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KNOWLEDGE INCLUDES know-how of creating value processes of how the firm works best practices FIVE IMPORTANT IMPLICATIONS

NS OF KNOWLEDGE AS VALUE customer intelligence 1. new The business tangible concepts output of knowledge work is explicit knowledge, but the creative process is largely tacit. R&D Explicit knowledge is increasingly quick and easy to distribute globally 2. competitive intelligence 3. When it is embedded in products and services, explicit knowledge dramatically lowers the cost of the basic infrastructure required to be competitive Tacit knowledge - knowledge-in-practice; developed from direct experience and 4.action; All knowledge creates new knowledge and, thus, grows through use, while highly pragmatic and situation specific; subconsciously understood and physical assets are depleted by use. applied; difficult to articulate; usually shared through highly interactive conversation 5.and The explosion of knowledge growth, combined with its rapid distribution, makes it shared experience. difficult to stay on top of the available knowledge in any industry. Thus, a global Sharing your best thinking, data, understanding, and opinion with others diminishes knowledge economy rewards not only creators of new knowledge but also those your personal competitive advantage who can identify and integrate knowledge effectively. Use of other people's knowledge is often resisted, in particular the 'not-invented-here syndrome' is difficult to brake down Improving by synthesizing new ideas continuously while purging yesterday's conventional wisdom is difficult due to resistance to change 1. Tools 2. Processes Information - data placed within some interpretive context, and thus acquiring meaning and value Knowledge - meaningfully structured accumulation of information; information that is relevant, actionable, and based at least partially on experience Knowledge Management The systematic process of finding, selecting, organizing, distilling and presenting information in a way that improves an employee's comprehension in a specific area of interest.

DISTINGUISHING BETWEEN DATA, INFORMATION, AND KNOWLEDGE

KNOWLEDGE VERSUS INDUSTRIAL ENTERPRISE


INDUSTRIAL ENTERPRISE KNOWLEDGE ENTERPRISE

Economies of scale Standardization of work Standardization of workforce

Smaller business units Customization of work Flexible, multi-skilled workforce

Financial capital as scarce resource Human capital as scarce resource Corporate HQ as operational controller Corporate HQ as advisor & core competency guardian

Hierarchical pyramid structure Employees seen as expense Internally focused top-down governance Individualistic functional orientation Information based on "need to know" Vertical decision making Emphasis on stability Emphasis on vertical leadership

Flat or networked structure Employees seen as investment Both internal and external distributed governance Team orientation, emphasis on cross-functional teams Open & distributed information system Distributed decision making Emphasis on change Emphasis on empowered self-leadership

Managing Knowledge Enterprise Within a rapidly changing environment of the new knowledge economy, the latest information and knowledge is the key to sustained success and competitive advantage. In today's e-learning and e-business accelerated world, information quickly converted into knowledge at the point of highest business impact is a matter or survival. Switching to leadership approaches, employee empowerment, establishing a continuously learning organization, knowledge management and management of knowledge workers become very important manager's tasks. Knowledgeable workers seek service that support their knowledge. Unused knowledge depreciates very fast. On the opposite, using knowledge creates new opportunities which in turn create new knowledge. Managing Knowledge Workers To lead knowledge workers effectively and unlock their true potential, you need to define: What knowledge work professionals do?

How they do it best? What drives them to do it?

Organizing Knowledge Communities Use entrepreneurial approaches to organize knowledge communities within your organization to give it what it needs most - radical innovation. Knowledge communities organized around the principles of entrepreneurship have the best chance at success. Members of these communities - exciting, entrepreneurial, and highly profitable - would emulate entrepreneurs acting less like followers and more like empowered founders and builders of new organizational value. To establish cross-functional knowledge communities in your organization from scratch, you may need to go through the following three stages: 1. Information sharing - through task forces, cross-departmental activities e-mail. 2. 3. Cross-departmental Cooperation - through cross-functional teams Knowledge community - a vision of knowledge community has been embraced by the organization; supportive culture and connectivity established

