Making the Most of Your Companys Knowledge: A Strategic Framework - Essay Example

Running Head: PAPER ANALYSIS Paper Analysis Strategic Management Paper Analysis In the article “Making the Most of Your Company’s Knowledge: A Strategic Framework” (Von Krogh, Nonaka & Aben 2001) the authors investigated an issue of strategic knowledge management and its importance for the company’s success and its competitive positions. An introduced framework was based on the research of knowledge management practices at Unilever, a multinational fast-developing consumer goods company. Unilever has been especially active in knowledge management for the past 10 years and has managed to achieve “measurable results from these activities, such as faster rate of innovation, increased efficiency in manufacturing and supply chain, and an acceleration of rolling out best practices” (von Krogh, 2001). The major strength of the paper lies in the comprehensive nature of conducted research encompassing three years of close interaction with the company and in an excellent choice of company under analysis. Unilever was one of the first to recognize the importance of strategic knowledge management, having accumulated extensive evidence on its development and implementation in a wide organizational context. The idea of knowledge creation and knowledge transfer is central for the whole paper. The literature on strategic knowledge management identifies these two key processes to be major components of knowledge management process. Both significantly influence organisation’s success. “All managers must manage knowledge. Knowledge must not only be gained, but shared throughout the organization. This ability to create and transfer knowledge will be the key to competitive success” (Higgins & Vincze, 1993). Both knowledge creation and transfer became even more indispensable to companies operating in modern global markets, as knowledge management and accelerated innovation emerged to be crucial success factors for global competition in the 21st century. (Cumming & Wilson, 2003) Von Krogh, Nonaka & Aben (2001) identified that the primary purpose of knowledge creation is to advance the company’s potential of creating innovation and to reduce the time span to the market success of new products / services introduced by the company. Usually knowledge creation is pursued using small-sized groups of 5-15 specialists that actually develop collective tacit knowledge through an extensive experience and discussion of new business processes, products, use of technologies, etc. Through four subsequent steps this initial collective tacit knowledge is spread beyond the creating group and is being integrated into existing manufacturing, marketing, sales and other fundamental departments of the organisation. The practical constraints to adoption of knowledge creation within the organization structure could be problems with selecting the right experts from the group and reconciling their prime and these subordinate activities. The primary purpose of knowledge transfer is to spread created knowledge within the organization to bring large-scale benefits. So, in an essence, knowledge transfer facilitates utilization of the developed insights and innovation to the organization as a whole. However, knowledge transfer is not the same within all organizations. Certain conditions promoting knowledge transfer should be in place. First, the parties should be aware of the opportunity to exchange knowledge. Second, all parties engaged should clearly recognize worthiness of knowledge exchange. Third, the parties should be motivated to apply transferred knowledge in their own activities in order to realize benefits from it. Above described conditions seem to be truly influential in establishing and streamlining the process of knowledge transfer within the organization. It was noted that often the knowledge is recognized as a vital organization’s resource but because of absence of required conditions knowledge transfer was undermined. (Pemberton 2002) The practical constrain to adoption of knowledge transfer within the organization could be absence of one of those key conditions described above, general absence of culture of expertise sharing within the organization (Wagner and Hollenbeck 2005), and potentially high cost of implementing it on a wide-scale (across departments and geographical borders). One of the example of successful knowledge transfer within Unilever is the Category World Conference, “where global strategies and available knowledge and tools for implementing these strategies are transferred to key local company operatives” (Von Krogh, Nonaka & Aben 2001). Research Methods The research method used in the paper was a case study of knowledge management practices and approaches in Unilever. The authors used a wide range of sources, comprising documents (e.g. external and internal reports of Unilever on knowledge management approached), archival materials on projects that applied knowledge management, interview with managers and employees that were involved in knowledge management initiatives and projects or correspondent trainings. Moreover, the authors constructed the research in two stages, first investigating knowledge management initiatives in the culinary category and second conducting in-depth study of knowledge management comprising a wider scope in the company. Therefore, the research was rather strong and based on a diverse base of evidence. The data collection was not a short term activity. The whole research embraced three years of