Strategic Knowledge Management - Literature review Example

Strategic Knowledge Management Introduction The present nature of work in organisations has undergone drastic change in the past few decades. Few ofthese developments include self-driven managerial teams, focus on knowledge management and strategies for constant learning. Apart from the above, new age business work dimensions also include inclination towards creativity and leadership, flexible organisational hierarchies, employee-employer relationship and IT enabled strategies. With globalisation of the business, firms are constantly coping to keep up with the changing trends in environment and volatility in business patterns. The major objective of the essay is to analyse strategies and processes, which will help or supplement SST (Soft Systems Thinking) in developing an organisation’s intellectual capital. Soft skills are majorly intangible assets in an organisation that can be developed for proper knowledge management, intellectual and social capital and communication strategies. Larger aim of the present study is to identify and analyse factors that are responsible for making an organisation sustainable and knowledge oriented. Following sections will describe factors that are precursors to building intellectual capital in an organisation and ways in which these factors can be converted to achieve sustainable competitive advantage in this continuous learning environment. Discussion “The only way to cope with a changing world is to keep learning” (Dixon, 1998, p.31) An organisation is always in a dynamic equilibrium state. This implies that a set of internal and external forces are constantly acting in order to balance organisational objectives and satisfy demands of its dominant stakeholders. However, the theory is applicable only in an ideal situation and in real business environment; these forces are frequently constrained and challenged by various other forces. In case of most medium and large sized organisations, there is huge pressure and persistent competition for survival. As a result, pressure and pace overshadow numerous opportunities for knowledge enhancement and learning. An opportunity that has been identified as a major solution for the above problem is maintaining a dynamic stability. In this dynamically stable state, organisations consciously intersperse or divide major changes initiated by carefully placing them between organisational learning periods (Blattberg, Getz and Thomas, 2001; Kotler, 2008) Most of the industries are becoming knowledge intensive, where knowledge and its management have become significant criteria in every competitive strategy. According to Lev and Zambon (2003), companies are heavily investing in intangible assets as products need frequent innovation and differentiation. On the other hand, research and development, skills and competencies of managers create lasting advantages for a company. So, intangible assets of an organisation can be defined as competencies, apart from definite material, physical or financial assets. Businesses run on theories and assumptions, where intangible resources refer to competencies, knowledge, experience and skills of staff, their relationship with customers, investors and other important stakeholders, database and systems of the management, trademarks and contracts. Intellectual Capital and social capital Intellectual capital can be described as knowledge that can be transformed into value. According to Beyerlein, et al. (2003, pp. 22), “intellectual capital represents one key capability of the organization - the ability to produce, capture and synthesize information into knowledge that can be used to produce some product or service.” The above definition clearly indicates that experience, ideas and knowledge of individuals at every stage in an organization can have a notable impact on organization’s service, products, customers and processes. Assessing crucial intangible assets for an organization can assist in developing intellectual capital as well as generating desirable results such as, patents, trademarks and collective knowledge (Bounfour, 2003). Skills and knowledge present in individuals are fundamental components of a firm’s intellectual as well as human capital. In majority of developed nations, investment in brand development, design and research, workforce development and franchising is occurring at a faster rate compared to that in tangible assets (Ferrier, 2001). As organisations are focussing on expanding and building their knowledge base in both explicit and tactile manner, overall intellectual capital and competitive advantage are being enhanced simultaneously. Intellectual capital can be further sub-divided into structural and human capital (Bogdanowicz and Bailey, 2002). Human capital can be described as an individual-level function stressing upon knowledge and skills of individual employees. Moon and Kym (2006) established a human capital construct according to which human capital is more than simply assessing performance of an individual with respect to an organisation. As per the construct, human capital consists of sustainability, employee-capability and satisfaction (Moon and Kym, 2006). On the contrary, structural capital refers to procedures and processes, which are accessible to the firm and can be recorded for maintaining effectiveness. The basic fundamental of structural capital is similar to that of human capital as it depends on exquisite human skills for successful completion of projects. Structural capital also refers to those infrastructural properties allowing knowledge sharing. It helps in building and measuring intellectual capital at organisational level. Therefore, structural capital can be found not only in media such as, databases and documents, but also within organisational documents, services and products as well as product innovation. The success of business in the