31 Knowledge Management and Strategy

1.      Learning Outcome

2.      Introduction

3.      Concept of Knowledge

4.      Types of Knowledge

5.      Knowledge management

6.      Knowledge management and Strategy

7.      Aligning the Knowledge Drivers and Business Strategy

8.      Summary

1.    Learning Outcome:

After completing this module the students will be able to understand:

•  Changes in the environment leading to the concept of Knowledge economy
• Concept and relevance of knowledge
• Types of Knowledge
• Concept and process of knowledge management
• Interdependency of knowledge and business strategy
• Aligning the knowledge driver with business strategy

2.  Introduction:

Radical technological advancements, continuous changes in the customers’ preferences & tastes, demand, and global competition have made the modern business environment very complex and dynamic. The nature of business has changed. There is a shift from industrial economy, where main focus was on commercial products, to knowledge economy, where service and expertise are the main measures for performance of a business (Figure-1).

Knowledge   economy    has    changed     the overall business experience. As organizations develop quickly, information technology and information capital are playing key role in the success of any organization. Knowledge management has become an important aspect of performance as knowledge is one of the strategic issues for strengthening the competitive position of a company. Since it is important for individuals, organizations and economy as a whole, therefore understanding and managing the concerns related to effective management of knowledge and its impact on business strategy, has become crucial.

3. Knowledge:

Knowledge is very important aspect of performance of an organization today. It is important to note that many experts underline the need to focus on knowledge as a basic resource. Increasing number of companies has started realizing that knowledge is the key asset and have started managing this asset to achieve optimum business results.

The term knowledge is used by all of us in our day to day life. Sometimes we use this term for know-how or wisdom also. For a layman there may not be any difference in the terms data, information and knowledge, but actually these are different. Knowledge is a refined form of data and information (Figure-2). Data is the rawest stage, an unstructured collection of facts and figures, whereas information is the next level, and is regarded as structured data. The Longman online dictionary defines the knowledge as the information, skills, and understanding that someone has gained through learning or experience

Data: Facts and figures which relay something specific, but which are not organized in any way and provide no further information regarding patterns, context, etc. These are unstructured facts and figures that have the least impact on the decision making.

Information: For data to become information, it must be contextualized, categorized, calculated and condensed. It is a processed form of data and is clear, crisp and simple. It presents a bigger & clear picture and has some relevance and purpose. It may convey a trend in the environment, or indicate a pattern of sales for a given period of time. Information technology is usually invaluable in the capacity of turning data into information, particularly in larger firms that generate large amounts of data across multiple departments and functions. The human brain is mainly needed to assist in contextualization.

Knowledge: Knowledge is actionable information and is closely linked to doing. It helps in making predictions, determining associations and making decisions. The knowledge possessed by any individual is a product of his experience, and encompasses the norms by which he evaluates new inputs from his surroundings. It is hard to communicate and difficult to express in words. It often emerges in the minds of people through experience.

Davenport defines the knowledge as a fluid mix of framed experience, values, contextual information, insight, and intuition that provides an environment and framework for evaluating and incorporating new experiences and information. It originates and is applied in the mind of the knowers. In organizations it often becomes embedded not only in documents or repositories, but also in organizational routines, practices and norms. Knowledge is represented by all the attributes of human capital of a company like competences, expertise, market experience, know-how etc. Knowledge management’s role is to help companies to turn this human capital into intellectual capital by creating value.

4. Types of Knowledge:

From the business point of view, knowledge can be broadly classified on the basis of (a) Type (b) Focus (c) Complexity, and (d) Perishability (Figure-3).

Basis of Classification	Types of Knowledge
Type of Knowledge	Technological    Knowledge,    Market    Knowledge,
	Environmental Knowledge
Focus of Knowledge	Operational Knowledge, Strategic Knowledge
Complexity of Knowledge	Explicit Knowledge and Tacit knowledge
Perishability of Knowledge	Low Perishability, High Perishability
	(Figure-3)

In reference to knowledge management usually two types of knowledge are defined, namely explicit knowledge and tacit knowledge. In practice, knowledge resources of an organization are blend of explicit and tacit knowledge rather being one or the other. Both these types of knowledge are theoretically opposite of each other (Figure-4).

Explicit Knowledge: It is that component of knowledge resources of an organization which can be converted into tangible form. It can be converted into systematic & formal language and can easily be translated and shared with anyone in the organization. It is found in form of documents, plans, projects, manuals, specifications, memos, notes, databases, and patents etc. This type of knowledge is easy to collect, store and share through information technology. An organization, which can quickly transfer the knowledge throughout organization, creates competitive advantage over its rivalry.

Tacit Knowledge: It is intangible kind of knowledge which is personal in nature, context specific and difficult to translate or record. It is in the minds of the employees and includes their experiences, skills, intuitions, learnings from mistakes, abilities, ideas, values, visions, and beliefs etc. Therefore it is difficult to express, record and transfer such type of knowledge in the organization (Figure-5). It is hard to manage, store or share even with the help of information technology.

