Knowledge Management in Medley Fashion Stores - Case Study Example

Name……………… 31 Ramsgate Street BRISBANE QLD 4000 (07) 3511-3225 Fax (07) 3511-3224 15 October 2010 Mr. Jody Roth, CEO, Medley Fashion Stores, Victoria Park Road Kelvin Grove 3089 Dear Mr. Roth, As per your request, the following is a report that analyses the situation at Medley Fashion Stores and indicates the possible way forward in terms of managing knowledge your firm. The report contains information sourced from relevant literature on knowledge management, innovation and learning culture. A number of theories have also been employed in the report in discussing the current situation in the forms. The first section of the report gives an overview of the theories and models in knowledge management, knowledge storage, learning culture, innovation and systems that can be applied to understand the situation in your organisation. The second part of the report makes recommendations based on the models that should be implemented in the company in order to increase profitability and enhance general organizational performance. It has been both a pleasure and challenge working on this report as it presents new work experience for me and enhances my personal learning and development process. I will be more than pleased to make further clarifications or respond to any queries on this report if need be, so feel free to contact me. Prepared for: Jody Roth Prepared by: ….. Knowledge management caste study: Medley Fashion Stores, Submitted to: Mr. Jody Roth, CEO, Medley Fashion Stores, Submitted by: …………. 23 SEPTEMPER 2010 Executive summary This paper makes gives a literature review necessary to identify theory that applies to the case of Medley Fashion Stores (MFS). The paper identifies tacit and explicit knowledge as two clear different forms of knowledge that are critical to any organization. Tacit knowledge is more critical for management decisions. Managing this knowledge will enhance organisation performance. The report notes that there are problems in knowledge management in this firm and makes a number of recommendations. Among them is that new knowledge-based merchandising practices should be adopted and that more social interrelationships in the workplace should be facilitated to enhance knowledge sharing. The paper concludes that the section of the senior managers rooting for the status quo is relying on old fashioned knowledge while those that are rooting for new merchandising practices is well informed from current market trends. Introduction This paper addresses the issue of knowledge management in organisations. This approach in organisational management heavily relies on the people element. Knowledgeable employees imply a knowledgeable organisation. However, since the staffs are not a single unit, knowledge should be shared amongst employees and all entities. Knowledge sharing is heavily linked with innovation and competitive advantages for organizations. One organisation, Medley Fashion Stores, is experiencing problems when it comes to adopting new ideas in merchandising. This problem is attributed to poor knowledge management practices. This paper thus reviews relevant literature in this topic and makes recommendations for the firm. Literature Review Organizations should invest in its personnel to gain effective knowledge through creating the necessary environment and organisational structures and systems that encourage knowledge sharing (Dalkir 2005). Organizations should avoid encouraging excessive internal competition amongst employees as it hinders knowledge sharing as individual employees seek to retain and protect knowledge that gives them competitive advantage over other employees (Stenmark 2001). While the whole organization is poised to benefit from the act of transforming tacit knowledge into explicit knowledge, the individual employee does not benefit hence firms should seek ways of rewarding information sharing (Alavi & Cook 2001). A good example would be rewarding teams which develop ideas that the firms adopts in its processes rather than individuals. Knowledge is intangible and is heavily intertwined with the human capital in an organization (Alwis & Hartman 2008) though organisational structure and culture are also responsible for harnessing and nurturing knowledge (Pan & Scarbrough 1999). Wong (2005) says that “a strong link to a business imperative, a compelling vision and architecture, knowledge leadership, a knowledge creating and sharing culture, continuous learning, a well-developed technology infrastructure and systematic organizational knowledge” (p. 265) are the critical success factors for knowledge management. Interpersonal trust, both in a person’s competence and benevolence, facilitate knowledge creation and sharing (Abrahams et al. 2003). The constructivist approach argues that knowledge is created through shared understanding that emerges out of social interactions amongst the employees and stakeholders (Dalkir 2005). Knowledge, whether tacit or implicit, is very relevant in business management as it determines the quality of the strategy (Class notes session 1). However, many experts in this field perceive tacit knowledge as infinite hence has the greatest potential but remains underexploited (Alwis & Hartman 2008). At the same time, tacit knowledge is a “cultural, emotional and cognitive background, of which we are only marginally aware” (Stenmark 2001 p.10) and also creates the environment for understanding. This confirms the fact that knowledge is not the absolute truth but can be created and influenced by the environment, education, culture, planning, and leadership values (Class notes session 1; Mintzberg 2005). The double line thinking theory insists that an entity in an organization should consider the impact of the action on the entity and the organization as a whole (Baets 2005). Nonetheless, Polanyi (cited in Stenmark 2001) says that the difference between explicit and tacit knowledge should be appreciated but the two should not be separated as they are mutually constituted. Innovation is a