present competitive environment depends on the way an organisation is perceived by investors, media, customers and company stakeholders. In addition, their knowledge and beliefs about companies influence various decisions such as, purchase and investment. The foundations of relational capital are built through communication between a company and its customers, investors and other stakeholders. Relational capital is essential for overall operations in an organisation as well as for achieving a competitive edge. From the above categories, it is clear that organisations need to focus on every category and function of intellectual capital. Few of the intellectual capital models that have been discussed in literature are Skandia Navigator (Edvinsson, 1997), balance scorecard (Kaplan and Norton, 1992), intangible monitoring of assets (Sveiby, 1997) and value platform (Brennan and Connell, 2000). The framework of balance scorecard focuses on productivity and capability of employees as well as on employee retention and satisfaction. The Skandia Navigator determines human capital in an organisation in terms of annual staff turnover, graduate percentage and service years within the firm as well as leadership index measuring performance of leaders in an organisation. In an asset monitor, education level of staff, education and training costs, seniority and pay position are determined. This intangible asset monitoring device was further modified by Petty and Guthrie (2000) so that important organisational factors could be measured such as, vocational and educational qualifications, employee knowledge enhancement, work-related competencies and knowledge, innovations, entrepreneurial spirit, reactive and proactive abilities as well as changeability in business environment. Thus, critics and researchers have aptly assumed that intellectual capital and its models are few of the effective ways to increase overall competencies in an organisation. Social Capital Social capital, as opposed to intellectual capital, is more applicable in relation management strategies. It is based on the relationship among different parties, rather than in parties themselves. So, it can also be said that social capital is owned by both members of an organisation and the organisation itself. Critics have argued that an important factor that differentiates successful organisations from others is the high level of brand loyalty among their employees (Leana and Van Buren, 1999). For instance, Google Inc. is considered one of the most powerful brands in the world. An important factor that distinguishes the internet search company is low attrition rate among its employees, which is almost zero. Hence, by maintaining a strong social capital, Google not only retains its intellectual capital, but also builds on innovation and creativity through experience and a positive work environment (Adler and Kwon, 2002). A major challenge faced by organisations is intellectual capital development. In order to overcome the same, organisations will have to evaluate their tangible and intangible assets as well as prepare strategies through which these assets can be transformed into competencies. For achieving success in any organisation, employees need to establish well-functioned networks among them and within organisational system, especially interpersonal relationships. According to Van Aken and Weggeman (2000), networks can be distinguished into two categories; designed networks and emergent networks. Emergent networking is majorly informal, while designed networks are either informal or formal. It has also been argued that social capital networks are often informal and submerged, which makes them invisible to external people and poorly visible to professionals and management. As a result, even sophisticated firms need addressing relationship between intellectual capital, formal structures, interpersonal relationships and productivity. Soft system thinking The development of soft systems management occurred during the 1970s. According to this system, well-established and frequently adopted hard system approaches were not adequate while addressing complex, ill-structured and practical issues faced by present day managers. Soft systems thinking, which is an integral part of soft systems management, was developed on four fundamental ideas. The first idea was that present day managers are dealing with a more complicated learning environment. Consequently, these people endeavour in taking purposeful actions. The second idea is that every declared purpose or objective in a system has multiple interpretations. The third idea stated that it is not possible to recognize any definite model, which will fit into every organizational objective. So, the process of organizational learning was developed as a means to reduce gap between organizational goals and efficiency of proposed business models. The last idea formulated had indicated that any course of action undertaken should be feasible and desirable for individuals involved and affected by the situation (Checkland, 1999). From above discussion, it is clear that soft skills are as important as hard skills in any management. Few strategies that can be implemented for enhancing soft skills in an organization include knowledge management and communities in practice. Knowledge Management As discussed above, knowledge management forms an important precursor to building intellectual capital in any organisation. It is described as an intangible resource underpinning and enhancing overall competitiveness of an organisation, especially in an economy that is predominantly knowledge based. During initial study on intellectual capital, the term knowledge worker came into existence; a knowledge worker is one who has realised his or her intellectual worth. Knowledge management is the method, where intelligence and expertise in an organisation is captured and utilise with the aim