Real Value of Knowledge The value of knowledge is measured in its application. Knowledge has no intrinsic value of its own - it is only relevant when it is used. "The real value of it is only real if you change the way business is done." Knowledge as the Source of business value In the new economy, the knowledge component of products and services has increased dramatically in importance and has become the dominant component of customer value. The shift to knowledge as the primary source of value, makes the new economy led by those who manage knowledge effectively - who create find, and combine knowledge into new products and services faster than their competitors. "Knowledge includes all the valuable concepts and vital know-how that shape a business to be wanted and needed by customers. Companies that are fast to market and demonstrated an ability to move with speed and sustain speed view time and knowledge as assets that are real money in the bank." Knowledge Management versus Information Management "Knowledge management" is different from "information management". While the former targets collecting and distributing knowledge - both explicit and tacit one - throughout the organization, the latter deals mainly with documented explicit knowledge - or information - only. Most companies create, have access to, and use plenty of bits of knowledge, but neither efficiently, nor effectively. The increased emphasis on knowledge management is attributed to recent rapid developments in the following areas: On a practical level: 1. Shift to the new knowledge-driven economy dominated by knowledge-based enterprises and information-intensive industries 2. Rapid advances in information technology. On a theoretical level, increased emphasis on knowledge in the strategic management literature, in particular: 1. Popularity of the new resource-based view of the company 2. Postmodern perspectives on organizations Idea Management Idea management systems and process can help your company make innovation a discipline. They can help make the hunt for new possibilities each and every department's business, as well as involve broader and more enthusiastic participation among managers and employees. Tacit Knowledge as a Source of Competitive Advantage Tacit knowledge, or implicit knowledge, as opposite to explicit knowledge, is far less tangible and is deeply embedded into an organization's operating practices. It is often called 'organizational culture'. "Tacit knowledge includes relationships, norms, values, and standard operating procedures. Because tacit knowledge is much harder to detail, copy, and distribute, it can be a sustainable source of competitive advantage... What increasingly differentiates success and failure is how well you locate, leverage, and blend available

explicit knowledge with internally generated tacit knowledge." Inaccessible from explicit expositions, tacit knowledge is protected from competitors unless key individuals are hired away. A brief history of knowledge management A number of management theorists have contributed to the evolution of knowledge management, among them such notables as Peter Drucker, Paul Strassmann, and Peter Senge in the United States. Drucker and Strassmann have stressed the growing importance of information and explicit knowledge as organizational resources, and Senge has focused on the "learning organization," a cultural dimension of managing knowledge. Chris Argyris, Christoper Bartlett, and Dorothy Leonard-Barton of Harvard Business School have examined various facets of managing knowledge. In fact, Leonard-Bartons wellknown case study of Chaparral Steel, a company that has had an effective knowledge management strategy in place since the mid-1970s, inspired the research documented in her Wellsprings of Knowledge Building and Sustaining Sources of Innovation (Harvard Business School Press, 1995). Everett Rogers work at Stanford in the diffusion of innovation and Thomas Allens research at MIT in information and technology transfer, both of which date from the late 1970s, have also contributed to our understanding of how knowledge is produced, used, and diffused within organizations. By the mid-1980s, the importance of knowledge (and its expression in professional competence) as a competitive asset was apparent, even though classical economic theory ignores (the value of) knowledge as an asset and most organizations still lack strategies and methods for managing it. Recognition of the growing importance of organizational knowledge was accompanied by concern over how to deal with exponential increases in the amount of available knowledge and increasingly complex products and processes. The computer technology that contributed so heavily to superabundance of information started to become part of the solution, in a variety of domains. Doug Engelbarts Augment (for "augmenting human intelligence"), which was introduced in 1978, was an early hypertext/groupware application capable of interfacing with other applications and systems. Rob Acksyns and Don McCrackens Knowledge Management System (KMS), an open distributed hypermedia tool, is another notable example and one that predates the World Wide Web by a decade. The 1980s also saw the development of systems for managing knowledge that relied on work done in artificial intelligence and expert systems, giving us such concepts as "knowledge acquisition," "knowledge engineering," "knowledge-base systems, and computer-based ontologies. The phrase "knowledge management" entered the lexicon in earnest. To provide a technological base for managing knowledge, a consortium of U.S. companies started the Initiative for Managing Knowledge Assets in 1989. Knowledge management-related articles began appearing in journals like Sloan Management Review, Organizational Science, Harvard Business Review, and others, and the first books on organizational learning and knowledge management were published (for example, Senges The Fifth Discipline and Sakaiyas The Knowledge Value Revolution). By 1990, a number of management consulting firms had begun in-house knowledge management programs, and several well-known U.S., European, and Japanese firms had instituted focused knowledge management programs. Knowledge management was

