We live in an information economy in which the major source of wealth and prosperity is the production and distribution of information and knowledge.
An era in which the key economic resource is knowledge is startlingly different from an era in which the key resources were capital, raw materials, land and labor. Emerging service economy trend lead many organizations towards the information base strategies to face and fight with the current business competitions. In that case knowledge plays a major role in every organization.
In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. (Harvard Business Review) Therefore an organization? s most valuable assets are the people it employs.
The ideas, experiences, expertise and knowledge contained in the mind of an individual may be worth more to an organization. In this case, Knowledge can be recognized as an important weapon for sustaining competitive advantage in organizations and many companies are beginning to manage organizational knowledge.
Any organization that dynamically deals with a changing environment ought not only to process information efficiently but also create information and knowledge. (Lee & Choi, 2003) 3 Organizational Knowledge It is often said that an organization? s most valuable assets are the people it employs.
The ideas, experiences, expertise and knowledge contained in the mind of an individual may be worth more to an organization than can be quantified with respect to how that knowledge is applied each day to save time, reduce costs, and advance the organization? s initiatives.
How can an organization capitalize on individual knowledge? How do individuals contribute to subunits or groups within the organization to build and perpetuate group knowledge? How does individual and group knowledge become organizational knowledge that can be captured, reused, and applied to achieve measurable positive effects for the organization?
When might extraorganizational knowledge be used to further increase or enhance the capabilities of an organization? In line with the topic; Organizational knowledge, we have to explores these questions, first by defining each knowledge type, then by examining how knowledge moves through an organization and becomes valuable organizational intellectual capital. Defining Knowledge Knowledge is a cognitive, a spiritual, event that take place inside people? s heads. There are two primary definitions of the knowledge as the Tacit Knowledge and the Explicit Knowledge.
In simply knowledge residing in the minds of employees that has not been documented is called tacit knowledge, whereas knowledge that has been documented is called explicit knowledge. Tacit Knowledge Tacit Knowledge can be defined as knowledge that has not yet been codified from the outside the individual? s mind. On another words, knowledge that comes from experience and is difficult or impossible to communicate. It is intangible and consists of knowledge which is difficult to express and to communicate to other people.
Also it is more difficult to transmit than codified knowledge and hard to formalize due to belonged personal qualities. Examples for tacit knowledge are; Awareness Mental models Wisdom – Skills – Expertise – Corporate memory 4 Explicit Knowledge Explicit knowledge, in contrast, is the knowledge that can be codified and is transmittable in formal systematic language. (Nonaka 1994) It consists of knowledge which can be expressed in symbols, and which can be communicated through these symbols to other people. Knowledge can reside in e-mail, unstructured documents, hand books, manuals can be listed under this category.
Examples for explicit knowledge are; Databases, statistics, collections Books, publications, reports, documents, correspondence Photographs, diagrams, illustrations Computer code, expert systems, decision support systems Presentations, speeches, lectures Recorded experiences, stories Materials for education, teaching and training Laws, regulations, procedures, rules, policies Individual Knowledge Individual knowledge can be defined simply as knowledge possessed by the individual. This knowledge is most often tacit unless the individual possesses explicit knowledge that is not shared with anyone or any organization other than the individual.
A private journal or private blog might be considered explicit individual knowledge. Individual knowledge can be acquired through experiences, and at times it can be acquired without language. When an individual is acquiring knowledge from observing another person? s actions, and once the individual applies his or her own experiences and background to what is learned it becomes individual knowledge. The creation of new „individual? knowledge derived from observation, imitation and practice is called socialization, or tacit to tacit knowledge sharing. Individual knowledge can certainly develop from explicit knowledge.