5. Knowledge Management:

The knowledge management has emerged as important field of management. It encompasses identifying and mapping intellectual assets within the organization, generating new knowledge for competitive advantage, making vast amount of information accessible in the organization, and sharing best practices.

Knowledge management is the process of capturing, distributing, and effectively using knowledge. It is a discipline that promotes an integrated approach to identifying, capturing, evaluating, retrieving, and sharing all of an enterprise’s knowledge resources (Figure-6).These resources may be in form of databases,documents, policies, procedures, and previously un-captured expertise and experience in individual workers. Perhaps the most central thrust in knowledge management is to capture the knowledge and make it available throughout theorganization so that it can be used by other also. Knowledge at many organizations with data warehousing, groupware information systems, systematic document management, imaging systems, and data mining techniques to understand and leverage the knowledge life cycle to help produce sustainable innovation to enhance knowledge production but not only knowledge integration.

It is all about getting the right knowledge to the right person at the right time. This in itself may not seem so complex, but it implies a strong tie to corporate strategy,understanding of where and in what forms knowledge exists,creating processes that span organizational functions, and ensuring that initiatives are accepted and supported by organizational members. Peter Drucker states that knowledge management is the co-ordination and exploitation of knowledge resources of a particular organization in order to create benefit and competitive advantage. It may also include new knowledge creation, or it may solely focus on knowledge sharing, storage and refinement. The overall objective is to create value and to leverage, improve, and
Figure-7

Knowledge management is the systematic management of an organization’s knowledge resources for the purpose of creating value and meeting tactical & strategic requirements. It consists of the initiatives, processes, strategies, and systems that sustain and enhance the creation, refinement, storage, assessment, sharing, and application of knowledge (Figure-8).

Knowledge management has several dimensions including (Figure-9):

Knowledge Strategy: Knowledge strategy must be dependent on corporate strategy. The objective is to manage, share, and create relevant knowledge assets that will help meet tactical and strategic requirements.

Organizational Culture: The organizational culture influences the way people interact, the context within which knowledge is created, the resistance they will have towards certain changes, and ultimately the way they share (or the way they do not share) knowledge.

Organizational Processes: The right processes, environments, and systems that enable knowledge management to be implemented in the organization.

Leadership: Knowledge management requires competent and experienced leadership at all levels. There are a wide variety of related roles that an organization may or may not need to implement, including a chief knowledge officer, knowledge managers, knowledge directors etc.

Technological Platform: The systems, tools, and technologies to be used for storing and sharing the knowledge, which are fit to the organization’s requirements, are properly designed and implemented.

Knowledge management must provide the right tools, people, structures, teams, and culture, so as to enhance the overall learning in the organization (Figure-10). It must reflect the value and applications of the knowledge created and must provide the solutions to store the knowledge and make it available for the right people at the right time. It must provide a system to continuously assess, apply, refine, and remove organizational knowledge in conjunction with concrete long and short term factors.

6. Knowledge Management and Strategy:

Organizations are redesigning their business models to link the knowledge and business strategy (Figure-11). Knowledge acquisition, sharing and application have taken the role of key sources for competitive advantage. Generally, every organization has knowledge resources and business strategy but they often find difficult to link both of them for competitive advantages. Managers are busy deciding that how to utilize the

knowledge resources of their organization to strengthen the strategic performance. They are seeking to understand the present status of their organization, to decide the future direction and to plan that how to steer the knowledge assets of organization for competitive advantage. A recent benchmarking study by the American Productivity and Quality Centre suggests that more than fifty percent of best practice companies in Europe report that knowledge management is clearly a part of their strategic goals.

Even companies today have employee positions and designations that see the strategic view on the connection between knowledge and strategic management. The positions generally include chief knowledge officer, director of knowledge management, knowledge management specialist, knowledge management administrator, knowledge management manager etc. The positions and funding invested by organizations simply reveal their concern for effective knowledge management and its compatibility for business strategy.

The power of knowledge lies in its ability to influence, and enable, the business strategy. Once the role of knowledge is defined, then other aspects of strategic management like

formulation and knowledge, both are multifaceted and complex. Strategy reflects the current strategic position and future intent of a company. On the other side, organization’s knowledge strategy includes the different perspective like technology, supplier, competition, and customers etc. Company need to formulate its business strategy in a way that knowledge could make it flourish. In order to reap the benefits from linkage of knowledge and strategy, a company must formulate its strategic plan, identify the knowledge gap and then should try to fill the gap through knowledge strategy (Figure-12).

7. Aligning the Knowledge drivers and Business Strategy:

Knowledge has an enabling role in the success of business strategy. Knowledge management plays critical role, not only in operational planning but strategic planning also. Knowledge is a driver of business strategy and business strategy is a driver of knowledge management (Figure-13). Following insights will help further in understanding the linkage between knowledge and strategy.

