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Chapter 11 Knowledge Management

Managing and Using Information Systems: A Strategic Approach, 2nd ed.

by Keri Pearlson and Carol SaundersCopyright © 2003 John Wiley & Sons, Inc.

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Introduction• Knowledge management is defined as the

processes needed to generate, capture, codify and transfer knowledge across the organization to achieve competitive advantage

• This chapter provides an overview of knowledge management, describes its infrastructure and key elements, functions, and strategies, and briefly examines the role played by technology in managing knowledge

• In this chapter, we focus on knowledge management as infrastructure for business applications, not as an application itself.

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Defining Knowledge Management• Intellectual capital is a synonym of KM• KM is related to IS in three ways:

1. IT makes up the infrastructure for KM systems

2. KM systems make up the data infrastructure for many IS applications

3. KM is often referred to as an application of IS

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DATA, INFORMATION , AND KNOWLEDGE

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Data, Knowledge & Information (cf. Davenport, 1997)

Data Knowledge Information

Simple observations of the world:•Easily captured•Easily structured•Easily transferred•Compact, quantifiable

Data with relevance and purpose:•Requires unit of analysis•Needs consensus on meaning•Human mediation necessary•Often garbled in transmission

Valuable information from the human mind: includes reflection, synthesis, context•Hard to capture electronically•Hard to structure•Often tacit•Hard to transfer•Highly personal to the source

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Figure 11.2 Taxonomy of Knowledge From H-W Kim and S. M. Kwak, Linkage

of Knowledge Management to Decision Support: A System Dynamics Approach

Know-why

Know-what Know-howApplication

ProcedureInformation

Reasoning

Experience

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Tacit vs. Explicit Knowledge

• Tacit knowledge is personal, context-specific and hard to formalize and communicate

• Explicit knowledge can be easily collected, organized and transferred through digital means.

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Figure 11.3 Examples of explicit and tacit knowledge

Tacit Knowledge •Knowing how to identify the key issues necessary to solve a problem•Applying similar experiences from past situations•Estimating work required based on intuition & experience•Deciding on an appropriate course of action

Explicit Knowledge•Procedures listed in a manual•Books and articles•News reports and financial statements•Information left over from past projects

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AN EVOLVING CONCEPT

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Applying Knowledge Management

• KM is not a new concept, but one reinvigorated by IT such as collaborative systems, the Internet and intranets.

• KM is still an emerging discipline• Ultimately, an organization’s only sustainable

competitive advantage lies how its employees apply knowledge to business problems

• KM is not a magic bullet and can not solve all business problems.

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WHY MANAGE KNOWLEDGE?

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Factors to consider in Knowledge Management

• Information and knowledge have become the fields in which businesses compete.

• Several important factors include:– Sharing Best Practice– Globalization– Rapid Change– Downsizing– Managing Information and Communication Demand– Knowledge Embedded in Products– Sustainable Competitive Advantage

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Sharing Best Practice• Sharing best practice means leveraging the

knowledge gained by a subset of the organization.

• Increasingly important in organizations who depend on applying their expertise such as accounting, consulting and training firms.

• KM systems capture best practices to disseminate their experience within the firm.

• Problems often arise from employees who may be reluctant to share their knowledge.

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Globalization: Knowledge is the new Strategic Factor

• Historically three factors, land, labor and capital were the key to economic success

• Knowledge has become a fourth factor.• Low international labor costs are driving

globalization (as is telecom) and pushing companies that fail to take part out of business.

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Other factors• Rapid change: firms must be nimble and adaptive to

compete• Downsizing: sometimes the wrong people get fired

when creating a leaner organization• Managing Info Overload: data must be categorized in

some manner if it is to be useful rather than overwhelming

• Knowledge Embedded in Products: the intangibles that add the most value to goods and services are becoming increasingly knowledge-based

• Sustainable Competitive Advantage: KM is the way to do this. Shorter innovation life cycles keep companies ahead of the competition.

18Figure 11.5 Reasons for Managing Knowledge. ©IBM Global Services

Sharing Best Practices•Avoid “ reinventing the wheel”•Build on previous work

Sustainable Competitive Advantage•Shorter life-cycle of innovation•Knowledge as an infinite resource•Direct bottom-line returns Managing Overload

•Inability to assimilate knowledge•Data organization and storage is needed

Downsizing•Loss of knowledge•Portability of workers•Lack of time and resourcesfor knowledge acquisition

Globalization•Decreased cycle times•Increased competitive pressures•Global access to knowledge•Adapting to local conditions

Embedded Knowledge•Smart products•Blurring of distinction betweenservice and manufacturing firms

•Value-added through intangibles

Rapid Change•Avoid obsolescence•Build on previous work•Streamline processes•Sense and respond to change

Why ManageKnowledge?