What a person reads, for example, can contribute to new thoughts and ideas in the mind of the individual. This method of knowledge creation is referred to as internalization – turning explicit knowledge into 5 tacit knowledge. By reading or acquiring explicit knowledge, independent thought and analysis can develop into new, individual knowledge. An individual can make a greater contribution to the knowledge sharing and creation process by allowing their knowledge to be internalized by others or socializing their knowledge with others, which leads to the creation of group knowledge. Group Knowledge
Group knowledge might be defined as individual knowledge that multiple individuals rely upon as truth, share and understand. Group knowledge is “broadcast information” (Correa da Silva & Cullell, 56), but is not necessarily information shared „publicly? (i. e. “common knowledge”). Group knowledge can be generated and disseminated through socialization and often results in the transformation of tacit knowledge into explicit knowledge, or externalization. When groups come together and exchange ideas, “individual knowledge is synthesized to arrive at group knowledge, which eventually becomes routing at the organizational level.
Thus, the transformation of individual knowledge into organizational routines leads to complex and embodied organizational knowledge”. When group knowledge from several subunits or groups is combined and used to create new knowledge, the resulting tacit and explicit knowledge can be called organizational knowledge. 6 Important Dimensions of Knowledge Knowledge is a firm asset Knowledge is an intangible asset. Knowledge is not subject to the law of diminishing returns as physical assets, but its value increases as more people share it.
Knowledge has different forms Knowledge can be either tacit or explicit (codified) Knowledge involves know-how, craft and skill Knowledge involves knowing how to follow procedures Knowledge has a location Knowledge is a cognitive event involving mental models and maps of individuals There is both a social and an individual basis of knowledge Knowledge is sticky, situated, and contextual Knowledge is situational Knowledge is conditional: Knowing when to apply a procedure is just as important as knowing the procedure Knowledge is related to context
SOURCE: Laudon and Laudon, 2008. Management Information Systems Knowledge Creation New knowledge always begins with the individual. Making personal knowledge available to others is the central activity of the knowledge creating company. It takes place continuously and at all levels of the organization. Organizational knowledge creation may be explicated by the interchange between tacit and explicit knowledge. According to Nonaka and Takeuchi (1995), “tacit knowledge is highly personal and hard to formalize, making it difficult to communicate or to share with others.
Subjective insights, intuitions, and hunches fall into this category of knowledge”. On the other 7 hand, explicit knowledge is more easily transmitted as it is characteristically codified. As such, explicit knowledge is more easily processed and shared with others. According to the theory, the process of knowledge conversion proceeds through four different modes: 1. Socialization (the conversion of tacit knowledge to tacit knowledge) 2. Combination (the conversion of explicit knowledge to explicit knowledge) 3. Externalization (the conversion of tacit to explicit knowledge) and 4.
Internalization (the conversion of explicit to tacit knowledge) Socialization During the socialization mode, tacit knowledge is transferred through interactions between individuals, which may also be accomplished in the absence of language; individuals may learn and gain a sense of competence by observing behavior modeled by others. For example, mentoring and apprenticeships instruct tacitly through observation, imitation, and practice. Combination The combination mode of knowledge conversion embodies the aggregation of multiple examples of explicit knowledge (Nonaka, 1994).
Explicit knowledge may be exchanged during meetings or conferences in which a diversity of knowledge sources combines to shape a new and enhanced conception. Externalization The externalization mode of the knowledge conversion spiral references the translation of tacit knowledge into explicit. Metaphors are recommended as a way to facilitate this translation (Nonaka, 1994). Metaphors assist individuals in explaining concealed (i. e. , tacit) concepts that are otherwise difficult to articulate by assisting individuals in forming impressions based on “imagination and intuitive learning through symbols”.
Internalization The conversion of explicit to tacit knowledge, i. e. , the internalization mode occurs through a series of iterations in which concepts become concrete and ultimately absorbed as an integral 8 belief or value. Where externalization utilizes metaphors to facilitate knowledge conversion, internalization represents an active process of learning. Nonaka (1994) describes this as “participants….. sharing explicit knowledge that is gradually translated, through interaction and a process of trial-and-error, into different aspects of tacit knowledge.
