Knowledge Management - Why Companies choose Knowledge Management


Diploma Thesis, 1999

42 Pages, Grade: 1


Excerpt

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

1. INTRODUCTION

2. LITERATURE REVIEW
2.1 HISTORY OF KNOWLEDGE MANAGEMENT
2.1.1 INTRODUCTION
2.1.2 LEARNING ORGANISATION
2.1.3 INFORMATION TECHNOLOGY
2.1.4 CHANGING BUSINESS ENVIRONMENT
2.1.5 INCREASED AWARENESS OF THE VALUE OF HUMAN CAPITAL
2.1.6 SUMMARY
2.2 FAD OR REVOLUTION?
2.3 CLARIFICATION OF THE TERMINOLOGY
2.3.1 INTRODUCTION
2.3.2 WHAT IS ‘ KNOWLEDGE ’ ?
2.3.2.1 DISTINCTION BETWEEN DATA, INFORMATION AND KNOWLEDGE
2.3.2.2 EXPLICIT AND TACIT KNOWLEDGE
2.3.3 WHAT IS ‘ KNOWLEDGE MANAGEMENT ’ ?
2.3.3.1 THE THREE DIMENSIONS OF KNOWLEDGE MANAGEMENT
2.3.3.2 SUMMARY AND A WORKING DEFINITION OF KNOWLEDGE MANAGEMENT
2.4 HOW DO YOU IMPLEMENT KNOWLEDGE MANAGEMENT?
2.4.1 WHY COMPANIES CHOOSE KNOWLEDGE MANAGEMENT
2.4.2 MAIN STEPS IN THE IMPLEMENTATION PROCESS
2.4.2.1 CODIFICATION AND PERSONALISATION STRATEGY
2.4.2.2 STAGES IN THE IMPLEMENTATION PROCESS
2.5 CRITICAL ANALYSIS
2.5.1 COMMON PITFALLS
2.5.2 GENERAL CRITICISM
2.6 SUCCESS FACTORS

3. APPENDICES
3.1 APPENDIX 1: CLASSIFICATION OF DEFINITIONS

4. LIST OF REFERENCES

SUMMARY

The following report explores the main aspects of knowledge management.

The history of knowledge management reveals that different trends and developments influenced the evolution of a new management theory. Advanced information technologies that enable global knowledge-sharing and the recognition that people are the most valuable resource in a fast changing environment are the main reasons why knowledge management has become increasingly important.

An attempt to clarify the terminology demonstrates that there is no generally accepted definition of knowledge management. This report defines knowledge management according to the three dimensions content, culture and infrastructure and thus, provides a basic framework to the main knowledge processes.

The differentiation between the ‘codification’ approach and the ‘personalisation’ approach is essential in the evaluation of the implementation process. The first approach mainly relies on computer systems and databases whereas the latter focuses on person-to-person contacts. Both strategies can be combined to a certain extent, however, the main focus should only be on one of the two strategies.

The most common pitfalls for ineffective knowledge-sharing are cultural barriers and the fact that many organisations overestimate the role of technology. Thus, success factors include fostering a knowledge-sharing culture and embedding the use of technology in everyday practice.

1. INTRODUCTION

Increasingly, companies have started to recognise that with the transition from the industrial age to the knowledge era they are being forced to develop knowledge management strategies and tools to remain competitive. However, it is difficult to identify viable knowledge strategies and guidelines for the implementation of knowledge management. Research showing how employees view knowledge management and how they evaluate the implementation process are scarce.

The report attempts to translate the theoretical findings of the literature review into the practical realities of the implementation process. It examines the basic framework of knowledge management. Questions such as: ‘Where does knowledge management come from?’ ‘Why did it evolve?’ and ‘How can it be defined?’ are answered before the implementation process is examined in more detailed. Finally, the critical analysis highlights common pitfalls and weaknesses of knowledge management. Based on these findings the most important success factors are identified.

The main objective of the report was to make knowledge management tangible.

2. LITERATURE REVIEW

2.1 HISTORY OF KNOWLEDGE MANAGEMENT

2.1.1 INTRODUCTION

In one form or another, knowledge management has been around for a long time and the vital importance of knowledge in businesses has always been recognised (Taylor cited in Newman 1996). Knowledge management can be seen as a tool used to apply the knowledge and experience of employees to improve a process. However, the procedure that employees propose changes in work processes has existed in many companies for years. It is one proven way of getting at the ideas of more people and turning them into business values (Stewart 1997). Hence, the argument that companies were not able to manage knowledge until now (Taylor cited in Newman 1996) is not accurate. It describes, however, the fact that tools, techniques and methods become available to companies to understand the problems and opportunities of knowledge as an asset in a broader context including all parts of an organisation. Companies have realised that they can gain tremendously by consciously applying a more structured knowledge management. As Sveiby (1998) states, “this has given knowledge management a forceful push”.