close work with the company. Such a long research period on one hand allowed collecting an extensive body of evidence and ensuring that it is not short-term in nature. On the other hand it allowed analyzing mid- to long-term consequences and results of the knowledge management programs used by Unilever. So we can conclude that the research methods used were rather rigorous. The research was validated by the company’s staff. Beyond reporting back to company and discussing the findings with the selected group of managers, the writers tried to increase the validity by co-authoring the paper with one of the senior managers. Having played important role in Unilever’s decision making process for the last five years, the manager also reported on his personal experiences throughout this writing. However, in my opinion, this fact of co-authoring with a single Unilever decision-making may also question the objectivity of certain parts of the research as his/her contribution could be subject to some individual biases and own vision of the knowledge management processes. I consider this fact to be a weak side of the conducted research. The research findings are well-structured and concisely presented. However, certain parts of the research results are articulated in general terms. For example, the paper’s material on four knowledge base strategies is rather descriptive. It should be quite difficult to practically implement those strategies solely basing on the present research. But on the other hand, the evidence from Unilever knowledge management practices presented in the paper is quite comprehensive and features detailed description of undertaken actions and initiated programs. Therefore, the research generally provides good guidelines for implementation, but cannot be used as a detailed action blueprint. Below is the SWOT analysis of a potential research implementation: Strengths Boosted innovation process Improved projects performance from spread of tacit knowledge and learning from failures Weaknesses Existence and effects of rival knowledge management by competitors Changes associated with knowledge domain creation might be opposed within the organisation Opportunities Flexibility of strategy selection from different stages of organisation’s development Increasingly accepted by leading world companies Threats Competitors can beat you in pace of innovation process Too much reliance on knowledge management and inability to accurately estimate its benefits Key Concepts: Company’s Knowledge Strategies The authors of the article present four different knowledge strategies: leveraging, expanding, appropriating, and probing. Each of the strategies has impact of varying magnitude on strategic goals of the company through efficiency, innovation and risk management. Leveraging strategy concentrates on transferring existing knowledge across the organization. The strategy targets that the company internally transfers existing knowledge from various knowledge domains, for example, in areas such as product development, manufacturing, marketing and sales, finance, etc. Unilever leverages its knowledge through Knowledge Workshops and Communities of Practice, being able to spread good proven practices across the world very rapidly. In innovation-oriented Knowledge Workshops, knowledge is shared across disciplines, including successes and failures, which allows for faster innovation. By sharing knowledge in this way, capitalizing on relationships and trust between participants, the risk of repeating mistakes and “re-inventing the wheel” is significantly decreased, while innovation is encouraged. The second is expansion strategy. It aims at knowledge creation based on the existing information, data and knowledge. The focus of this strategy is to enhance and augment the existing knowledge by bringing additional expertise relevant for additional knowledge creation. It is worth noting that knowledge creation in this case is not refined to the company, but can be extended to partner firms. Haberberg and Rieple (2001) wrote the following with respect to the importance of drawing on additional explicit and tacit knowledge within the organization to build on the existing knowledge: Organisations come into being to fulfill particular purposes, but they do not always start out with clearly defined methods for achieving them. They often build upon existing practices in their industry and on the personal experience of their members. In this way, organisations learn ways of coping with the situations that they meet most often. These are called routines and include explicit and tacit knowledge. In this respect expansion strategy is extremely important for companies in enhancing efficiency and improvement of key operating processes. The appropriation strategy aims to create new knowledge domains by transferring knowledge from external sources. In pursuit of this strategy, companies can establish partnership and alliances with research institutions, academic establishment, social organization and other companies. It can also be achieved through acquisition of other companies. A good example of appropriate strategy in action could be establishment of alliance between Unilever and Microsoft to better serve customers through on-line channels. Extensive marketing expertise of Unilever coupled with information technology leadership of Microsoft allows development of a new knowledge domain on e-business and business-to-consumer services. This new knowledge domain is envisioned to be of high importance in the future. From this