It is found most commonly at highly successful Japanese companies such as Honda, Canon, Matushita and Sharp are in focusing to the knowledge creation. Managers in these companies recognize that creating new knowledge is not simply a matter of mechanistically “Processing” objective information. The knowledge creation process The mutual exchange of tacit and explicit knowledge that describes the knowledge creation process is initiated at the level of the individual employee or organizational member. Because individuals are an integral component of this conversion process, their commitment to knowledge creation is critical.
According to Nonaka (1994), knowledge creation may be activated when organizational members have freedom and sufficient purpose to pursue new knowledge. A continuous process of questioning and reconsidering existing premises by individual members of the organization fosters organizational knowledge creation” (Nonaka & Takeuchi, 1995). Knowledge Management For hundreds of years, owners of family businesses have passed their commercial wisdom on to their children, master artificer have taught their trades to followers, and workers have exchanged their knowledge on the job.
Therefore knowledge management is nothing new, but until the 1990s that managers were not talking about knowledge management. (Harvard Business Review) When the industrialized economies have shifted from natural resources to intellectual assets, managers have been constrained to censor the knowledge underlying their businesses and how that knowledge is used. At that same time rice of technological devices using; mainly computers has made it possible to codify, store, and share certain kind of knowledge more easily than ever. In current business environment, Knowledge management has become an important theme at many large business firms as managers realize that much of their firm? s value depends on firm? s ability to create and manage knowledge. (Laudon & Laudon). Studies have found that a substantial part of a firm? s stock market value is related to its intangible assets, of which knowledge is one important component, along with brands, reputations, and unique business processes (Gu and Lev, 2001).
Well executed knowledge-based projects have been known to produce extra ordinary returns on investment, although knowledge-based investments are difficult to measure (Blair and Wallman, 2001). Knowledge Management is the process of leveraging organizational knowledge to deliver longterm advantage to a business. This, in turn, requires technology to capture, codify, store, disseminate and reuse the knowledge. Any organization, before framing a strategy, should analyze the industry and should understand all relevant parameters of industry growth.
This analysis would yield results on the industry parameters like growth/ recession buyer/supplier power leading to determining the attractiveness of competition. The competitor analysis would reveal the strategy adopted by the competitors and identify the possible future movements of the competitors and to predict the strategies that are likely to be adopted by them. An organization can gain competitive advantage and sustain it only if it is able to understand the needs of the customer and track the changes in the customer needs.
In this context, the analysis of the needs of customer gains importance. An organization should assess the resources and capabilities, before formulating a strategy, since the resources and capabilities should aid the operationalization of the chosen strategy. The right combination of resources and capabilities in the context of a strategy can be discovered through the process of knowledge management. Knowledge Management Value Chain Knowledge management increases the ability of the organization to learn from its environment and to incorporate knowledge into its business processes.
Knowledge value is very difficult to measure and it is extracted when knowledge is used. Knowledge sharing increases the value of knowledge with abundance. Knowledge management value chain is a sequence of intellectual tasks by which knowledge workers build their employer? s unique competitive advantage and social and environmental benefits. There are four main value adding steps in the knowledge 10 management value chain; each stage adds value to raw data and information as they are transformed into usable knowledge. Acquisition Storage Dissemination Application
Figure 02: Knowledge Management value chain Knowledge acquisition Organizations acquire knowledge in a number of ways, depending on the type of knowledge they seek. In a way, organizations acquire knowledge by developing online expert networks so that employees can “find the expert” in the company who has the knowledge in his or her head. Other than that firms have to create new knowledge by discovering patterns in corporate data or by using knowledge work stations where engineers can discover new knowledge. A coherent and organized knowledge system also requires systematic data from the firm? transaction processing systems (sales, payments, inventory, customers etc. ), news feeds, industry reports, legal opinions, scientific research and government statistics as well. Knowledge storage Knowledge storage generally involves the creation of a database. Expert systems also help corporations preserve the knowledge that is acquired by incorporating that knowledge into organizational process and culture. Management must support the development of planned knowledge storage systems to update and store documents properly. 11 Knowledge Dissemination
Portal, e-mail, instant messaging and search engine technology have added to the existing technologies for sharing documents, data and graphics. Training programmes, informal networks and shared management experience communicated through a supportive culture help managers focus their attention on the important knowledge and information which is really important for their decisions and their work. Knowledge Application Knowledge that is not shared and applied to the practical problems facing firms and managers does not add business value.