Knowledge as a source of capacity building: Each and every employee joins the organization with different set of skill, knowledge, and attributes which are developed though experience and education over a period of time. These skills are further developed in the new work settings where peer group, organizational culture and experience contributes in further learning process. Knowledge management helps in ensuring that workers develop suitable competencies and capabilities to meet the future needs and challenges in the organization. It encourages the knowledge workers to anticipate and prepare for the long run strategic needs of the organization. Thus it helps the capacity to identify, reflect, influence, implement and continuously adapt in the light of new knowledge.

Knowledge sharing as a core competency: Core competency has got a important role to play in having winning strategies. While discussing about knowledge management, may authors list a range of core competencies that needs to be developed in knowledge workers for successful strategies. One of those core

competencies is the knowledge sharing (Figure-14). Many employees will have experienced contradictory messages about the need to share, particularly when rewards are to the individuals rather than team or group. But the knowledge intensive communities should must encourage the sharing and collaboration. Sharing of knowledge among individuals and among different departments or units is the most challengingaspectofknowledge communication technologies may be used to create knowledge networks to share knowledge among employees, teems, groups and departments, where intensive communication not only expands present knowledge, but also helps in creating new ideas leading to winning strategies.

Knowledge as a source of innovation: In the present era of competition and technology proliferation, innovation is the only key for survival, growth and profitability of any organization. Innovation builds on the activities of knowledge sharing whether explicit or tacit (Figure-15). Dialogues and frequent interactions between knowledge workers lead to knowledge synergy and is creation of innovation. Even the interaction of the knowledge workers with customers, suppliers and other parties outside the organization, also lead to innovation programme. Knowledge management helps in improving the innovation capabilities collection, storage and sharing of knowledge.

Knowledge Transfer vs. Knowledge Integration: Organizations have to choose a strategy among knowledge transfer and knowledge integration. In brief, knowledge transfer refers to general strategy of facilitating learning and exchange, whereas knowledge integration refers to rapid application of existing but disconnected knowledge throughout the organization. In case of knowledge transfer, knowledge is shared by one employee to some others through interaction. But in case of knowledge integration, knowledge is shared throughout the organization at a same time with the help of some common integrated data base system. The level of perishability of knowledge, uncertainty, and speed of response in the business context can help in determining which of these two knowledge strategies best suit the business strategy of an organization. A strategy that emphasizes knowledge integration promotes synthesis of individually held knowledge at the project or task level while keeping cross member learning down to a bare minimum level. Knowledge resources are of little value if they cannot be mobilized rapidly. A common trap that knowledge management initiative fall into is that of adopting a knowledge transfer strategy when knowledge integration strategy is required.

Adding Value: Knowledge management has the potential to be significant organizational influence which leads to value addition in long run. However, it also requires major shifts in the way the organization views its people, systems and the way they interact amongst themselves. Any activity associated with knowledge management must be carefully scrutinized to ensure that it does add value to the organization. The only imitation of practices of other organization without considering the existing culture may prevent the effective knowledge management. The development of knowledge management therefore needs to be carefully considered and constantly reviewed to ensure that each element positively contributes to the consistent implementation of an effective knowledge culture and related practices relevant to that organization.

Developing a strategic knowledge community: Knowledge management focuses on developing on a strategic knowledge community by emphasizing the communal sharing of knowledge and building of better practice through community interaction. While constructing knowledge management frameworks, it is important to include the whole organizational community. It affects the manner in which leadership is reflected across the organization. Many managers are territorial and try to exercise control over knowledge resources, its access and sharing. The knowledge environment needs to be user focused so that any stakeholder can identify and have access to knowledge resources with the minimum efforts. This changes the nature of power and control in the knowledge environment. It may also require a strong leadership, as the focus moves from unit based protectionism to the collective good.

8. Summary:

Knowledge is a key element that determines the functionality and performance of an organization. It is multivariate, multidimensional and of strategic importance for any business entity. Organizations grow when employees, continuously create, organize, stock, analyse, interpret and use the knowledge. Knowledge management requires specialized managers and effective management solutions in the form of information and communication technologies. Knowledge management cannot survive by itself. It involves people, communication, favorable policies, updated technologies and above all, a change in the culture of an organization.

The manners, in which a business strategy was used to be formulated few decades ago, are no longer applicable in the present era of knowledge economy. This phenomenon can be attributed to shift in the strategic importance of knowledge resource in the organization. An appropriate fit between knowledge management and objectives and business strategy is must for an organization. Objective and knowledge management strategy must be reflective of those of an organization. Without having a clear link between knowledge management and business strategy, even the world’s best strategy or knowledge management practices, will not be able to deliver. Organizations need to ensure that their knowledge practices and business strategy are consistent with corporate objectives. The techniques, technologies, resources, skills, culture etc. are aligned with and support the business objectives of the organization. When such alignment is clearly established, the knowledge management system will be moving in a direction that holds promise for long lasting competitive advantage.