Knowledge Management as Key Factor in Project Performance

ABSTRACT

Most organisations are aware that in today’s highly competitive environment managing effectively their knowledge is the only way to achieve a sustainable competitive advantage. One of the primary areas to which knowledge management can be applied is the field of project management. An increasing number of business sectors are adopting a project approach to carry out a range of essential activities where valuable knowledge is gained. Knowledge from projects is an important resource for further projects, because projects solve innovative and interdisciplinary tasks. However, the majority of organisations do not manage the information gained through past projects. Failure to transfer knowledge from past to future projects leads to wasted activity and unnecessary expenses by ‘reinventing the wheel’. Therefore, knowledge management is a critical success factor for many projects.

The purpose of this Management Report is to approach knowledge management from the perspective of project management. The main objective is to define how knowledge management can be enhanced within a project by analysing suitable tools and relevant theories. The research is based on the high-speed train project XY of the company XXX. This project is an important milestone for XXX to improve its market position in Spain. The knowledge gained through the XY project will be the key factor for the success of the further high-speed train projects.

The main finding of the case study highlights that there is a lack of formal knowledge management activities at the project. The project team focuses mainly on personal interaction for transferring knowledge and information technology is not used to its full potential. A hybrid approach to knowledge management for project environments is suggested, taking into account technical as well as human-specific aspects. The main recommendation is to determine a knowledge management strategy, which preferably focuses on transferring tacit knowledge and gives information technology a support function. Other areas of improvement are creating an open and constructive project culture, including knowledge initiatives in reward systems and fostering documented project review sessions. Finally, general conclusions are provided to answer the main research question of this management report.

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TABLE OF CONTENTS

TABLE OF  APPENDICES  iv

TABLE OF  FIGURES  v

  ABBREVIATIONS  vi

I.  INTRODUCTION  1

1.1  Background  1

1.2  Definition of the Problem  2

1.3  Objectives and Research Questions  3

1.4  Scope and Limitations  5

1.5  Structure of the Report  5

II.  THEORETICAL FRAMEWORK  7

2.1  Knowledge Management  7

2.2  Information versus Knowledge  9

2.3  Classifications of Knowledge  10

2.3.1  Tacit and Explicit Knowledge  11

2.3.2  Individual and Collective Knowledge  12

2.4  Knowledge Creation and Transfer  13

2.4.1  Four Modes of Knowledge Creation and Transfer  13

2.4.2  The Concept of Ba  16

2.5  Knowledge Management at Project-Specific Environments  17

2.5.1  The Project Management Processes  17

2.5.2  Definition of Project Performance  18

2.5.3  Knowledge at Projects  19

2.6  Tools of Knowledge Creation and Transfer  20

2.6.1  The Importance of Organisational Structures  21

2.6.1.1  Organisational Culture  22

2.6.1.2  Reward Systems  23

2.6.1.3  Management Support  23

2.6.2  Communication  24

2.6.3  Lessons Learned  25

2.6.4  Mentoring and Social Networks  26

2.6.5  Information Technology  27

2.7  Summary and Discussion  28

III.  APPLICATION: THE PROJECT XY  30

3.1  The Case Study Project XY  30

3.2  Knowledge Management Project at XY  32

IV.  EMPIRICAL FINDINGS AND ANALYSIS  34

4.1  Current Knowledge Management Practices  35

4.2  Organisational Structures  37

4.2.1  Organisational Culture  37

4.2.2  Reward Systems  40

4.3  Communication  42

4.4  Mentoring Programmes and Social Networks  46

4.5  Information Technology  48

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4.6  Analysis of the Four Modes  50

4.7  Summary and Discussion of Analysis  52

V.  RECOMMENDATIONS  53

5.1  Identification of Knowledge Management Strategy  53

5.2  Information Technology as Support Function  54

5.3  The Importance of Project Structures  54

5.3.1  Project Culture  55

5.3.2  Team Diversity  55

5.3.3  Reward Systems  56

5.4  Communication  57

5.5  Summary of Recommendations  58

VI.  CONCLUSIONS AND FURTHER RESEARCH  59

VII.  BIBLIOGRAPHY  61

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TABLE OF  APPENDICES  

Appendix I:  Spain’s Infrastructure Plan of Transportation  68

Appendix II:  Methodology  69

Appendix III:  Interview Guide  71

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TABLE OF  FIGURES  

  Figure 1 : Research Questions  

  Figure 2 : Structure of the Report  

  Figure 3 : Information versus Knowledge  

  Figure 4 : Knowledge Conversion Model  

  Figure 5 : Project Management Processes  

  Figure 6 : Keywords and Tools  

  Figure 7 : Fact Sheet of XY  

  Figure 8 : Key Questions for Lessons Learned Session  

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ABBREVIATIONS

AG Aktiengesellschaft (German: Public Limited Company) AVE Alta Velocidad Española (Spanish High-Speed) E España e.g. exempli gratia (Latin: for example) IBM International Business Machines ICE InterCityExpress (High-speed train in Germany) i.e. id est (Latin: that is) kph kilometres per hour PIT Plan Infraestructure Transporte (Infrastructure Plan of Transportation) RENFE Red Nacional de los Ferrocarriles Españoles (National Spanish Railway Network) S.A. Sociedad Anónima (Spanish: Public Limited Company) SECI Model: Socialisation, Externalisation, Combination, Internalisation