critical factor in the knowledge management process that allows organizations to gain competitive advantage. Innovation can also be defined as a process by which organizations create and define problems and develop new knowledge to get to the bottom of them (Alwis & Hartman 2008). Solving problems (knowing how) is the task of tacit knowledge while identifying and defining the problems (knowing that), is the task of explicit knowledge (Class notes session 1). Therefore, before the management can embark on solving problems, the problems must be clearly identified and defined to avoid developing ambiguous solutions. The system thinking approach proposes a holistic approach to problems to avoid addressing the symptoms rather than the causes of the problems which emanate from interrelationships of entities in an organization (Class notes systems thinking). Green Line Lens Theory suggests that common problems in organizations are symptoms of larger undetected problems (Class notes Green Line Lens Theory). To solve these problems, the management should rely on theory bearing in mind that any theory can never be the absolute true but is a false representation of the truth aimed at stimulating thinking (Mintzberg 2005). Recommendations 1.0 Changing merchandising practices The management should adapt new merchandising practices as a response to environmental changes to enable it to be more competitive. The firm currently faces a dilemma on whether to retain the current merchandising practices or adapt new ones, a decision which has split the management. Although the fall in profitability for the chain store is partly attributable to the recent global financial recession, the Green Line Lens Theory indicates that the fall in profitability and the senior managers’ split over the decision is just a tip of a bigger problem of poor interrelationships and poor information and knowledge sharing practices (Class notes Green Line Lens Theory). Such changes should be identified through explicit knowledge since it identifies issues that are open to the public (Wong 2005). For MFS, only a fraction of the senior management team has explicitly identified these changes and attributed them to the present problems. The firm should utilize its knowledge better for long term success of the organization rather than adopting the short term problem-solution approach in management. Any organization that does not utilize knowledge well is bound to fail. There is a strong relationship between knowledge and change in that change is supposed to explore new practices of doing business (Class notes session 1) while knowledge is supposed to inform and guide the process. These new measures and practices cannot be introduced in an organization blindly but must be guided by knowledge in order for the firm to gain competitive advantages through such actions (Haas & Hansen 2007). MFS has therefore to actively introduce competent merchandising practices which are knowledge guided. 2. Establishing a learning culture The firm should enact measures to promote knowledge sharing and uniform information flow. There are two major mechanisms of sharing knowledge; electronic databases and interpersonal interactions (Haas & Hansen 2007). These two mechanisms are often used together in what is called the socio-technical approach (Pan & Scarbrough 1999). Organizations such as MFS are poised to gain competitive advantage by combining social and technical subsystems of knowledge sharing as research indicates that many organizations have opted for the technical approach in knowledge sharing which has received mixed results. Borrowing from psychological and social theories, social interpersonal interactions in the workplace breed more trust which is a requisite for knowledge sharing (Abrahams et al 2003). A horizontal organizational structure should be adopted to facilitate sharing of knowledge which transcends departmental and hierarchical boundaries to encompass the whole organization. Information should flow from one individual to the other, from subordinate staff to senior level employees etc. Developing a learning culture with a supporting structure creates a learning organization that has immense knowledge (Haas & Hansen 2007). The Action Learning Cycle argues that learning only takes place through action or experience where continuous evaluation and correction leads to long term improvement (Dalkir 2005). As an entity by itself, the organization is considered ‘knowledgeable’ so long as all the employees have the somehow the same level of knowledge which simplifies decision making and innovation. Strategies to ensure unlimited knowledge sharing may entail forming teams comprising of employees from different hierarchies, different departments and different cultural backgrounds (Wong 2005). Innovation The firm should be more open to new ideas in order to promote knowledge based innovation. By doing so, there will be motivation and even more space for new ideas and knowledge sharing. Innovation being the brainchild of knowledge, in that it is the application of knowledge to generate new knowledge, will see the development of better ideas and products (Alwis & Hartman 2008). Innovation therefore is continuous advancement from one stage to the other either in terms of knowledge or products services, new systems and new business processes. Employees should be motivated to develop new ideas through a reward system that captures information sharing and innovation activities. Innovation can be perceived as the implementation of knowledge-based practices (Johannessen, Olsne, & Olaisen 1999). Knowledge works in a cyclic manner with innovation in that innovation is a productive resource for creating a knowledge worker, profitability of the firm and fertilizer for sustainable development of the organization which also generally breeds knowledge out of experience (Carlile & Rebentisch 2003). MFS therefore, has the obligation to protect innovation at whatever cost by acting on the forces that resist change as with innovation comes change. MFS should facilitate knowledge sharing