This section looks at why knowledge has emerged as a mayor topic in management strategies and why it is important now. There are four broad trends which play a significant role in the history of knowledge management:

- The concept of the “Learning Organisation”
- Fast developments in Information Technologies
- A changing business environment
- Increased awareness of the value of human capital

These areas are discussed in more detail below.

2.1.2 LEARNING ORGANISATION

The first important source in looking for the origin of knowledge management is the concept of the learning organisation. Before it is possible to establish what kind of relationship, if any, exists between the two it is necessary to examine some definitions and aspects of a learning organisation. Senge (1990) describes the learning organisation as where ‘people are enhanced to expand their capacity to create the results they desire’. Senge (1990) discovers that it is no longer sufficient to have just one person learning in a company. As the world becomes more complex and dynamic, work must become more ‘learningful’ at all levels in an organisation. Organisations must be able to anticipate, react and respond to change, complexity and uncertainty.

Senge (1990) argues that there are five disciplines characterising a learning organisation: personal mastery, mental models, shared vision, team learning and systems thinking. In brief, this describes that a learning organisation has to put aside old mental models, be open with others, understand how the organisation works, agree one shared vision and work together to achieve a common purpose (Micklethwait and Wooldridge 1994). This definition looks on the learning organisation in a quite abstract way, describing the cultural framework necessary for a company to become a learning organisation. Looking at the five activities of the learning organisation as Garvin (1993) describes them, the link to knowledge management becomes clearer. He states the activities necessary to become a learning organisation are as follows:

- systematic problem solving,
- experimenting with new approaches,
- learning from own experiences and past history,
- learning from experience and best practices from others,
- transfer knowledge quickly and efficiently throughout the organisation.

Whereas the first two aspects of his definition focus on how learning should take place, the last three overlap precisely with knowledge management. The difference between knowledge management and the concept of the learning organisation, can be seen by the emphasis the learning organisation places on how individuals and organisations learn. However, knowledge management puts a focus on how existing knowledge can be made available to the company to create value. This different focus can be examined by looking at the pioneers of the learning organisation. Argyris (1992) defines organisational learning as the process of detection and correction of errors. Furthermore he investigates how to overcome the difficulties of double-loop learning as a major step towards organisational learning (Argyris 1992). At Royal Dutch/Shell the first so called learning organisation was realised by de Geus. He implemented scenario planning as a means to learn about the organisation itself and future developments (Micklethwait and Wooldridge 1994). A learning organisation does not consider the dissemination and usage of knowledge as its primary focus . It concentrates, however, on the question how learning occurs and searches for methods of knowledge acquisition. Helleoid and Simonin (1994), for example, summarise the methods of knowledge acquisition in a learning organisation from internal development, assisted internal development, market procurement, inter firm collaboration to merger or acquisition.

Following the argument that the learning organisation sets the framework for knowledge management it might be possible to show that knowledge management developed out of the concept of the learning organisation. From studying Grey’s argument as cited in Newman (1996) that “knowledge is the result of learning” it is clear why first the idea to create a learning organisation had to evolve and then the question arose how acquired knowledge can be used more efficiently.

Regardless of which definition of organisational learning is being looked at, organisational learning and knowledge management are based on similar ideas and the ultimate objective to enable a company to react to a fast changing environment. There are overlapping areas between the two theories and the assumption is close that knowledge management arises out of the concept of organisational learning. However, theoretically a learning organisation could exist without knowledge management and visa versa. An organisation could learn without making knowledge available and knowledge management could only concentrate to disseminate knowledge without making sure that a learning process creates new valuable knowledge. But clearly both concepts would be incomplete without the existence of the other.

2.1.3 INFORMATION TECHNOLOGY

The next area to look at to find the root of knowledge management is information technology. The advent of ever more sophisticated information technology could be regarded as the reason for the need for knowledge management in order to deal with the advanced systems and all the information available. On the other hand information technology could be regarded as the facilitator of knowledge management providing tools like the Internet, intranets, data warehouses, e-mail and so on which enable companies for the first time to systematically find, spread and use knowledge. Both arguments realise that there is a link between the existence of knowledge management and the development of IT.

Scheraga (1998) remarks that with the recent advent of advanced communications and document management technology firms have been able to best harness the power of their personnel. He supports the argument that IT enables the management of knowledge. This is in contrast to Malhotra’s (1998) argumentation. He suggests that there is no direct correlation between increased IT investments and improved business performance. In his opinion the key factor for a higher return on the money spent on IT is the effective utilisation of information. In order to avoid information overload a variety of systematic and more complex interpretations of information output generated by computer systems is necessary. Looking at it from this perspective knowledge management is not enabled through IT but needed because more complex systems and information demand management co-ordination and sensitive information usage. Both aspects of the influence of advanced information technologies on knowledge management are correct. IT enables effective knowledge management through sophisticated tools, and knowledge management is needed to effectively find and use information generated by systems. Both arguments realise, that there is a shift from the command-and-control model to an information-based organisation (Drucker 1988).