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“In an economy where the only certainty is uncertainty,

I. INTRODUCTION

The aim of this section is to provide background information about the researched area. In the beginning, the concept of knowledge as a key to sustainable competitive advantage will be examined. This is followed by the problem discussion and some of the obstacles related to knowledge transfer between projects. Further on, the objectives and research questions will be presented. As a final note of this section, the limitations and the structure of the report will be introduced.

1.1 Background

Over the past several years there have been intensive discussions about the importance of managing knowledge within organisations (Davenport et al., 1998). Most organisations are aware that in today’s highly competitive environment managing their knowledge effectively is the only way to achieve sustainable competitive advantage (Drucker, 2001). To achieve this advantage, the ability to create, capture, transfer (share) and apply knowledge is essential (Davenport and Prusak, 1998).

One of the primary areas to which this knowledge management approach could be applied the field of project management.

In recent years the number of tasks and the amount of work within a company, which are managed in projects, is growing immensely (Disterer, 2002). This trend is increasing because key characteristics of project organisations address success factors of companies: high flexibility, interdisciplinary work, and promoting innovation (Katzy et al., 2000). An increasing number of organisations at different business sectors are adopting a project approach to carry out a range of vital operational and innovative activities, and the influence of project-based activities on overall company performance keeps intensifying. Consequently, the significance of excellent performance in the management of projects is also increasing.

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Demanding environmental pressures, uncertainty, shrinking time for projects, decreasing time to market for project results and high quality requirements are influencing the ability of organisation to perform successful project management (Disterer, 2002). Therefore, gained knowledge from projects is an important resource for following projects because projects solve innovative and interdisciplinary tasks.

1.2 Definition of the Problem

Most organisations are running projects where valuable knowledge is gained, including success and failures, lessons learned and best practices. However, the majority of organisations do not capture, manage or use the information they gain through their projects. Another related problem is the fact, that most project managers do not explicitly budget for resources to perform knowledge transfers (Alderman et al., 2001).

What occurs to knowledge gained after the completion of a project and at the beginning of the next project? Learning from the past is how things should work, but it rarely happens. Failure to transfer gained knowledge from former projects to future projects leads to wasted ‘reinventing the wheel’ activities. Thee organisations incur new expenses as they search for similar solutions and repeat mistakes of past problems (Tiwana, 1999). Therefore, an important concern is how to generate knowledge for a given project in a way that makes it available not only during the project and to other projects, but also to future projects (Katzy et al., 2000).

In contrast, there exist various challenges for knowledge transfer in project environment. Significant barriers include the dissolving of a project team, lack of formal management support, an inadequate project culture and essentially the reluctance of employees for knowledge sharing.

The discussion about the importance of knowledge in projects has become of interest since there has been an increase of project approaches at organisations. However, very little published research deals directly with the issue of knowledge management at projects.

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Furthermore, traditional project management literature still offers a limited view of knowledge and knowledge management. But this view is understandable considering certain differences between project management and knowledge management. First, projects are by nature finite endeavours, whereas knowledge is a resource that should stay around as long it is useable, typically far beyond the life of a single project (Katzy et al., 2000). Second, project management is goal oriented and happens in spite of potential differences in culture, whether it is at the level of project teams, organisations, or even national entities (Katzy et al., 2000). Moreover, projects also create their own distinct team and culture. Knowledge management, on the other hand, is not necessarily an end itself. Knowledge is generated and shared as project activities occur where the sociocultural context has an important influence on this process (Leseure and Brookes, 2004).

In conclusion, this report adopts the viewpoint that knowledge management is a fundamental basis of project management. Projects create the necessity to manage knowledge across time and in a multi-context setting, because knowledge has proven to be one of the most critical enablers within a project. Therefore, project knowledge should be captured and retained so that other projects can retrieve and apply the knowledge to future tasks. Companies not securing systematically knowledge gained in projects for later usage, risk to reinvent solutions, repeat mistakes and incur unnecessary expense to relearn the same lessons (Tiwana, 1999).

1.3 Objectives and Research Questions

At this report knowledge management will be approached from the perspective of project management. The main objective is to define how knowledge management within a project can be enhanced by

analysing suitable tools of effective knowledge management from relevant theories and

creating a framework to enable and support a transfer of knowledge across project frontiers.

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As exposed in the definition of the problem, there exist several challenges to ensure the essential process of knowledge transfer after the completion of a project. To investigate these challenges, this report will try to answer the following questions (figure 1).