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KNOWLEDGE MANAGEMENT PROCESSES

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Knowledge managementKM involves four main processes:

1. Knowledge generation2. Knowledge capture3. Knowledge codification4. Knowledge transfer

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1. Knowledge generation

• Knowledge generation concerns the efforts by an organization to acquire or create new knowledge.

• This can be done in several ways (Figure 11.6):– Research and Development (develop knowledge

internally)– Adaptation (use existing knowledge in new ways)– Buy or Rent (obtaining knowledge from another source)– Shared Problem Solving (knowledge generation

through “fusion” of different approaches)– Communities of Practice (obtain knowledge through an

informal network)

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KNOWLEDGEGENERATION

Buy or Rent

Adaptation

Creating (R&D)

Figure 11.6 Knowledge Generation Strategies

Shared Problem Solving

Communities of Practice

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Research and Development

• Knowledge generated by R&D efforts frequently arises from synthesis

• Synthesis brings disparate pieces of knowledge together, often from extremely diverse sources, then seeks interesting and useful relationships among them

• Realizing value from R&D depends largely on how effectively new knowledge is communicated and applied across the rest of the firm

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Adaptation

• Adaptation is the ability to apply existing resources in new ways when external changes make old ways of doing business prohibitive

• A firm’s ability to adapt is based on two factors: having sufficient internal resources to accomplish change and being open and willing to change

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Buy or Rent

• Knowledge may be acquired by purchasing it or by hiring individuals, either as employees or consultants, who possess the desired knowledge.

• Another technique is to support outside research in exchange for rights to the first commercial use of the results

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Shared Problem Solving

• Also called “fusion,” shared problem solving brings together people with different backgrounds and cognitive styles to work on the same problem

• The creative energy generated by problem-solving groups with diverse backgrounds has been termed “creative abrasion”

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Helping Fusion Work

• Ideas that help fusion work effectively include: – (1) fostering awareness of the value of the

knowledge sought and a willingness to invest in it;

– (2) emphasizing the creative potential inherent in different styles of thinking and viewing the differences as positive;

– (3) clearly specifying the parameters of the problem to focus the group on a common goal

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Communities of Practice • Achieved by groups of workers with common

interests and objectives, but not necessarily employed in the same department or location, and who occupy different roles on the organization chart.

• Workers communicate in person, by telephone or by e-mail to solve problems together.

• Communities of practice are held together by a common sense of purpose and a need to know what other members of the network know

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Knowledge Codification • Codification puts the knowledge in a form

that makes it possible to easily find and use• The boundaries of knowledge are difficult

to identify because of context sensitivity; one person’s crucial fact is another person’s irrelevant trivia

• Knowledge is unavailable across the firm until it has been codified in a manner that will allow those who need it to find it

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Davenport and Prusak’s (1998) 4 basic principles of knowledge codification:

1. Decide what business goals the codified knowledge will serve (define strategic intent).

2. Identify existing knowledge necessary to achieve strategic intent.

3. Evaluate existing knowledge for usefulness and the ability to be codified.

4. Determine the appropriate medium for codification and distribution.

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Knowledge Capture

• Knowledge capture takes into account the media to be used in the codification process.

• The 3 main knowledge capture activities are: • Scanning (gather “raw” information)• Organizing (move it into an acceptable

form)• Designing knowledge maps (providing a guide

for navigating the knowledge base)

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Ruggles (1997) knowledge categorization scheme:

• Ruggles provided four categorize knowledge:– Process knowledge– Factual knowledge– Catalog knowledge– Cultural knowledge

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Other examples of categorization schemes

• The American Productivity & Quality Center’s (APQC) Process Classification Framework – an organizational thesaurus developed to allow organizations to communicate across industry boundaries and overcome proprietary vocabularies

• Encyclopedia Britannica’s “Propædia,” – the search engine developed from the Propædia is now being used at a website called eBLAST those web navigator uses the Propædia categorization scheme to classify websites indexed in the system.

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Designing Knowledge Maps • A knowledge map (see next slide) serves as both a

guide to where knowledge exists in an organization and an inventory of the knowledge assets available.

• Although it may be graphically represented, a knowledge map can consist of nothing more than a list of people, documents, and databases telling employees where to go when they need help.

