the vision and strategy of the
organisation– Monitor organisation performance against strategic goals– Originated by Kaplan and Norton, HBS
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Mission / Values/Vision/Strategy
• Mission – why we exist?– Starting point by defining why the organisation exists
• Values – what’s important to us?– Remains fairly stable over time
• Vision – what we want to be (mid to long term)?– Organisation’s direction and sets the organisation in motion
• Strategy – how do we get there? – Evolves over time to meet the changing conditions posed by
the external environment and internal capabilities– Strategy maps and Balanced Scorecards can be developed
for any strategic approach
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The Strategy MapFinancial Perspective
Customer Perspective
Internal Process Perspective
Learning & Growth Perspective
“If we succeed, how will we look to our shareholders?”
“To achieve our vision, how must we look to our customers?”
“To satisfy our customers, which processes must we excel at?”
“To achieve our vision, how must our organization learn and improve?”
Creates Value for the Enterprise
Knowledge Management
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Long-Term Shareholder value
Financial Perspective
ProductivityRevenue Growth
Customer Perspective
Price Quality Time FunctionPartnership Brand
Product/Service AttributesRelationship Image
Internal Process Perspective
Learning & Growth Perspective
Manage Innovation
Manage Operations
Manage Customers
Manage Regulatory & Social Processes
Human Capital
Information Capital
Organisation Capital
Business Strategy Map: cause and effect GAME PLAN
Financial Outcomes
Customer Outcomes
Value-Creating Processes
Intellectual Assets and Activities to create value
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Learning and Growth Perspective: Intangible Assets
Knowledge that exists in an organisation to create differential advantage or the capabilities of the company’s employees to satisfy customer needs.
Intangible Assets must be aligned with the strategy in order to create value.– E.g. TQM and CRM
• Human capital• Information capital• Organisation capital
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Internal Process Perspective
• Manage operations• Manage Customers• Manage Innovation• Manage regulatory & social Processes
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Customers Perspective
• Target segments– How the organisation will create differentiated, sustainable value to
targeted segments• Growth targets by segment (product mix & product performance
required)– Customer Retention – Customer Acquisition
• Revenues per customer (lifetime value/profitability) vs Cost per customer
• Customer value proposition: Define the conditions to create value for the customers: cost leadership? product leadership? Customer intimacy? – Product/service attribute
• Price, quality, availability, selection, functionality– Customer relationship / experience
• Service, partnership– Image / brand strength
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Financial Perspective
• Growth targets (overall & by customer, by product/service)– Selling more– Spending less– Revenue growth by deepening relationships with existing
customers• Banks – Home loans• Introducing new products e.g. Woolworths - Petrol
• Cost/productivity targets– Lowering direct and indirect expenses
• Spending less on people, energy and supplies • Utilising their financial and physical assets more efficiently
• To deliver the vision / outcomes desired
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5 Ps of Strategic KM
1. Planning• Defined knowledge needs• Systems and processes
2. People• Participants commitment• Sharing culture• Leadership values
3. Processes• Alignment of strategy, Principles, Processes and practices
4. Products• Capture• Distribution
5. Performance
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KM Implementation Strategy
• Why – Intent? (From Business Strategy)– E.g. Business ability to cross-sell product lines based on customer needs
• Who – knowledge worker?– E.g. Financial Advisor, Senior Manager etc
• What knowledge?– Customers– Products – Processes / systems– Business relationships– Competitors– Partners / suppliers– Regulations
• How – Infrastructure?– Formalized knowledge process (create, store, distribute, collaborate,
protect)– System Assets (Customer, Product Databases)– Training & informal best-practice knowledge sharing– Certification institutions
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Successful Knowledge Management…when
• Strategy aligned with the Business Strategy• Supported people in their work and activities to create
value• Inculcated as a business discipline (corporate culture)
supporting critical business processes• Used to improve the business processes• Measured against the strategic objectives
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Conclusion - Business Challenges
• Optimize the performance of operational processes to reduce costs and enhance quality
• Commercialize the products at the lowest price possible
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References
• Awad, E.M. and Ghaziri, H.M. (2004). Knowledge Management. Pearson.
• Becerra-Fernandez, I, Gonzales,A and Sabherwal, R. (2004). Knowledge Management: Challenges, solutions and technologies. Pearson.
• Davenport, T.H. and Probst, G.J.B.(2002). Knowledge Management Casebook. John Wiley.
• Debowski, S.(2006). Knowledge Management. Wiley.• Kaplan, R.S. and Norton, D.P. (2004). Strategy Maps: Converting
intangible assets into tangible outcomes. Harvard Business School Press.
• Nonaka, I. And Takeuchi, H(1995). The Knowledge Creating Company. OUP.
• Thompson and Strickland. 2010. Crafting and executing strategy. McGraw-Hill.
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Knowledge Exercise
• 5 groups to present on the following scenario:“Suppose you were asked to do a 15-minute
presentation before the managers of a small retailer about the pros and cons of KM. What would you say? Outline the content of your talk.”