To provide a return on investment, organizational knowledge must become a systematic part of management decision making and become situated in decision support systems. An organizations can do this is to build online information databases that employees can access which works as an online knowledge bank. Other than this some knowledge management experts have suggest that organizations create “communities of practice”, which are groups of people who share a concern, a set of problems or a passion about a topic and who deepen their knowledge and expertise in that area by interacting on an ongoing basis.
Out of the four steps in knowledge management value chain, knowledge sharing is considered to be the most important one, and it is said “Knowledge sharing is the power” instead of “Knowledge is the Power”. In order to do this an organization must have a knowledge supporting culture, that management can support the knowledge creation and sharing. In line with that perfect human resource management is a prior functional area in an organization. Top management provides employees with a sense of direction by setting the standards for justifying the value of knowledge that is constantly being developed by the organization? members. Deciding which efforts to support and develop is a strategic task. (Harvard business review on Knowledge management, 2008) 12 Knowledge Applications in the Technological Aspect Business Problems ? ? ? Monitor service levels and costs Develop document access rules Management ? Document intensive business Fragmented information in legacy systems and manual processes ? ? ? Coordinate Documents and maintenance data Develop Document Access procedures Revise repair and maintenance procedures Organization Information systems Business solution ? ? Reduce time Reduse cost ? ? ? ?
Implement oracle database Deploy laptops Technology Immediately access Equipment maintenance information Figure 03: Use of Technology in Knowledge Management Process The diagram shows how organizations can use technology in solving business problems and how an organization can reduce the time consumption and the cost by using information systems. These information systems would include transaction processing systems, management information systems, decision support systems, expert systems and intelligent systems etc. Knowledge Management Strategies There are mainly two types of knowledge management strategies.
In some companies, the strategy centered on the computer. In that c knowledge is carefully codified and stored in databases, where it can be easily accessed and used by anyone in the company. This is called Codification Strategy. 13 Codification Strategy Codification strategy implies the theme; “people to documents”, pointing to develop an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge. The companies that follow codification strategy rely on the” economics of reuse”. Once an organization invests in knowledge asset; they can reuse it many times.
The reuse of knowledge saves work, reduces communication costs and allows a company to take on more projects. And the strategy focuses on generating large overall revenues. And also the organizations always think in the point of human resource management to hire new graduates who are suited to reuse knowledge and the implementation of solutions, to train people in groups and through computer based learning, to reward people for using and contributing to document databases. Earnest & Young is an organization which uses this strategy as their knowledge management strategy.
In other companies, knowledge is closely bounded to the person who developed it and is shared mainly through direct person to person contacts. In those companies main purpose of the computers is to help people to communicate knowledge, not to store it. This is called Personalization Strategy. Personalization Strategy And this strategy implies that “person to person” fact which points to develop networks for linking people so that tacit knowledge can be shared. In contrast to the codification strategy, the personalization strategy relies on the logic of “expert economics”.
It focuses on maintaining high profit margins. But on the other hand the process of sharing deep knowledge is time consuming, expensive and slow. It can? t be made much efficient. The companies that applied this strategy as their knowledge management strategy; wish to hire people who like problem solving and can tolerate ambiguity and to reward people for directly sharing knowledge with others. Choosing the knowledge management strategy is not an arbitrary thing, it depends on the economics of the company, the way it serves its clients and the people it hires.
