The Role of Knowledge Integration in the Creation of Competitive Advantage for Any Firm - Essay Example

Capabilities and competencies Introduction In any organization, effective management is dependent on how the diverse business units in the company contribute to the firm as a whole. In turn, this determines the detailed knowledge integration requirements. For instance, an organization can be viewed as a collection of independent businesses that are entirely different, with interdependence amongst themselves due to financial factors. As a result, the corporate environment will be made up of inter-unit relationships that are minimal, and thus decision making is dependent on a knowledge scheme that is sparse. This is so because knowledge integration needs are limited to the exchange of structured and well defined financial statements. On the other hand, some corporate environments might be much more demanding in relation to knowledge integration needs, in attempting to achieve corporate effectiveness. For instance, a company can aim at achieving economies of scale in its purchasing decisions or in trying to coordinate its research and development activities, so as to achieve synergies that are essential for attaining competitive advantage (Hamel & Prahalad 1990, p.82). This means that an organization should have a proper knowledge flow management system across the diverse business units in the organization. From these short examples, it is evident that the precise knowledge integration requirements rely heavily on the conditions present in an organization. Additionally, the actions that a company can take to achieve corporate effectiveness are exceedingly contingent. On one hand, every company is faced with specific technical conditions, and, on the other hand, learning capabilities, culture, and tradition differ significantly form one company to another and even from one business unit to another. This paper aims at discussing the concept of knowledge integration in organizations. In particular, the paper discusses the concept of knowledge integration from a firm’s viewpoint, to identify the issues facing firms as they seek to integrate knowledge and the reasons why knowledge integration is so crucial to maintaining competitive advantage. Knowledge integration refers to the process of combining numerous knowledge models into a single model. This process also entails the incorporation new knowledge into a body of already existing information (Murray 1995, p.72). It entails establishing how new knowledge can interact with existing knowledge, how current knowledge can be transformed to integrate new knowledge, and how new knowledge can be changed in light of the current knowledge. In integrating explicit knowledge, there are few problems involved due to its intrinsic communicability (Linn cited in Sawyer 2006, p. 68). The developments in information technology have significantly promoted the integration of explicit information by improving the ease with which explicit information can be assimilated, communicated, codified, retrieved, and stored. Nevertheless, there are multifaceted and compelling issues that are relevant to the integration of knowledge (Grant & Spender 1996, p. 8). Direction Direction is said to be the chief means by which organizations can use to communicate knowledge between specialists and non-specialists or individuals who are experts in other fields, at a low cost. For instance, for a McDonald restaurant to optimize its operations, it is more efficient for the company to produce an operating manual that encompasses nearly all aspects of the management of the restaurant. This will be more efficient as compared to informing each manager in finance, accounting, psychology, human resource management, production management, marketing, engineering, hygiene, nutrition, and cooking, plus other specialist knowledge areas that are incorporated in the standard operating rules (Spender 1994, p. 355). When an activity is more difficult, it means that there will be more locations where the activity will be duplicated. This means that the performance requirements for the outcome of such an activity will be more stringent, and, therefore, direction will be heavily relied upon in integrating knowledge (Nonaka 1991, p.98). For instance, there are approximately 67 locations where British Airways has aircraft maintenance facilities. Repair and service facilities are managed by a number of directives and procedures that are highly formalized founded on the standards set by the regulatory authorities, technical and guidance information that is supplied by aircraft makers, and procedures and policies established by the company itself. These procedures, policies, and directives incorporate the technical information of numerous specialists (Starbuck 1992, p. 725). Routines Direction entails codifying implicit knowledge into explicit instructions and rules. However, one feature of implied knowledge is that transforming implicit knowledge into explicit knowledge in the form of expert systems, formulae, directives, and rules, inescapably entails the loss of considerable knowledge. Having a routine in an organization provides a system of harmonization which does not rely on the need for an explicit form of communicating knowledge. From a knowledge-based perspective, the role of having a routine in an organization is so that people develop patterns of interaction that are sequential. This will facilitate the integration of specialized information