introduced in the popular press in 1991, when Tom Stewart published "Brainpower" in Fortune magazine. Perhaps the most widely read work to date is Ikujiro Nonakas and Hirotaka Takeuchis The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation (1995). By the mid-1990s, knowledge management initiatives were flourishing, thanks in part to the Internet. The International Knowledge Management Network (IKMN), begun in Europe in 1989, went online in 1994 and was soon joined by the U.S.-based Knowledge Management Forum and other KM-related groups and publications. The number of knowledge management conferences and seminars is growing as organizations focus on managing and leveraging explicit and tacit knowledge resources to achieve competitive advantage. In 1994, the IKMN published the results of a knowledge management survey conducted among European firms, and the European Community began offering funding for KM-related projects through the ESPRIT program in 1995. Knowledge management, which appears to offer a highly desirable alternative to failed TQM and business process re-engineering initiatives, has become big business for such major international consulting firms as Ernst & Young, Arthur Andersen, and Booz-Allen & Hamilton. In addition, a number of professional organizations interested in such related areas as benchmarking, best practices, risk management, and change management are exploring the relationship of knowledge management to their areas of special expertise (for example, the APQC [American Productivity and Quality Council] and ASIS [American Society for Information Science]).
NEW KNOWLEDGE ECONOMY MARKETS Volatile - extremely fast change, with explosive upsurges and sudden downturns, and chaotic - the direction of the economy's changes is not perfectly clear Fast and unpredictable Short Innovative entrepreneurial knowledge-based firms Global hypercompetition Speed: The fast eats the slow Differentiation ENTERPRISE Appreciably faster with ever-rising customer expectations Change management Opportunity-driven, dynamic strategy Market capitalization Flexible and lean production Resources: people, knowledge, capabilities

Research, systemic innovation, knowledge management, integration, new business creation, venture strategies, new business models Information and communication technology, e-business, computerized design and manufacturing Distinctive capabilities: institutional excellence, moving with speed; human resources, customer partnership; differentiation strategies; competitive strategies Human capital Distributed Continuous, systemic Entire value chain Teaming up to add complementary resources Interconnected subsystems, flexible, devolved, employee empowerment, flat or networked structure New: refocused on people, knowledge, and coherence Work Force Shared: employee empowerment & self-leadership No gender bias; high proportion of graduates Multi-skilled, flexible Continuous learning Cooperation, teamwork Affected by market opportunity / risk factors Investment

The Knowledge Management Model and Organisational Learning The model itself is centred on one fundamental process: Learning. The authors assert that the learning process spans over the entire knowledge management function. In a learning organisation, every individual learns: employees stretch, grow, nurture, develop, and enhance their skills and capabilities to create and innovate. People learn to take risks while developing and experimenting new ideas. They are invited to learn what is going on at every level of the organisation. This promotes further learning through feedback as to how their individual contributions make a difference to the organisation as a whole and how they can further the shared cause. Communication occupies a significant place in a learning organisation. Employees at all levels feel free to inquire about one anothers ideas, notions, concepts, and approaches. Mutual respect, trust, empathy, and a sense of belongingness play a significant role in building a learning organisation. Peter Senge brings out the importance of making team-based, joint efforts in such organisations:

As the world becomes more interconnected and the business becomes more complex and dynamic, work must be become more learningful. It is no longer sufficient to have one person learning for the organisation, a Ford or a Sloan or a Watson. It is just not possible any longer to figure it out from the top, and have everyone else following the orders of the grand strategist. The organisations that will truly excel in the future will be the organisations that discover how to tap peoples commitment and capacity to learn at all levels in an organisation. The model on knowledge management can be seen to carry the distinctive feature of learning embedded in its architecture. It emphasises the need of learning at every opportunity: before, during and after everything that is done. The authors contend that learning is one of the key elements of getting business results from business objectives. Learning, according to them, takes place along three dimensions, which they explain as follows: Learning Before: Before commencing a new task, team members can learn from work done on similar projects since it is likely that someone has already worked on it before. Corporate intranets, the Internet, search engines, corporate-wide yellow pages, etc., all prove to be good starting points for existing knowledge. It seems reasonable to learn from such instances before actually embarking on the venture. Learning During: If, during the course of a project, team members occasionally keep on reflecting on what they have done so far, a lot of time, effort and resources may be saved by contemplating on the progress made and measuring it against the intended design. The authors suggest initiatives such as an after-action review (AAR), short team meetings, and setting up communities of practice, etc. Learning After: New projects tend to create a lot of new knowledge during the process of completion. Evaluating original intended design against current outcome and reality, during post-implementation reviews and audits, enables the team members to gauge how it could have been done better, and how the newly created knowledge could be codified for future use and reference.

Captured Knowledge

Access and apply

Learn during

Validate and renew

Business objectives
Learn befor e Learn after

Business results

Why we need knowledge management now Why do we need to manage knowledge? Ann Macintosh of the Artificial Intelligence Applications Institute (University of Edinburgh) has written a "Position Paper on Knowledge Asset Management" that identifies some of the specific business factors, including: Marketplaces are increasingly competitive and the rate of innovation is rising. Reductions in staffing create a need to replace informal knowledge with formal methods. Competitive pressures reduce the size of the work force that holds valuable business knowledge. The amount of time available to experience and acquire knowledge has diminished. Early retirements and increasing mobility of the work force lead to loss of knowledge. There is a need to manage increasing complexity as small operating companies are transnational sourcing operations. Changes in strategic direction may result in the loss of knowledge in a specific area. To these paraphrases of Ms. Macintoshs observations we would add: Most of our work is information based. Organizations compete on the basis of knowledge. Products and services are increasingly complex, endowing them with a significant information component. The need for life-long learning is an inescapable reality. In brief, knowledge and information have become the medium in which business problems occur. As a result, managing knowledge represents the primary opportunity for achieving substantial savings, significant improvements in human performance, and competitive advantage. Its not just a Fortune 500 business problem. Small companies need formal approaches to knowledge management even more, because they dont have the market leverage, inertia, and resources that big companies do. They have to be much more flexible, more responsive, and more "right" (make better decisions) because even small mistakes can be fatal to them. Knowledge management: a cross-disciplinary domain Knowledge management draws from a wide range of disciplines and technologies. Cognitive science. Insights from how we learn and know will certainly improve tools and techniques for gathering and transferring knowledge. Expert systems, artificial intelligence and knowledge base management systems (KBMS). AI and related technologies have acquired an undeserved reputation of having failed to meet their own and the marketplaces high expectations. In fact, these technologies continue to be applied widely, and the lessons practitioners have learned are directly applicable to knowledge management.

Computer-supported collaborative work (groupware). In Europe, knowledge management is almost synonymous with groupware and therefore with Lotus Notes. Sharing and collaboration are clearly vital to organizational knowledge management with or without supporting technology. Library and information science. We take it for granted that card catalogs in libraries will help us find the right book when we need it. The body of research and practice in classification and knowledge organization that makes libraries work will be even more vital as we are inundated by information in business. Tools for thesaurus construction and controlled vocabularies are already helping us manage knowledge. Technical writing. Also under-appreciated even sneered at as a professional activity, technical writing (often referred to by its practitioners as technical communication) forms a body of theory and practice that is directly relevant to effective representation and transfer of knowledge. Document management. Originally concerned primarily with managing the accessibility of images, document management has moved on to making content accessible and re-usable at the component level. Early recognition of the need to associate "metainformation" with each document object prefigures document management technologys growing role in knowledge management activities. Decision support systems. According to Daniel J. Power, "Researchers working on Decision Support Systems have brought together insights from the fields of cognitive sciences, management sciences, computer sciences, operations research, and systems engineering in order to produce both computerised artifacts for helping knowledge workers in their performance of cognitive tasks, and to integrate such artifacts within the decision-making processes of modern organisations." That already sounds a lot like knowledge management, but in practice the emphasis has been on quantitative analysis rather than qualitative analysis, and on tools for managers rather than everyone in the organization. Semantic networks. Semantic networks are formed from ideas and typed relationships among them sort of "hypertext without the content," but with far more systematic structure according to meaning. Often applied in such arcane tasks as textual analysis, semantic nets are now in use in mainstream professional applications, including medicine, to represent domain knowledge in an explicit way that can be shared. Relational and object databases. Although relational databases are currently used primarily as tools for managing "structured" data and object-oriented databases are considered more appropriate for "unstructured" content we have only begun to apply the models on which they are founded to representing and managing knowledge resources. Simulation. Knowledge Management expert Karl-Erik Sveiby suggests "simulation" as a component technology of knowledge management, referring to "computer simulations, manual simulations as well as role plays and micro arenas for testing out skills." (Source: Email from Karl-Erik Sveiby, July 29, 1996 ) Organizational science. The science of managing organizations increasingly deals with the need to manage knowledge often explicitly. Its not a surprise that the American Management Associations APQC has sponsored major knowledge management events.