to foster innovation through continuous learning within organisation (Quinn, Anderson and Finkelstein, 1996). Application of knowledge results in productivity. In a similar manner, knowledge applied to tasks yields results, which are different and new and are also termed as innovation. Therefore, researchers have concluded that only with the help of knowledge productivity, innovation can be achieved. Nonaka (1991) has suggested existence of two types of knowledge within an organisation. These are explicit knowledge and tactic knowledge. Tactic knowledge comprises mental beliefs, models and mental persuasions of each employee, which are supposedly ingrained within them. Employees are naturally endowed with tactical knowledge, which is deeply rooted in their activities and decision making processes. Tactical knowledge is also present inside an employee’s commitment towards specific profession, market, technology or team activities. Most organisations rarely communicate or share tactical knowledge. As a result, tactic knowledge is lost when employees possessing them resign or leave. The culture of an organisation often represents the level of tactical knowledge possessed. For instance, employees from organisations, such as, Amazon and Apple, are known to be self-motivated and creative, referring to their motivation, free will as well as adaptability to different work conditions and environment. Literatures on knowledge management have suggested that employees showing high level of tactical knowledge significantly increase overall performance of a firm (Davenport, De Long and Beers, 1998). Other examples that point out tactical knowledge within an organisation are casual knowledge, resource chemistry providing competitive advantage as well as cultural tactic found within the corporate culture of an organisation (Michalisn, Smith and Kline, 1997). Explicit Knowledge, on the other hand, is that organisational knowledge that is codified. Explicit knowledge is easily communicated and shared and majority of organisations retain this knowledge in operating technologies or repositories. So, this knowledge is available to almost every member in an organisation. Explicit knowledge can be further sub-divided into three categories, systems understanding, advanced systems knowledge and cognitive knowledge (Davenport, De Long and Beers, 1998). Cognitive knowledge is enhanced through certification and advanced training facilities. Advanced systems skill is the ability of an employee to apply guidelines and rules of a particular discipline to complicated real life issues. Systems understanding reflect deep knowledge of the cause and effect process in a particular discipline (Quinn, Anderson and Finkelstein, 1996). Another important process whereby organisations can improve their knowledge management is continuous interchange between tactic and social knowledge, which ultimately results in enhanced organisational learning. Almost all leading brands and firms have one thing in common. They all are leading investors in human resource management and have a strong belief that long-term competitive advantage can only be achieved through employee knowledge management. Firms such as, McKinsey, Boston Consulting Group and Bain, have established elaborate knowledge management systems. These technology enabled systems enhance communication between individuals. These firms have effectively used practice communities, apprenticeship, brainstorming sessions, group activities as well as computer aided collaboration in order to maintain high level of employee engagement and a continuous learning work environment (Hansen and Tierney, 1999). Another example of a brand that has successfully established knowledge management system in organizational core values is Microsoft. The firm has especially focused on social and technical aspects while evaluating its intellectual capital. Apart from retaining top talent and providing extensive work and career opportunities, the technology firm also boasts of state-of-the-art infrastructure supporting its product developers and researchers. With implementation of advanced technology, Microsoft has rendered knowledge exchange across departments possible, which was otherwise considered difficult (Stross, 1997). Organisational learning is described as an innovation process, where new knowledge is constantly created. The process of organisational learning is continuous and occurs only when employees are involved in knowledge work (Davenport, De Long and Beers, 1998). The iterative method of internalisation and articulation results in organisational learning. Articulation occurs when tactic knowledge of an employee is acquired as explicit knowledge. Transforming tactic knowledge into explicit will result in externalisation, thereby further increasing confidence and intellectual knowledge of an individual. When this explicit knowledge is changed into tactic knowledge of another employee, internalization occurs. This improves overall knowledge base and competency of that individual. Hence, continuous organisational learning takes place where explicit and tactic knowledge intersects, while employees, teams or departments interact within an organisation. Sustainable advantage is a direct result of innovation, which in turn evolves from new knowledge creation. New knowledge can be created only through constant learning practiced within an organisation. So, it can be said that knowledge management is first step towards achieving sustainable competitive advantage. As discussed above, intellectual value is greatly enhanced when cognitive knowledge is transferred to a level of creativity that is self-motivated. Hence, increasing intellectual capital of an organisation assures competitive advantage and future growth (Hamel, 1998). Practice Perspective- SAP and Community Practice Practice perspective in an organisation can be achieved through SAP (strategy as