Organisations need not only clerical workers knowing how to use a system but knowledge workers who can convert data into information. Drucker (1988) states, IT is not necessary for this change but it must be engaged in analysis and diagnosis to avoid the risk of being swamped by information.

As Lank (1998) sums up ‘we are in the midst of a transition from the industrial age to a different era, one in which intangible assets such as knowledge and information matter as much as the tangible assets’. This leads to the next argument; why knowledge management is needed. Knowledge management can be seen as the answer to a changing business environment.

2.1.4 CHANGING BUSINESS ENVIRONMENT

In a world where the only certainty is uncertainty, markets shift, technologies proliferate, competitors multiply and products become obsolete faster than ever before, companies must consistently create new knowledge, disseminate it and embody it in new technologies and products (Nonaka 1991). As de Geus cited in Senge (1990) states, the ability to learn faster than your competitors may be the only sustainable competitive advantage. Or as Leonard and Strauss (1997) put it, ‘innovate or fall behind’. Malhotra (1998) concludes that knowledge management is needed to face these new challenges. He emphasises that the earlier economic environment was characterised by relative slow and predictable change and could be deciphered by most formal information systems. The new world as mentioned above is characterised by radical change and the emphasis on precognition and adaption can only be managed by knowledge-based industries. Whereas in the information era ‘out-of-the box standard solutions’ (Malhotra 1998) were sufficient, now one based on knowledge creation is necessary. Grey (as cited in Newman 1996) describes knowledge as the next paradigm shift in computing following data processing and information management.

Knowledge management therefore, it could be concluded, comes from the need that those radical changes in the business environment and the predominance of uncertainty in every business area asks for more intelligent, knowledge-based solutions. What these solutions should look like is not answered at this stage. They realise however, that for a fast changing environment more than standard answers are necessary and that a new concept must include the very basics of peoples’ knowledge and experience. As Newman (1996) states knowledge management is not a computer or a technology thing, elements of knowledge management exist in each job.

2.1.5 INCREASED AWARENESS OF THE VALUE OF HUMAN CAPITAL

With the move from the industrial era to the knowledge era the understanding of what creates value in an organisation has changed radically. The key to competitive advantage in the knowledge era is seen in the intangible assets (Saint-Onge 1998). Lank 1998 states that intangible assets such as knowledge and information matter, in her opinion, as much as the tangible assets. Saint-Onge however, goes one step further. He states that by looking at the enterprise as a whole with financial, tangible and intangible capital, it is the intangible capital which accounts for up to 95% in consulting firms and around 60% in other companies of total assets (Saint-Onge 1998).

Abbildung in dieser Leseprobe nicht enthalten

Figure 2-1: The knowledge capital model. (Saint-Onge 1998)

According to this increased awareness of the importance and value of intangible assets and thus human capital it is now realised that all forms of the human capital, competencies, ideas, relational systems and networks are based on knowledge. And more importantly, that this human capital can be enhanced through careful knowledge management to yield highest possible value (Bock 1998).

Quinn, Anderson and Finkelstein (1996) summarise the above mentioned as follows. They see the success of a company in the post-industrial era in its intellectual and systems capabilities rather than in its physical assets. In their opinion the capacity to manage human intellect and convert it into useful products and services is fast becoming the critical executive skill of the age. They recognise as well, that professional intellect creates most of the value in the new economy.

The second argument for the increased value of human capital can be seen in relation with business process re-engineering activities and its unfavourable consequences experienced in some companies.

Business Process Reengineering is an approach to corporate change which emerged in the 1990s. It involves analysing companies’ core processes, reassembling them in a more efficient.1 According to Probst (1998) these restructuring, downsizing and re-engineering activities have in many cases destroyed effective informal networks, and companies have lost their corporate memory and valuable expertise. Companies now realise that along with the people, valuable knowledge is gone. Hallahan (1998) states that knowledge management is designed to replace the lost knowledge and experience following Business Process Reengineering which involved outsourcing and downsizing.

As Micklethwait and Wooldridge (1990) express it, re-engineering sees the middle managers as barriers. Yet, they may also hold valuable information and long experience within an organisation which is hard to replace. Knowledge management incorporates exactly what many companies are experiencing at the moment, that is, that people are the most valuable resource. Hence, according to Myers (1996) knowledge management at its core must be seen as tied to the personal or human element.