perspective, the appropriation strategy also boosts innovation processes through partnership based on common goals. The probing strategy focuses on building a new knowledge domain and creating knowledge from the scratch within the organization. This strategy differs from the rest in its approach to knowledge creation. While all the previous strategies can be characterized as intermediate in innovation, the probing strategy can offer radical innovation. The new knowledge domain created as a result of a probing strategy can become crucial for the company’s ability to sustain its long-run performance or merely survive. This ability is especially important in the present era of global competition and ever-changing markets. Heracleous (2003) wrote the following: Most consultants, management gurus, and academics exhibit a rare instance of agreement on the view that in order to achieve competitive success in the future, existing ways of competing and thinking are not enough; organizations have to learn to compete and think in new ways. Emerging strategic imperatives include goals of not just aiming to optimize within the organization’s current industry but trying to generate ground-breaking strategies which will create new niches and markets and re-define whole industries. It is important to note that a certain strategy may not work for one company, while it works for another. Companies should apply a particular strategy based on the industry in which they operate, prevailing market conditions, strategic objectives and stage of business cycle. If the company operates in a stable and mature industry and there are few technological developments in place, the company could focus merely on maintaining and enhancing the existing knowledge. But if the company operates in emerging industry, such as communication, media or financial services, the company should pay considerable attention to creating new knowledge and fuelling innovation process. Argument Limitations The data produced by the research is rich and consistent. The authors clearly identified the four basic strategic approaches to knowledge management. Even though the research is definitely not comprehensive and certain points could be well expanded beyond presented information, it sufficiently and succinctly covers the main topics. The major limitation of the argument presented in the paper is its descriptive nature and qualitative approach used by researches. This makes the results less suitable for outside verification and cross check by other researchers. However, in the case of intangible assets (i.e. both tacit and explicit knowledge are intangible assets of an organization), it is often misleading and inaccurate to calculate the return and benefits from their usage in quantitative terms. Further discussion of this topic is presented in the final section of this paper dealing with measurement problems. The content should be useful to practioners, as a lot of fundamentals for knowledge management are common for many organizations (i.e. creating a working group of 5-15 professionals for knowledge creations, organizing company conferences to promote knowledge transfer). Taking into account rising importance of strategic knowledge management, this data is of high importance to basically any modern organization. The practical constraints to such an implementation could be a general novelty of strategic knowledge management. Even though there was a host of discussions as to its importance recently, there is limited experience of its practical implementation and considerable room for further academic research on this topic. Comparative Analysis Other papers chosen for analysis included “Knowledge Management Initiatives: Learning From Failure” (Storey & Barnett 2000), as well as a case study “Black and Decker – Towards a Knowledge-centric Organizations” by Pemberton, Stonehouse & Francis (2002). Generally the paper under analysis was comparable with other works and consistent with their findings were there the correspondent linkage was present. The paper by Storey & Barnett constitutes an in-depth research on managing knowledge creation and transfer from organizations’ past failures. In this aspect it is consistent with the paper under analysis, which also stressed the importance of learning from failure. The paper by Storey & Barnett substantially expands on this topic and presents detailed recommendations on what the company can do in order to better manage its past failures to improve future performance by means of knowledge transfer. Storey & Barnett (2000) echoes the research under analysis when writing “the concept of “failure” (especially so from a knowledge management perspective) is somewhat problematic because it is possible that valuable lessons may be learnt and/or that initiatives may be resuscitated at a later date”. The case study by Pemberton, Stonehouse and Francis (2002) also fit will into the general findings framework of the research under analysis. It provides additional evidence from Black and Decker Company on the importance of knowledge assets for company’s success. At the same time the authors presented new finding that stipulate that “knowledge creation and management could be enhanced by developments in the organization’s human and cultural infrastructure, leadership and communications that promote the value of knowledge and integrate it within its core business.” In consensus with the research under analysis, Pemberton, Stonehouse and Francis found that the role of tacit knowledge is recognized as an integral part of