perspective) as well as community practice. SAP has been recognised as a major tool for encouraging social learning in a firm. SAP aims at improving the intellectual capital of an organisation by making social learning a continuous process. Intellectual capital can be relational, structural and human and together they have high influence on the overall workplace quality. for developing IC, firms will have to develop continuous monitoring processes for their intangible assets. Some of the well-known asset monitors are Skandia navigator and Balance scorecard (Bazin, 2010). Even though social capital helps in enhancing network relationships and overall business knowledge, it is still a rare phenomenon across industries. The importance of social learning can be stated from the fact that transformational leaders in a complex environment apply social innovation strategies which enables channelizing of the business proceedings on cooperative intelligence grounds (Rivera-Vazquez, Ortiz-Fournier and Flores, 2009). Multinational such as Wal-Mart have been transferring their business responsibilities into social innovation. Social innovation can also assist in addressing market failures and making businesses scalable and sustainable. Companies such as Levi Strauss, Starbucks and Kraft have already integrated social strategies in their business. Strategic knowledge should be used by leaders for bringing competitiveness and long term sustainability. For instance, when faced with similar issues, codification approach is implemented. On the other hand, personalisation is an appropriate strategy for dissimilar problems. Hence, it can be sated that social innovation, intellectual capital and strategic knowledge among managers and employees are important for nurturing strategy as a fundamental perspective in an organisation. Community practice is an activity, where groups of individuals sharing a passion or concern for a particular job, role or task are continuously learning in order to improve the task with regular interaction. Practice community is majorly focused on understanding knowledge network and ways in which knowledge is created and shared. While terms such as, social capital, are too broad, a study on communities of practices offer exhaustive understanding of relationships where explicit knowledge is shared. Practice communities have been associated with sharing, finding, archiving and transferring knowledge and converting them into tactic knowledge or expertise as these expertises are difficult to codify, capture and store. A growing awareness among knowledge based organizations is the need to become a learning organization. Communities of practices are frequently implemented in organizational activities, which help in developing and understanding networks within an organization (Davenport, De Long and Beers, 1998). Companies such as, General Electric, have been adhering to this practice for achieving competitive edge in respective industries. With extensive communities of practice, General Electric has expanded service and product offerings and transformed from a standalone computer making business to a successful provider of client-server architecture as well as electronic and internet business (Moon and Kym, 2006). While technology is integral to knowledge management, individuals are also critical of its overall success. So, it can be said that a strong organisational culture and infrastructure help in establishing interaction between technology components and people and generating knowledge, thereby rendering General Electric competitive (Kurtzman, 1998). Knowledge management is majorly seen as a process where information is captured, retrieved and organized, evoking notions of documents, databases, data mining and query languages. As a result, these community practices, individually as well as collectively, are regarded as a rich source of crucial information gathered from actual experiences and best practices. Conclusion The major objective of the paper was to understand the role of relational, organisational as well as individual experiences while developing intellectual capital. It has been argued in the essay that the only way for organisations to survive and thrive in a competitive and knowledge based economy is through continuous learning. Companies are rapidly shifting from being a product focussed firm to an innovation focussed one. The importance of intellectual capital has been growing because of numerous business models that have been applied for employee knowledge enhancement. Similarly, organisations are shifting from hard skills training to soft skills training with the objective of enhancing overall competencies within an organisation. It has been found that positive experience increases intellectual capital in an organisation. Successful organisations have been effectively implementing knowledge management systems. Knowledge can be tactic or explicit and by capturing the same, companies have been able to achieve sustainable competitive advantage. Organisations also depend on communities of practice for purpose of knowledge enhancement through continuous learning and evaluation of industry best practices. Collaboration of all sub-categories of intellectual capital, knowledge management systems and communities of practices boosts the organisational objective and value to a higher level, thereby providing a competitive edge over others and ensuring sustainable future growth and development. Reference List Adler, P.S. and Kwon, S., 2002. Social capital: Prospects for a new concept. Academy of Management Review, 27(1), pp. 17-40. Beyerlein, M., Freedman, S., McGee, C. and Moran, L., 2003. Beyond teams: Building the collaborative organizations. San Francisco: Jossey-Bass. Blattberg, R., Getz, G. and Thomas, J. S., 2001. Customer equity: building and managing relationships as valuable assets. 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