and innovation as a sustainability initiative. Knowledge creates opportunities for businesses while innovation makes knowledge sustainable (Alwis & Hartman 2008). While this may seem confusing, it can be explained by saying continuous changes in knowledge, which is facilitated by a learning culture in the workplace, creates new profit opportunities for firms which are quickly eroded by competitive forces through imitation (Johannessen, Olsne, & Olaisen 1999). Innovation comes in handy by creating a new knowledge-base that will, under the catalyst of a learning-friendly environment and culture, be responsible for generating even better ideas (Wong 2005). In the case of the MFS, a convenient learning culture for knowledge sharing will be responsible for creating dynamic values and business practices for the firms. A continued knowledge sharing culture will further create room for more innovations. As such, knowledge and innovation will keep rediscovering each other as a continuous process. However, when one fails, then the competitiveness of the firm is no longer sustainable which is witnessed by fall in profitability as it is at MFS. While innovation cannot take place without knowledge, new tactics for knowledge sharing, and storage need to be developed. Knowledge storage and retrieval The management should adapt one of the many knowledge storage systems available in the market offered by the Likes of Oracle, IBM and Nec. Given that knowledge is gained from experience and when this experience cannot be recalled and retrieved then there is no knowledge. While organizations create knowledge and learn, they also forget hence the need to store conveniently in a retrievable manner i.e. organizational memory (Alavi, & Cook 2001). It is presumable that MFS has undergone such a phase in the past but knowledge gained from such experiences was not stored hence no ideas on how to deal with the current situation. Storing relevant data and information will allow the firm to save costs used to create another knowledge database every time a problem arises (Haas & Hansen 2007). In the past, printed documents in form of reports and memos were used to store knowledge. IT is quickly replacing this where data and information is stored electronically. However, it should be noted that knowledge cannot be stored electronically as it a concept of the mind which is personalised information obtained from information and data (Smith 2001). MFS should carry out regular evaluation of knowledge and dispose off irrelevant data. The firm could be suffering from the same memory that is supposed to help the firm in that it is outdated. This is because such memory does not experience environmental changes that affect the firms and hence relying on outdated knowledge to solve modern day problems create more problems for the firms. This is what has created tension between senior managers where some want to rely on old fashioned merchandising practices while others want to adopt new ones. Relying outdated memory may result in biased decision-making at the individual level or retention of the status quo at the organizational level (Alavi & Cook 2001). Conclusion The issue of adapting new merchandising practices pits old knowledge against new knowledge. New knowledge is based on past tactics which proved successful but might not be relevant presently. Had the management been uniformly informed over new trends in merchandising, the issue should be about what mix of new merchandising strategies to use. To be on the safe side, MFS should consider adapting all the recommendations given above in knowledge management for a long term solution. The above measures will ensure that that the firm returns to profitable ways and makes informed decisions always. Nonetheless, the above recommendations are based on theory hence their results cannot be guaranteed. References Abrahams, L, Cross, R, Lesser, E. & Levin, D. (2003). “Nurturing interpersonal trust in knowledge-sharing networks.” Academy of Management Executive, Vol. 17, No. 4. 64-77 Alavi, M. & Cook, L. (2001). “Review: knowledge management and knowledge management systems: conceptual foundations and research issues.” MIS Quarterly Vol. 25 No. 1, pp. 107-136 Alwis, C. & Hartman, P. (2008). “The use of tacit knowledge within innovative companies: knowledge management in innovative enterprises.” Journal of knowledge management. Vol. 12, No. 1, pp. 133-147, Baets, W. (2005). Knowledge management and management learning: extending the horizons of knowledge-based management. London: Springer Carlile, P. & Rebentisch, E. (2003). “Into the black box: the knowledge transformation cycle.” Management Science. Vol. 49, No. 9, pp. 1180–1195 Class notes. (2010). EMBA 774 Dalkir, K. (2005). Knowledge management in theory and practice. London; Butterworth- Heinemann Earl, M. (2001). “Knowledge management; towards a taxonomy.” Journal of management information systems. Vol. 18, No. 1, pp. 215-233 Haas, M. & Hansen, M. (2007). “Different knowledge, different benefits: Toward productivity perspective on knowledge sharing in organizations.” Strategic Management Journal. Vol. 28, pp.1133–1153 Johannessen, J, Olsne, B. & Olaisen, J. (1999). “Aspects of innovation theory based on knowledge-management.” Information journal of information management. Vol. 19, 121-139 Mintzberg, H. (2005). Developing theory about the development of theory. Retrieved online on 15/10/10 from http://www.mintzberg.org Pan, S. & Scarbrough, H. (1999). “Knowledge management in practice: An exploratory case study.” Technology Analysis & Strategic Management. Vol. 11, No. 3, pp. 359-374 Stenmark, D. (2001). “Leveraging tacit organizational knowledge.” Journal of management information systems, Vol. 17, No. 3, pp. 9-24. Smith, E. (2001). “The role of tacit and explicit knowledge in the workplace.” Journal of knowledge management. Vol. 5, No. 4, pp. 311-321. Wong, K. (2005). “Critical success factors for implementing knowledge management in small and medium enterprises.” Industrial management & data systems Vol. 105 No. 3, 2005 pp. 261-279 Read More