with no requirement to communicate this information (Hodgetts 1999, p. 26). For instance, from the observation of any team in an organization, be it a surgical team in the operation room of a hospital or a mechanics team in the grand prix, it is evident that there are working arrangements that are closely coordinated, whereby each member of a team contributes his or her expertise knowledge, but there are automatic interaction patterns (Liebeskind, Brewer, Zucker & Oliver 1996, p. 432). This harmonization relies considerably on the informal procedures that exist as commonly-understood interactions or roles developed through constant repetition and training. It is also supported by a number of implicit and explicit signals. As compared to direction, routine has the advantage of optimizing on communication, and it also provides a higher capacity that can be utilized in changing responses to a wide variety of situations (Levitt & March 1988, p. 328). Culture Organizational culture refers to the certain implicit assumptions that members of a group hold that guide group behavior and how a group reacts to its environment. The culture of an organization consists of beliefs and values that dictate what goal a company should strive to achieve and how an organization will achieve it. These beliefs and values dictate the obvious organizational practices and norms that consist of control systems, organizational structures, power structures, symbols, myths and stories, routines, rituals, expectations, and rules (Blacker 1995, p. 1028). In turn, such practices and norms guide subsequent behaviors by offering the social context through which individuals act and communicate. In the context of knowledge integration, the culture of an organization dictates the social context which determines who can hold information, who can share it, and who has the authority to control information. In an organization, there can be three different cultural types: supportive, innovative, and bureaucratic. In a bureaucratic culture, work is highly systematized and regulated, and there are lucid lines of authority. In cultures that are considered innovative, they are typified by creativity, risky environments where pressure, stress, and burnout are common. In supportive cultures, the environment is warm and friendly, whereby workers tend to be honest, open, and fair. Each organization is said to have the three cultural types to different degrees, and this will affect organizational knowledge integration in different ways. Knowledge integration and competitive advantage In many organizations, productivity, agility, and efficiency are cited as the essential competitive assets that are required to attain competitive advantage. Where knowledge integration is used as the foundation of competitive advantage, there are three main features of knowledge integration that are linked with the sustenance and creation of competitive advantage (Andreau & Sieber 2005, p. 159). Efficiency of integration Competitive advantage relies on how firms that are productive utilize the information that is stored within the individual members in an organization. This relies on the capability of an organization to harness and access this specific knowledge that its members possess. There are three key factors that are vital in establishing the competence with which an organization can integrate the specialized knowledge it possesses (Porter 1991, p. 56). Common knowledge level: Communication between individuals facilitates both routine and direction in a firm. For different specialists to communicate effectively there must be common knowledge between the specialists. However, where specialized knowledge is simplified to common knowledge for communication purpose, there will be considerable loss of information. The magnitude of this loss will be dictated by the sophistication and level of common knowledge. For both routine and direction, effectiveness of communication relies on commonality of experience, conceptual knowledge, and vocabulary between individual experts. Culture is considered as the central part of common knowledge that promotes understanding and communication. In general terms, the broader the extent of knowledge integrated, the lesser the level of common knowledge, and the higher the inefficiency in integration and communication of knowledge. In addition, the culture in an organization is considered as a form of common knowledge, whose function is to promote knowledge integration in the firm (Demsetz cited in winter, 1991, p. 67). Variability and frequency of performance of tasks The effectiveness with which the routines in an organization incorporate the unique knowledge of members in a team, rely on the level of complexity of the system of responsiveness and signaling; which grows among members of a team due to improvement and repetition. What is crucial is the ability to obtain and interpret incoming information from the environment or other members of the team. Integrative efficiency relies on the efficiency of communication in extracting suitable responses from each member of an organization (March 1991, p. 75). Structure: for an organization to integrate knowledge efficiently; there is a need to optimize on the quantity of communication required to achieve integration. The structure in an organization should be designed in such a way that its activities reduce the intensity and extent of communication required to effect knowledge integration. In a bureaucratic structure, the