company’s business. Similarly to Unilever, Black and Decker introduced seminars and workshops with the specific aim of sharing expertise and promoting knowledge transfer. The research under analysis also appropriately corresponds to a wider strategic management framework. It is in line with other researchers’ findings and conclusion from both recent and more remote time frames. Pitts and Lei wrote in 1996 that “in many ways, knowledge and expertise represent the best types of resources on which to build and extend new sources of competitive advantage.” Hill and Jones in 1998 concluded that “Learning effects are cost savings that come from learning by doing. Labor, for example, learns by repetition how best to carry out a task. . . Learning effects tend to be more significant when a technologically complex task is repeated, since there is more to learn”. Birkinshaw & Sheehan in 2002 suggested that “Knowledge isn’t static, but it often gets managed as if it were. Companies that want to develop and use knowledge most profitably should start treating it differently according to the stages of its life”. It was also clearly stated that the existence of knowledge per se doesn’t guarantee success. The transfer and implementation of it across the organization is of vital importance. Hyde and Mitchell (2000) stated it in the following way: “The organizational value of knowledge management is achieved when the sharing of an enterprises collective intellectual assets stimulates innovation and reuse, enables formal management and leverage of intellectual capital, drives organizational learning, and thereby improves the collective performance of employees.” Measurement Problems In dealing with organization performance and return from strategic knowledge management, the most common problem is to accurately evaluate and measure it. Even though quantitative methods are generally preferred by researches since they use rigorous mathematical apparatus and provide results that are numerically explicit and comparable, strategic performance and knowledge management are not the fields where it is most appropriate. There are several potential problems related with using quantitative criteria for evaluating strategies. First of all, most quantitative methods are tied to annual objectives rather than long-term objectives. Also, using different accounting methods and underlying assumptions in the models can provide visibly different results on many quantitative criteria. Third, intuitive judgments are almost always used in constructing quantitative criteria. (David 1995) The nature of knowledge management impact on organization’s performance is rather complex and versatile. Knowledge management seldom affects financial and strategic performance directly, but rather it influences the company indirectly through complex cause-effect chains. Providing training to employees in Total Quality Management or conducting meetings with expertise to share tacit knowledge should improve process quality. It should also increase customer satisfaction and loyalty from the service/product, also cutting on human resource resources and improving project timing. Those improvements can be translated into actual increase in sales only after the product is successfully sold, so that increased intangible loyalty and customer satisfaction is transformed into tangible sales revenue. Only when the loyalty is realized in money terms we can quantitatively calculate the return on investment. (Kaplan & Norton, 2004). In this light, applying qualitative methods in measuring knowledge management and largely strategic performance is fully justified. References Birkinshaw, J., & Sheehan, T. (2002). Managing the knowledge life cycle. MITSloan Management Review, 44, fall 2002, 75-85. Cumming, S., & Wilson, D. (Eds.). (2003). Images of strategy. Oxford: Blackwell Publishing. David, F.R. (1995). Concepts of strategic management. London: Prentice Hall. Haberberg, A., & Rieple, A. (2001). The strategic management of organisations. Harlow: FT Prentice Hall. Heracleous, L. (2003). Strategy and organization: realizing strategic management. Edinburgh: Cambridge UP. Higgins, J.M., & Vincze, J.W. (1993). Strategic management concepts. Fort Worth: The Dryden Press. Hill, C.W., & Jones, G.R. (1998). Strategic management: an integrated approach. Boston: Houghton Mifflin Company. Hyde, A.C., & Mitchell, K.D. (2000). Knowledge management: The next big thing. The Public Manager, Vol. 29. Retrieved November 26, 2005, from Questia Database. Kaplan, R.S. & Norton, D.P. (2004, February). Measuring the strategic readiness of intangible assets. Harward Business Review Online. Knowledge Management Magazine. Retrieved November 25, 2005, from www.kmmag.com Knowledge Management Resource Center. Retrieved November 25, 2005, from www.kmresource.com Pemberton, J.D., Stonehouse, G.H. & Francis, M.S. (2002). Black and Decker – towards a knowledge-centric organization. Knowledge and Process Management, 9 (3), 178-189. Pitts, R.A., & Lei, D. (1996). Strategic management: Building and sustaining competitive advantage. New York: West Publishing Company. Storey, J & Barnett, E. (2000). Knowledge management initiatives; learning from failure. Journal of Knowledge Management, 4 (2), 145-156. Von Krogh, G. Nonaka, I. & Aben,M. (2001). Making the most of your company’s knowledge: A strategic framework. Long Range Planning, 34 (20DI), 421-439. Wagner, J.A., Hollenbeck, J.R. (2005). Organizational Behavior: Securing Competitive Advantage. Taunton, Massachusetts: Thomson South-Western. Read More