Thats only a partial list. Other technologies include: object-oriented information modeling; electronic publishing technology, hypertext, and the World Wide Web; helpdesk technology; full-text search and retrieval; and performance support systems. Categorization of knowledge management approaches The term "knowledge management" is now in widespread use, having appeared in the titles of many new books about knowledge management as a business strategy, as well as in articles in many business publications, including The Wall Street Journal. There are, of course, many ways to slice up the multi-faceted world of knowledge management. However, its often useful to categorize them. In a posting to the Knowledge Management Forum, Karl-Erik Sveiby identified two "tracks" of knowledge management: Management of Information. To researchers in this track, according to Sveiby, " knowledge = Objects that can be identified and handled in information systems." Management of People. For researchers and practitioners in this field, knowledge consists of " processes, a complex set of dynamic skills, know-how, etc., that is constantly changing."

Sveibys characterization is on target, but it may not capture the full flavor of the important distinctions in approaches to organizational knowledge management. At Knowledge Praxis, we have adopted a three-part categorization: (1) mechanistic approaches, (2) cultural/behavioristic approaches, and (3) systematic approaches to knowledge management. Mechanistic approaches to knowledge management Mechanistic approaches to knowledge management are characterized by the application of technology and resources to do more of the same better. The main assumptions of the mechanistic approach include: Better accessibility to information is a key, including enhanced methods of access and reuse of documents (hypertext linking, databases, full-text search, etc.) Networking technology in general (especially intranets), and groupware in particular, will be key solutions. In general, technology and sheer volume of information will make it

work. Cultural/behavioristic approaches to knowledge management Cultural/behavioristic approaches, with substantial roots in process re-engineering and change management, tend to view the "knowledge problem" as a management issue. Technology though ultimately essential for managing explicit knowledge resources is not the solution. These approaches tend to focus more on innovation and creativity (the "learning organization") than on leveraging existing explicit resources or making working knowledge explicit. Assumptions of cultural/behavioristic approaches often include:

Organizational behaviors and culture need to be changed dramatically. In our information-intensive environments, organizations become dysfunctional relative to business objectives. Organizational behaviors and culture can be changed, but traditional technology and methods of attempting to solve the "knowledge problem" have reached their limits of effectiveness. A "holistic" view is required. Theories of behavior of largescale systems are often invoked. Its the processes that matter, not the technology. Nothing happens or changes unless a manager makes it happen.

Systematic approaches to knowledge management Systematic approaches to knowledge management retain the traditional faith in rational analysis of the knowledge problem: the problem can be solved, but new thinking of many kinds is required. Some basic assumptions: Its sustainable results that matter, not the processes or technology or your definition of "knowledge." A resource cannot be managed unless it is modeled, and many aspects of the organizations knowledge can be modeled as an explicit resource. Solutions can be found in a variety of disciplines and technologies, and traditional methods of analysis can be used to re-examine the nature of knowledge work and to solve the knowledge problem. Cultural issues are important, but they too must be evaluated systematically. Employees may or may not have to be "changed," but policies and work practices must certainly be changed, and technology can be applied successfully to business knowledge problems themselves. Knowledge management has an important management component, but it is not an activity or discipline that belongs exclusively to managers.

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