efficiency of knowledge integration is maximized in a firm where direction is considered to be the chief integrating mechanism (Takeuchi & Nonaka 1995, p. 84). In the structuring of organizations, the principle of modularity is vital for an organization to achieve efficiencies in communication. Modularity is instrumental in organizing capabilities that are considered highly complex which entail knowledge integration on a wide scope. Nevertheless, many conservative approaches to modularity have the problem of relying heavily on time sequencing. This sequencing is time consuming under circumstances of hyper-competition. The challenge to organizations is to establish modularity that allows full simultaneity or overlapping phases (Volberda 1996, p. 362). Scope of integration The augmentations of the span of knowledge that are incorporated in the capability of an organization raises the potential for both sustaining and establishing competitive through two key sources: One is through the different forms of unique knowledge that are complements, as opposed to being substitutes in production. The marginal revenue product of a single unit of unique knowledge rises with the increase of different forms of knowledge, up to the position of diminishing relevance (Malone & Edvinssson 1997, p. 96). Secondly, the higher the level of knowledge being integrated in a capability, the higher the complexity faced by competitors in duplicating a capability as a result of increases in casual ambiguity, and diseconomies of replication that are time-based. The intricacies linked with integration that is of a broader scope are increased further when different forms of knowledge need patterns on integration, which are different. For instance, the lean production system of Toyota combines innovation, flexibility, quality, and cost efficiency. Such diverse performance dimensions involve diverse forms of integration. Whereas cost efficiency may be attained through sequential independence, flexibility requires patterns of reciprocal interdependence that are more complex. Such integration complexities are also likely to be witnessed among fashion apparel suppliers who merge quick response capability, and fashion-based differentiation with low costs (Richardson 1996, p.406). Flexibility of integration In as much as integration across a broad scope of expert knowledge is crucial in maintaining competitive advantage, hypercompetitive circumstances will result, in the erosion of competitive advantage through innovative or imitative competition. Therefore, for a firm to sustain improved performance, the firm should continuously renovate its competitive advantage strategy through the development and innovation of fresh capabilities. This renewal can be achieved in two ways: expanding the present capabilities to cover new forms of knowledge, and restructuring the current knowledge into new forms of capability (Grant 1996, p.382). The simplicity with which the present capabilities can be expanded to cover fresh knowledge relies considerably on the features of knowledge in terms of communicability. When novel information is explicit, or if implied knowledge can be expressed in an explicit manner, then incorporating new information will not result in serious problems. For instance, when general motors sought to upgrade its manufacturing capacity to incorporate the knowledge found in the lean production system of Toyota, the process was painful and slow because a lot of the needed information was implicit and the routines used in integration were deeply rooted in the culture and history of Toyota (Ciborra & Andreau 2001, p. 72). The restructuring of present knowledge using new patters of integration is more difficult; however, this process is more significant in terms of competitive advantage. This restructuring of knowledge is fundamental to the idea of architectural innovation. The crucial role of architectural knowledge involves the integration of knowledge across organizational and disciplinary boundaries in a firm (Prahalad & Connor1996, p. 492). In addition to process and product innovations, architectural innovation also encompasses strategic innovations that restructure knowledge into new strategies for competing. Strategic innovation is vital to creating competitive advantage in business environments that are mature, as opposed to new business environments. For instance, in fashion companies such as The Limited and Benetton have used innovative approaches in value-chain restructuring to create quick-response capability (Quinn 1992, p.86). A majority of firms that are restructuring knowledge into strategic and architectural innovations, identify such innovations as secluded successes as opposed to being proof of flexible capabilities that have the ability to repeatedly, and continuously restructure knowledge in new trends of integration (Clark & Henderson 1990, p.26). As a result, of difficulties innate integrating implicit knowledge and reliance of such integration on communication patterns and routines that are developed with time, creating the organizational preparations required to attain the flexibility of integration. In a competitive environment, continuous innovation is required for the extension and deployment of existing capabilities as opposed constant development of new capabilities (Snow & Hassen 1996, p. 425). The achievement of flexible integration by reconfiguring existing knowledge constantly or integration implicit knowledge continually; will impose