Knowledge Based Business Environment - Essay Example

Knowledge Based Business Environment Introduction Knowledge management is considered as at the center of economic transformation as organizational success is now largely dependent on the knowledge management of the organization. Competitive advantage is located in “learning organizations” “brain-based organizations” “intellectual capital” and the “economics of ideas”. Knowledge has assumed this centrality in conjunction with sweeping changes in organizational forms and the dawning post-industrial and information revolutions. Any economy with declining industrial base relies largely on its knowledge base since the rapid changes in the technological as well as professional skills demands that the human resource base must acquire a certain degree of knowledge which keep them in-line with the industry trends. Due to lack of this knowledge base, organizations within the economy also suffer since it is largely reflected in the performance of that organization having low or insufficient knowledge base. Thus the success of economy as well as organizations is shifting in the favor of having solid knowledge base on keep them sustainable and competitive. This easy will look into some of the implications for the organizational performance in the current business environment with special emphasis on the movement from a manufacture to knowledge context, the importance of stakeholders as well as how systems and procedures may be used to achieve the desired targets. Based on the above parameters, this essay will be divided into two parts. The first part will discuss the macro-level issues related with the knowledge base business environments whereas the last part will be more of micro-analysis orientation as it will focus on the knowledge base at the firm level and its implications for the organization in terms of performance. What is Knowledge based economy? Generally there is a dearth of a concise and definite definition for the knowledge based economy however it has loosely being defined as “one in which the generation and exploitation of knowledge has come to play the predominant part in the creation of wealth”[ CITATION Ian06 \l 1033 ]. Thus the notion of knowledge economy is more than just the traditional concepts of research & development and demands a more comprehensive approach. Due to this shift in the perception within the economy, it is now largely believed that the emergence of knowledge based economy will give rise to the new organizational forms within and between the organizations and a radical change in the way employment was perceived in its more traditional way since the new knowledge workers within the economy can take the form of freelancers or even self employed. The emergence of industrial sectors based on information technologies, and the increasing weight of intangible or immaterial investment (R&D, software, education and training, organization, marketing, design) have made clear that the nature of the regulating processes of economic activity were being transformed. In fact, the basic regulators of information activities are no longer pure exchanges, but rather “sharing” transactions.[ CITATION Car04 \l 1033 ] The failure of the dot.com companies and the bursting of the dot.com bubble however raised certain critical issues of whether the knowledge base economy actually exist or not and whether the use of knowledge can provide a sustainable base to the firms within the organization to keep sustaining in the longer run however the success of entrepreneurships which are largely considered as the innovative and creative organizations clearly points towards the strength of the concept and level of flexibility and success it can provide to the economy if taken in right perspective. Apart from that, it is always argued that the economy is always being driven by the knowledge which leads to innovation and technological changes hence providing firms necessary tools to improve the efficiency and output levels. [ CITATION Ian06 \l 1033 ]. Knowledge Base firms It has largely being argued that the exploitation of knowledge base has provided organizations an unprecedented level of productivity. The changing patterns of globalization and the use of knowledge based resources has allowed firms to shift the value creation process from the traditional tangible assets to the more intangible resources like human resources as well as the social capital. [ CITATION RGB00 \l 1033 ]. The shift from the manufacturing base to the use of ICT has allowed the firms to tap scientific and technical knowledge base to create competitive advantages for them. The firm theories as suggested by the economists have failed to produce theories with multi-purpose theory of the firm and largely concentrated on the use of singular approach towards the firm theory which ultimately has provided a very narrow and abstracted view of how actual firms work.[ CITATION Gra96 \l 1033 ] as most of them provide completely different view of the same phenomenon. As companies entered into the 1990s, knowledge became one of the most important strategic resources. Knowledge production is critical to sustaining competitive advantage and organizational success. Traditional types of competitive strategies based on industry positioning, such as cost leadership, differentiation and focus were not sufficient to cope with dynamic environments. Competing on capabilities, i.e. obtaining and sustaining competitive advantage through the development of a distinctive set of organizational capabilities, has become a focus in the strategic field. The essence of strategy does not lie in the organization’s particular products and markets, but the dynamics of its behavior and processes. In addition, the organization’s ability to renew and achieve new and innovative forms of competitive advantage becomes most important. This ability is referred to as a firm’s dynamic capability. The new and emerging phenomenon of how firms work also leads us to a non-traditional view of the firm behavior which is based on the resources base of the firm. The new concept of resource based firms suggest that the firm is a collection of some idiosyncratic capabilities and resources which help management to increase the value of the firm and increasing the resource base of the firm for future use also.