Experts believe that the choice between codification and personalization is the central one facing virtually all 14 companies in the era of knowledge management. However an organization? s strategy for knowledge management reflects its competitive strategy; it creates value for customers; how that value support for customers; how that value supports an economic model and how the company? s people deliver on the value, because it is the leading fact and the base of all other functional areas in the organization for gaining the competitive advantage in the dynamic economy. Types of Knowledge Management systems in an Organization
There are essentially three major types of knowledge management systems namely; enterprisewide knowledge management systems, knowledge work systems and intelligent techniques. Figure 3 shows the knowledge management system applications for each of these major categories. Enterprise-Wide Knowledge Management Systems Knowledge Work Systems Intelligent Techniques – Structured knowledge systems – Semi structured knowledge systems – Knowledge network systems – Computer aided design (CAD) – Data mining – 3 D Visualization – Virtual reality -Neural networks – Expert systems – Intelligent Agents 1. Enterprise-wide knowledge management systems are general purpose firm wide efforts to collect, store, distribute and apply digital content and knowledge. They provide databases and tools for organizing and storing structured and unstructured documents and other knowledge objects for locating employees with expertise in a particular area including web based tools for collaboration and communication. Structured knowledge systems: These systems perform the function of implementing the tagging, interface with corporate databases where the documents are stored and 15 reating an enterprise portal environment for employees to use when searching for corporate knowledge. Semi structured knowledge systems: These systems track, store and organize semi structured documents (folders, messages, proposals, e mails, slide presentations etc) Knowledge network systems: Knowledge network system addresses the problem that arises when the appropriate knowledge is tacit knowledge residing in the memory of expert individuals in the firm. Because such knowledge cannot be conveniently found, employees expend significant resources rediscovering knowledge.
Knowledge network systems provide an online directory of corporate experts in well-defined knowledge domains and use communication technologies to make it easy for employees to find the appropriate expert in a company. 02. Knowledge work systems (KWS) are specialized systems built for professionals and other knowledge workers charged with discovering and creating new knowledge for an organization. The development of powerful networked work stations and software in the discovery of new knowledge has led to the creation of knowledge work systems. 03.
Intelligent techniques have different objectives from a focus on discovering knowledge (through data mining and neural networks) to distilling knowledge (through expert systems and fuzzy logic) in the form of rules for a computer programme in order to discover optimal solutions for problems. Knowledge Portals Many organizations have integrated their content and document management capabilities with powerful portals and these will provide access to external sources of information, such as news feeds and research, as well as to internal knowledge resources along with capabilities for e mail, chat, discussion groups and video conferencing.
Organizations are now using blogs, wikis and social book marking for internal use to facilitate the exchange of information between individuals and teams within organizations. 16 A learning Organization In more recent times, managers seem to be searching for new approaches to management. Fuelling this search is a range of new issues that modern managers face but that their historical counterparts did not. These issues include a concern about the competitive decline of western firms, the accelerating pace of technological change, the sophistication of customers, and an increasing emphasize on globalization.
A new approach to management that is evolving to handle this new range of issues can e called as the learning organization approach. Organizational learning means the process of improving actions through better knowledge and understanding. Therefore under the organizational knowledge title organizational learning is another important fact which can be identified as a supportive term for the organizational knowledge. A learning organization is an organization skilled at creating, acquiring and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.
Learning organizations emphasize systematic problem solving, experimentation, learning from their own experience and past history, transferring knowledge. These activities leading the organizations towards the fact of gaining competitive advantage by relying on the scientific method and data rather than assumptions, searching for and testing of new knowledge, reviewing their successes and failures, learning from others; specially from immediate environment, and spreading the knowledge throughout the organization quickly and efficiently.