considerable costs with regards to reducing the effectiveness of knowledge integration. The consequence is that discontinuous and radical change in an industry environment is likely to go along with the decline of reputable market leaders (Grant 1991, p. 126). Conclusion From this paper, it is evident that knowledge integration is crucial in the creation of competitive advantage for any firm. Nevertheless, there are issues facing firms as they seek to integrate knowledge. Such issues have to do with direction which is the means by which organizations can use to communicate knowledge between specialists and non-specialists or individuals who are experts in other fields, at a low cost. The routines in an organization that enables people develop sequential patterns of interaction, and organization culture that dictates the social context which determines who can hold information, who can share it, and who has the authority to control information. In addition, this paper has described the three main features of knowledge integration that are linked with the sustenance and creation of competitive advantage. Efficiency of integration deals with, how firms utilize the information that is stored within the individual members in an organization. Scope of integration deals with the span of knowledge that is integrated in the organizational capability. Finally, the flexibility of integration that proposes that firms should continuously renovate its competitive advantage strategy through the development and innovation of new capabilities so as to maintain a competitive advantage. References Andreau, R & Sieber, S 2005, ‘Knowledge integration across organizations: how different types of knowledge suggest different integration trajectories’. Knowledge and process management, Vol. 12, no. 3, pp. 153-160. Blacker, F, 1995, ‘Knowledge, knowledge work and organizations; an overview and interpretation’. Organization studies. Vol. 16, no. 6, pp. 1022-1042. Boiset, M, Information space; a framework for learning in organizations, institutions, and cultures, Routledge, London. Ciborra, S & Andreau, R, 2001, sharing knowledge across boundaries, Journal of information technology, vol. 16, no. 2, pp. 73-81. Clark, K, & Henderson, R 1990, ‘Architectural innovation; the reconfiguration of existing product technologies and the failure of established firms.’ Administrative science quarterly, vol. 35, pp. 9-31. Demsetz, H, 1991, The theory of the firm revisited, in Winter, S, & Williamson, E, The nature of the firm, Oxford University press, New York. Grant, M 1991, ‘The resource based theory of competitive advantage; implications for strategy formulation,’ California management review, vol. 33, no. 3, pp. 114-135. Grant, R, M, 1996, ‘Prospering in dynamically-competitive environments; organizational capability as knowledge integration’. Organization science, vol. 7, no. 4, pp. 375-387. Grant, M, & Spender, C, 1996, knowledge and the firm; overview. Strategic management journal, Vol. 17, no. 4, pp. 5-9. Hamel, G, & Prahalad, K 1990, ‘The core competencies of the corporation,’ Harvard business review, pp. 79-91. Hodgetts, M, 1999, ‘A conversation with Michael E. Porter: a significant extension toward operational improvement and positioning’, Organizational dynamics, vol. 28, no. 1, pp. 24-33. Levitt, B, & March, G, 1988, ‘Organizational learning’. Annual review of sociology, Vol. 14, pp. 319-340. Liebeskind, P, Brewer, N, Zucker, L, & Oliver, A, 1996, “Social networks, learning, and flexibility; sourcing scientific knowledge in new biotechnology firms’. Organizational science, vol. 7, no.4, pp. 428-443. Linn, C 2006, The Knowledge Integration Perspective on Learning and Instruction. Sawyer, R. In The Cambridge Handbook of the Learning Sciences. Cambridge University Press, Cambridge, MA. Malone, S, & Edvinssson, L, 1997, Intellectual capital; realizing your company’s true value by finding its hidden brain power, Harper business, New York. March, G, 1991, ‘Exploration and exploitation in organizational learning.’ Organizational science, vol. 2, no. 1, pp.71-87. Murray, S 1995, Learning as Knowledge Integration. University of Texas, Austin. Nonaka, I, 1991, The knowledge-creating company. Harvard business review, vol. 69. no.6, pp. 96-104. Porter, E, 1991, The competitive advantage of nations, Free press, New York. Prahalad, K, & Connor, K, 1996, ‘A resource-based theory of the firm; knowledge versus opportunism’. Organization science. Vol. 7, no. 5, pp. 477-501. Quinn, J, B 1992, Intelligence enterprise, Free press, New York. Richardson, J 1996, Vertical integration and rapid response in fashion apparel, Organizational science, vol. 7, no. 4, 400-412. Sieber, S & Andreu, R 2000, Learning trajectories: the ultimate requirement for effective knowledge management. University or Warwick, UK. Snow, C & Hassen, J 1996, ‘Responding to hyper competition; the structure and processes of a regional learning network organization, Organization science, Vol. 7, no. 4, pp. 413-427. Spender, C, 1994, Organizational knowledge, collective practice, and Penrose rents, International business review, vol. 3, no. 4, pp. 353-367. Starbuck, H, 1992, ‘Learning by knowledge-intensive firms’ Journal of management studies, Vol. 29, pp. 713-739. Takeuchi, H, & Nonaka, I, 1995, The knowledge-creating company. Oxford University press, New York. Volberda, W, 1996, ‘Towards the flexible form; how to remain vital in hypercompetitive environments,’ Organizational science, Vol. 7, no. 4, pp. 359-374. Read More