Figure 1: Research Questions

Source: Own

The main question is viewed from management perspective in order to determine areas of improvement for managerial practices. The purpose of the two sub questions is to answer the key question based on the findings of the literature review as well as the case study. In order to respond the first sub question, Nonaka and Takeuchi’s (1995) model of knowledge conversion is presented and discussed. Tools are derived from this model to establish a theoretical framework on how to improve knowledge management processes in a project-specific context to improve performance.

In the practical part the analysis of a project should create the understanding to answer the second sub question. The research in the practical part of this report is based on a long-term engineering project at XXX: the high-speed train project XY.

The findings of both parts might determine the solution for the main objective: to give recommendations on how to implement an effective knowledge management programme at the project XY in order to improve project performance and secure the knowledge gained during the project for further high-speed train projects at XXX.

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1.4 Scope and Limitations

When analysing knowledge management processes in a project-specific environment, there are important facts to consider.

First, due to the main objective of this report, the focus is mainly on the process of knowledge transfer (sharing) in a project-specific context, not on the whole knowledge management process. Moreover, a Japanese model will be applied to a Spanish subsidiary of XXX Germany, assuming that this model is applicable to the organisational and national cultures of the investigated case.

Finally, this report will adopt a holistic approach to knowledge management, e.g. addressing not only technology solutions but mainly concentrating on human-specific factors within the project environment.

1.5 Structure of the Report

The first chapter of this report encompasses the introduction to the problem, the main objectives and research questions. The function of these research questions is to enable the link between the research part and the purpose of the report. The parts of this report are summarised at figure 2.

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Figure 2: Structure of the Report

Source: Own

The methodology used for this report is explained in Appendix II, and the interview guide

employed for the collection of empirical data can be found in Appendix III.

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II. THEORETICAL FRAMEWORK

In order to determine whether the concept of knowledge management is a necessary approach for improving project performance, or if it is just ‘the emperor in new clothes’, a review of various literature sources is necessary. This chapter focuses on the theoretical framework of knowledge transfer and is divided into two sections. The first illustrates on a theoretical background of knowledge transfer. Issues like general knowledge management, a comparison of information and knowledge as well as different classifications of knowledge are discussed at this part. The second one addresses the discussion of Nonaka and Takeuchi’s (1995) model of knowledge creation and transfer. Further, project-specific aspects for knowledge management will be discussed. As a final note, tools will be derived from the theoretical models and analysed. This chapter should provide the answer to the first sub-question asked in this report “Which theoretical tools do influence the processes of knowledge capture and transfer?”

2.1 Knowledge Management

There are forces of change such as globalisation, new technology, increased competition, different costumer demands, and changing economic and political structures which are reshaping businesses. Companies and academics have highlighted the importance of knowledge as the basis of competitive advantage (Drucker, 2001; Boisot, 1998). Numerous organisations are recognising that technology-based competitive advantages are temporary and that the only ones are the employees (Black and Synan, 1997) and their knowledge. Though, knowledge has always been a valuable asset but what is knowledge management?

Knowledge management is a fast-moving field that has been created by the collision of several others such as human resources, organisational development, and information technology (Bukowitz and Williams, 1999).

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The growth of this strategy has emerged from two fundamental shifts: downsizing and technological development (DiMattia and Oder, 1997). For this report, knowledge management is defined as “the process by which the organisations generate wealth from its intellectual or knowledge-based assets” (Bukowitz and Williams, 1999, p. 2). It is mainly characterised by four processes: generation, capture, transfer (sharing) and application of knowledge (Alavi and Leidner, 2001).

Knowledge management has received a widespread attention in recent years, but despite of the its popularity of as a source of competitive advantage, its literature has been criticised for a lack of empirical evidence and the strong emphasis on the conversion of individual knowledge into organisational knowledge through the use of information technology (Pan and Scarbrough, 1999).

Moreover, the concept of the ‘management’ of knowledge has also been subject of intensive debate. Some critics argue that knowledge, due to its intangibility, cannot be managed. However, organisations have previously applied the management of other intangible phenomena, e.g. motivation or creativity (Davenport and Völpel, 2001).

It is useful to consider knowledge management programmes in the context of the resource-based view of the company (Penrose, 1959). The knowledge-based view, foreseen by Drucker (1988), is a further development of the resource-based view focusing on knowledge as an organisational resource (Grant, 1991). It has originated the discussion of knowledge management systems and the role of information technology for management strategy and competitive advantage (Alavi and Leidner, 2001). While the knowledge-based view focuses mainly on information technology, many scholars agree that knowledge by itself cannot be the source of competitive advantage (Grant, 1996). In contrast to this technology-driven view, some authors have suggested that the novel contribution of knowledge management is to reveal the importance of collaboration at all levels of collective forms of work (von Krogh and Roos, 1996).

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