[ CITATION Gra96 \l 1033 ]. This same resource based view therefore, outlines the use of knowledge as a resource not only helps organizations to gain the competitive advantages but also provide the firms the opportunity to recognize the knowledge as the most strategically important asset. The underlying assumption behind this notion is that the use of knowledge base provides firms to use efficiently and strategically the allocation of firm’s resources besides offering firms the opportunity to innovate and unleash creativity. The knowledge base firms thus largely depend upon how the firms manage its innovativeness and creativity. Innovation is considered as one of the key functions of entrepreneurship as a process and Peter Druker went on to suggest that the “Innovation is the specific function of entrepreneurship… It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth. Thus creativity and innovation are considered as essential for the development and creation of wealth in the nation. However the process of creativity and innovation requires sometimes a greater aptitude and certain strength of character to overcome the barriers to the process of creativity. The so called killer phrases are also sometime referred to as one of the real barriers behind the process of creative thinking. However in order to overcome these barriers to the creative thought process, resources are required which might include the right attitude adopted by the entrepreneur. These knowledge based intangible resources flourish creativity and innovation in entrepreneurs. However these knowledge based intangible resources may also not foster creativity and innovation in the context of entrepreneurship if the intentions to implement these resources is missing. Until and unless the entrepreneurial intentionality is missing from the whole process, the creativity and innovation may not spring up through the use of knowledge based resources of entrepreneurs. (Bird, 1988). It is also believed that the creativity and innovation thus success of the entrepreneur will not be achieved until and unless there is a conducive economic system present in the society which provide opportunities to the entrepreneur and it is important that that economic system must not provide the holding of factors of production in the hands of government. Only private or capitalist economies provide the entrepreneur the necessary input to foster creativity and innovation. (Panglaykim, 1979). Apart from seeing the economy within the context of knowledge base economic resources, there is a greater linkage between the knowledge base economy and globalization. The formation of integrated chains of various operational activities spread over various geographical locations, outsourcing of activities to gain cost advantages as well as better out put and efficiency levels have allowed firms to tap resources beyond their traditional capacities. This all happens mainly due to the use of knowledge based resources by the organizations which provided them to get strategic advantages by creating value. Importance of Stakeholder in the knowledge base firms The process of value creation through the use of knowledge based resources, it is very important that all the stakeholders in the firm are taken care of because building better relationships with various stakeholders reflect in the performance of the firm through its strategic alliances with all the stakeholders which include customers, employees, shareholders, government as well as general public at large. Stakeholders are also important within the context of the knowledge base environment is the fact that the relationships with these stakeholders develop a fine and delicate balance between various resources of the firms.[ CITATION RGB00 \l 1033 ]. The stakeholders are also important in the sense that the organizational structure within the context of knowledge base environment reflects the thinking that the firms are collection of various elements as well as their relationship among themselves.[ CITATION Wan03 \l 1033 ]. These hard and soft components of the organizational structure reflect the role of stakeholders within this context as it captures the essence of organizational activities. Use of Systems Knowledge based firms always tap their internal resources to create critical mass of resources which help them to evolve through innovation and creativity. This innovation and creativity resultantly lead improvement in performance through the effective use of systems. To integrate knowledge transfer into everyday activities, the support structure needs an organizational component, a process component, and a technology component. The organizational component includes the implementation of adjustments to management philosophy, group member interaction, and individual responsibilities. The process component includes changes to problem solving processes, decision making processes, and communication processes. The technology component requires the implementation of the technology that will become the knowledge base repository as well as any other required support technology. [ CITATION Dav96 \l 1033 ]. This technology component as well as the process component allows firms to evolve the systems over the period of time. The use of effective systems like Balanced Score cards, Use of sophisticated inventory management systems with the help of information technology allow firms to be more reflective in its performance. The combination of the knowledge based resources and the technology allow firms to be more productive, align the processes and systems to make their use more effective. Groups within the organization will be rewarded with more effective decision making, being confident the right problems are being addressed, and a rich source of knowledge that can be applied to their work. Conclusion Knowledge based business environment is essential and emerging phenomenon in the organizational contexts. Though the knowledge based firm’s theory can not directly be considered as the more credible theory of firms however it provides an alternative view of how firms can evolve and be viewed in a different context. The traditional reliance on the hard assets to generate value creation is being challenged with the use of intangible resources including knowledge which allows firms to be more productive and flexible in nature. This flexibility result into the use of effective systems within the organization to generate the value creation. Besides the organization, being viewed as a collection of various elements require that the firms take a holistic view of all the stakeholders in the organization to create a critical mass of knowledge resources to gain competitive advantages and grow and evolve within the context of globalization. References CITATION Ian06 \l 1033 : , (Brinkley, 2006), CITATION Car04 \l 1033 : , (Caraça, 2004), CITATION Ian06 \l 1033 : , (Brinkley, 2006), CITATION RGB00 \l 1033 : , (RGB Global, 2000), CITATION Gra96 \l 1033 : , (Grant, 1996), CITATION RGB00 \l 1033 : , (RGB Global, 2000), CITATION Wan03 \l 1033 : , (Wang & Ahmed, 2003), CITATION Dav96 \l 1033 : , (Harris, 1996), Read More