• A good knowledge map gives access to resources that would otherwise be difficult or impossible to find

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Capturing and Codifying Tacit Knowledge with Narratives

• If the expert is unavailable or leaves the firm, the value of his or her knowledge will be lost. Capturing tacit knowledge through narratives prevents this.

• Research has shown that knowledge is communicated most effectively through a good story, told with feeling, that resonates with other people.

• More firms are beginning to circulate videotapes that tell stories, for example, about how an important sale was closed. These narratives “codify” the expert’s tacit knowledge of how to close a sale in a way that conveys much of its underlying meaning.

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Nonaka and Takeuchi’s Knowledge Transfer

1. Socialization: from tacit knowledge to tacit knowledge

2. Externalization:from tacit knowledge to explicit knowledge

3. Combination:from explicit knowledge to explicit knowledge

4. Internalization: from explicit knowledge to tacit knowledge

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TYPES OF KNOWLEDGE MANAGEMENT PROJECTS

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Figure 11.9 Contrast between KM and IT Projects

KM Projects•Emphasis on value added information•Supports org. improvement and innovation•Adds value to content•Requires on-going user contributions•Balanced focus on both technology and culture•Variety of inputs often precludes automated capture of knowledge

IT Projects•Emphasis on accessing information•Supports existing ops

•Delivers content only•Emphasis on one-way transfer of info•Primary focus on tech•Assumes all info inputs can be automated

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Knowledge management initiatives

• Knowledge management can have either an internal or external focus, and has thus far been built around the following four themes:

1. Developing knowledge repositories2. Providing knowledge access3. Improving the knowledge environment 4. Evaluating knowledge assets.

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Knowledge Repositories • Three fundamental types of repositories have been

identified: 1. Externally focused knowledge, sometimes called

competitive intelligence 2. Structured internal knowledge such as research reports,

marketing materials, and production processes 3. Informal internal knowledge such as discussion databases

for “lessons learned” and internal best practices • Data warehouses sometimes serve as repositories of

organizational knowledge

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Other Repositories of Knowledge• Knowledge Access: projects sometimes referred to

as corporate “Yellow Pages,” which map and categorize knowledge and expertise in an organization, allowing identification of expert knowledge sources.

• Knowledge Environment: aimed strictly at culture, seeking to establish an environment conducive to knowledge creation, transfer, and use

• Knowledge Assets: sometimes referred to as “intellectual capital”, these initiatives attempt to treat knowledge as a balance-sheet asset, to direct attention towards the effective or ineffective use of intellectual capital over time.

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MEASURING THE VALUE OF KNOWLEDGE MANAGEMENT

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Project-Based Measures• Measuring the success of KM projects is often

done by measuring the specific benefits of the project examples include:– Enhanced effectiveness– Revenue generated from extant knowledge assets– Increased value of extant products and services– Increased organizational adaptability– More efficient re-use of knowledge assets– Reduced costs– Reduced cycle time

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Figure 9.10 Skandia Intellectual Capital Framework (cf. Edvinson & Malone, 1997)

Market Value

Intellectual CapitalShareholder’s Equity

Structural CapitalHuman Capital

Customer CapitalOrganizational Capital

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Valuation of Knowledge Capital • Strassmann: “Knowledge capital” is the

value a customer places on goods or services over the cost of sales and cost of capital

• It is the amount an investor is willing to pay for intangible assets, in excess of the cost of capital, for a risk-adjusted interest in the future earnings of the company

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CAVEATS FOR MANAGING KNOWLEDGE

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Caveats for Managing Knowledge 1. Knowledge management is an emerging discipline 2. Competitive advantage increasingly depends on

knowledge assets that are hard to reproduce, so it is sometimes in the best interests of the firm to keep knowledge tacit, hidden, and nontransferable

3. Knowledge can create a shared context for thinking about the future, not to know the future, but rather to know what projections influence long-term strategy and short-term tactics

4. The success of knowledge management ultimately depends on a personal and organizational willingness to learn

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FOOD FOR THOUGHT: DIGITAL MILLENNIUM

COPYRIGHT ACT

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The Digital Millennium Copyright Act • The DCMA, passed in 1998, makes it a crime to

circumvent copy protection, even if that impairs rights established by the earlier Audio Home Recording Act

• 2001: Dmitry Sklyarov, of the Russian firm ElcomSoft, was charged in the U.S. for selling ‘cracked’ software

• DCMA Critics argue that fair use of digital products includes rights to make back-ups, translate files into other formats, “time-shift” audio or video for later playback, or “space-shift” audios, videos or software by copying to blank CDs, other PCs or portable players

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END OF CHAPTER 11