Organisations have re-awakened to the inherent value of their human capital, the knowledge and know-how of individual employees and the relationships and networks they form (Allday 1998). This might indeed be the most important reason for the presence of knowledge management, as people are at the heart of its philosophy.

2.1.6 SUMMARY

In conclusion, knowledge management evolved out of the need to create a link between technology and people who use it to accelerate learning in a fast changing environment. All four aspects, organisational learning, information technology, a new business environment and the recognition of the valuable intangible human asset have in themselves explained the need for a new management idea. Taken together knowledge management could be the answer to all those urgent questions. Sveiby (1998) perhaps describes the origin and development of knowledge management best. In his view it can be split into two sections. The first is management of information which is new and growing fast assisted by new developments in IT. The second track is management of people. However, this is very old and is not growing as fast.

2.2 FAD OR REVOLUTION?

The opinions why knowledge management actually evolved and whether it can be sustained could not be more controversial. As the senior president for strategy at IBM, J. Bruce Harreld, states as cited in Wright (1998): “knowledge management may be on the verge of becoming the only ingredient in the recipe that matters”. On the other hand Micklethwait and Wooldridge (1996) think that the life-cycle of any management theory has now shrunk from a decade to a year or less. After Business Process Reengineering came combining technology and quality into one package. The next concept has to find solutions to the problems the last fad, Business Process Reengineering, created. They view management theories as a means to make money for gurus, business schools, management consultants and the business press. In their opinion, the fourth leg of knowledge management, as of any other management theory, is that it is ‘faddish and bedevilled’ by contradictions. Shapiro (1997) disproves this statement. Management theories do not pull companies in conflicting directions as it is the managers who are paid to apply them according to their particular circumstances. A management idea is just as any medicine in a doctor’s kit: helpful if used intelligently and capable of causing harm when applied inappropriately. And, as a survey conducted by KPMG recently found out as stated by Hallahan (1998), only 2% of the respondents thought that ‘knowledge management is a fad which will soon be forgotten’. Findings from OmniTech Consulting Group reveal that 80% of executives expect that knowledge management will have a significant influence on their organisation over the next three to five years.

2.3 CLARIFICATION OF THE TERMINOLOGY

2.3.1 INTRODUCTION

If a company decides to implement knowledge management one of the first difficulties they encounter is to define what the term ‘knowledge management’ exactly means. Unfortunately, there is no generally accepted definition for knowledge management. As the term suggests, the objective is to manage knowledge. But it is at this stage where the confusion starts. What exactly is meant by ‘knowledge’? and, how can something which is so subjective and indeed so difficult to define be managed at all?

2.3.2 WHAT IS ‘KNOWLEDGE’?

2.3.2.1 DISTINCTION BETWEEN DATA, INFORMATION AND KNOWLEDGE

The easiest way to begin, is to clarify the relationship between data, information and knowledge. On this question the authors agree to a broad extent. Davenport and Prusak (1998) stress, that data, information and knowledge are not interchangeable concepts. It is vital for a company to know which of these they need, which they already have, and how each of them can be used. According to Cope’s (1998) findings, data is raw and unprocessed material, for example, sales figures generated by computer systems. If this data has been reworked by a person for specific purposes, it can be transformed to information, as in the example mentioned above sales figures can be transformed into information about changes in sales per month, per product, per region and so on.

As Drucker (1988) remarks this process of converting data into information already requires knowledge. This is correct to a certain extent, particularly when data is too complex to gain any information without specific knowledge of the subject. Then intervention of a person is needed. Knowledge according to Cope (1998) however, is more than a facilitator to obtain information from data. Knowledge is the full utilisation of information and data. From information on sales figures a person can gain knowledge on trends, find reasons for changes and formulate actions which need to be taken. This process transforming data and information to knowledge needs to be coupled with the potential of people’s skills, competencies, ideas, intuitions, commitments and motivations (Grey as cited in Newman 1998). It is stored in the individual brain and might then be embedded in documents, products and services.

One of the main aspects to clarify the term knowledge is this distinction between data, information and knowledge. Sveiby (1997) states that the confusion between knowledge and information has caused managers to invest billions of dollars in information technology with only marginal results.

[...]


1 See ‘Glossary’, The Financial Times: Mastering Information Management. Monday, 8 March 1999. 12

Excerpt out of 42 pages

Details

Title
Knowledge Management - Why Companies choose Knowledge Management
College
Reutlingen University
Grade
1
Author
Year
1999
Pages
42
Catalog Number
V185318
ISBN (eBook)
9783656999195
ISBN (Book)
9783867462488
File size
810 KB
Language
English
Tags
knowledge, management
Quote paper
Susanne Schneider (Author), 1999, Knowledge Management - Why Companies choose Knowledge Management, Munich, GRIN Verlag, https://www.grin.com/document/185318

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