Actually the most important thing is that the using and sharing the knowledge which has collected. Otherwise there is no any created benefit from the knowledge to the organization, peculiarly learning from others and spreading the knowledge throughout the organization is become more important in this case. Learning occurs in two forms, those are single-loop and double-loop. Single loop learning asks a one dimensional question to expose one dimensional answer. Double loop learning takes an additional step or several additional steps.
It might also ask why the current setting was chosen at the first place. In other words, it asks questions not only about objective facts but also reasons behind those facts. 17 A learning organization is focusing to create, acquire and transfer knowledge continuously from the environment and there by modify its behavior to reflect new knowledge and insights. This involves mainly three areas. An organization has to follow ongoing programmes, designed to produce incremental gains in knowledge.
An example to indicate that an organization can import new ideas from outside and apply it to daily operations; a case study, General Electric’s impact program originally sent manufacturing managers to Japan to study factory innovations, such as quality circles and kanban cards, and then apply them in their own organizations. This program was one of the major reasons that General Electric recorded productivity gains averaging nearly 5 % over the last four years. (Harvard business review on Knowledge Management, 2008) Successful ongoing programmes also require an incentive system that favors risk taking.
Employees must feel that the benefits of experimentation exceeds the costs; if not they will not participate. This is challenging for managers, since they must maintain accountability and control over experiments without stifling creativity by unduly penalizing employees for failures. Companies must learn from past experiences and should review their successes and failures, assess them systematically and record the lessons in a form that employees find open and accessible. 18 Learning and the Knowledge Management The knowledge continuum shows the process of transforming data in to knowledge and wisdom.
The knowledge continuum In this continuous process organizations acquire knowledge throughout its life cycle. Therefore learning plays very important role in the knowledge management process. It’s probably appropriate to develop some perspective regarding this stuff called knowledge, which there seems to be such a desire to manage, really is. Consider this as a basis for thought relating to the following diagram. ? ? ? ? A collection of data is not information. A collection of information is not knowledge. A collection of knowledge is not wisdom.
A collection of wisdom is not truth. The idea is that information, knowledge, and wisdom are more than simply collections. Rather, the whole represents more than the sum of its parts and has a synergy of its own. 19 8 Average Time (Hours) 4 6 Learning curve 2 10 20 quantity 60 30 40 120 180 240 Figure 07 – Learning Curve 20 Conclusion Organizations can achieve competitive advantage by focusing their knowledge Management efforts in harnessing their assets and competences in their core areas of operation, which can be identified by the value chain analysis approach.
An organization progressively discover that value creating activities change over a period of time, and helps to identify value-creating activities faster thereby providing a strategic direction. As organizations evolve into more effective and efficient knowledge creators and knowledge consumers, the effects of knowledge management efforts should be measurable as knowledge management itself requires an investment of time, resources and manpower.
Perhaps organizations will continue to create their own frameworks for valuation or be able to rely on a common methodology for such measurement regardless of the type of organization doing the evaluating. On the other hand, any organization, before framing a strategy, should analyze the industry and should understand all relevant parameters of industry growth. This analysis would yield results on the industry parameters like growth/ recession buyer/supplier power leading to determining the attractiveness of competition.
The competitor analysis would reveal the strategy adopted by the competitors and identify the possible future movements of the competitors and to predict the strategies that are likely to be adopted by them. An organization can gain competitive advantage and sustain it only if it is able to understand the needs of the customer and track the changes in the customer needs. In this context, the analysis of the needs of customer gains importance. An organization should assess the resources and capabilities, before formulating a strategy, since the resources and capabilities should aid the operationalization of the chosen strategy.
The right combination of resources and capabilities in the context of a strategy can be discovered through the process of knowledge management. In short, today? s organizations act with the theme of “Knowledge sharing is the power” instead of “Knowledge is the Power”, in order gain competitive advantages, by keeping a knowledge supporting culture, that management can support the knowledge creation and sharing, maintaining a perfect human resource policy which lead to minimize the employee turnover for the purpose of securing organizational memory in the organization.