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Measuring Knowledge Management Readiness in ERP Adopted

Organizations: A Case of Iranian Company



1
Golnaz Azhdari,
2
Fariborz MousaviMadani,
3
Mahdi ZareBahramabadi
*
1 Member of Young researchers club Azad Islamic University Tehran Central Branch Iran,
e-mail: g.azhdari@gmail.com
2
Assistant Professor, Department of Information Technology, Alzahra University, Tehran,
Iran, e-mail: mosavif@alzahra.ac.ir
3
The faculty member of The Organization for Researching and Composing University
Textbooks in the Humanities (Samt), Tehran, Iran, e-mail: mz.bahramabadi@gmail.com

Abstract
Both Knowledge Management and Enterprise Recourse Planning play a crucial role in
organizations, also there have been an increasing trend to implement both systems concurrently, but
are either implemented separately or in tandem. There are bulks of literature on the importance of
KM in all kinds of organizations. There are also lots of recommendations on ERP implementation
and post-implementation processes. The key characteristics of ERP and KM are quite different in
their orientation, however, with ERP systems focusing primarily on managing physical assets while
KM systems leveraging innovation and the utilization of knowledge assets. KM integrated into ERP
can improve the business processes managed by ERP to increase firms competitive advantages.
Thus the interaction between ERP and KM systems are synergistic and of significant importance.
This paper assesses the readiness of KM implementation in an enterprise which has successfully
implemented ERP. To this goal we surveyed the KM readiness with KM assessment tools such as
KMAT and also different models of KM readiness and critical success factors. Finally, based on the
proposed model, KM readiness of the organization under survey was assessed to be in the average
level.

Keywords: Knowledge Management, Enterprise Recourse Planning, Readiness Assessment

1. Introduction

The result of the knowledge revolution is represented by a new economy the knowledge-
based economy, which is radically different from previous economic types known to
mankind [1]. In the era of knowledge economy organizations are increasingly becoming
aware of the need for a knowledge focus in their organizational strategies as they respond
to changes in the environment [2]. Systematic management of enterprise knowledge, e.g. new
ideas, innovations and patents, has paramount impact on business sustainability and growth
[3]. In such a highly dynamic environment, enterprises also increasingly recognize that
knowledge management is one of the most important factors contributing to business success
[4].
Over the past 20 years, KM has progressed from an emergent concept to an increasingly
common function in business processes in one hand [5] and has become an indispensible part
of the business and also academic agenda on the other hand. Organizations have high
expectations for KM to play a significant role in improving their competitive advantage [6].
KM process is the effective sharing of tacit knowledge and effective transfer of explicit
knowledge in enhancing organizational performance and innovativeness [7]. In general KM
is the systematic process of creating, maintaining and nurturing an organization to make the
best use of its individual and collective knowledge to achieve the corporate mission [8]. KM
systems are information systems designed to collect, code, integrate, disseminate, and
facilitate organizational knowledge. Efficient knowledge management leads to superior
business performance such as organizational creativity, operational effectiveness, and quality
of products and service [9]. As a result, successful KM implementation is expected to have a
positive influence on a company's performance and effectiveness [10].

Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
International Journal of Information Processing and Management(IJIPM)
Volume3, Number1. January 2012
doi:10.4156/ijipm.vol3.issue1.4
2. KM Readiness

Usually organizations spend plenty of time and budget on KM projects. So a clear vision of KM
success comes into necessity. The success of KM projects depends largely on the organization
readiness to implement it [11]. Readiness assessment projects perform a quick scan of organization for
sophisticated KM practices [12]. During recent years, KM strategies are maturing to consider the
ability to assess an organizations readiness for such systems [13]. As a result the KM readiness
research may help an organization to analyze its preparedness for effective knowledge sharing before a
KM system is implemented [14]. Practical implications include more targeted and accurate assessments
of KM readiness for firms considering similar strategies. This information will improve an
organizations ability to make more actionable decisions based on their KM readiness assessments
[14].Awareness and understanding of KM and its benefits are very important. The KM awareness
benefits the entire organization and that it relies on developing a KM environment inside and outside
the organization that allows the generation of new knowledge, the transfer of existing knowledge, and
the application of knowledge to new products, services, and process [12]. KM is a potential way to
improve productivity and boost confidence among staff on the job. So, it is necessary to increase the
awareness of and readiness for KM [15].

3. IS1 in Organizations and the role of IT in KM

During the information era attributed by generation of tremendous amount of data on a daily
basis, enterprises only use IT to integrate each division with various technologies, such as
intranet, data warehouse, electronic whiteboard, artificial intelligence and expert systems so that
the jumbled business data is well-organized and more integrated [16]. It is obvious that certain
methods, such as data mining, can be helpful to an organization in extracting valuable
information from a database, particularly when they are applied to marketing, customer
relationship management, and e-commerce domains, hence, it is obvious that IT is a crucial
enabler for enterprises to achieve a competitive advantage and organizational innovation [17].
IT is recognized in most literature as a key enabler of KM although there are many other factors
that are necessary for KM success [18]. Other researchers emphasize on that IT and
Organizational Culture [OC) play very important roles in determining the success or failure of
the implementation of KM [19]. The regression result for KM model of Salleh that have been
conducted on his case study highlights that knowledge sharing process and ICT infrastructure
and software, knowledge sharing technologies and communication technologies are the most
important KM enablers for the successful KM implementation. This analysis also confirms the
significant impact of process and technology as KM enablers to facilitate high organizational
performance since the core business in accounting functions and financial services is heavily
related to accounting process and information technology [8].
Without the capabilities of IT in terms of both storage and communication, leveraging of
knowledge resources would hardly be feasible. A variety of tools are available to organizations
to facilitate the leveraging of knowledge. These tools (KMS) are defined as a class of
information systems applied to managing organizational knowledge. That is, they are IT-based
systems developed to support and enhance the organizational processes of knowledge creation,
storage/retrieval, transfer, and application [18]. Common KMS technologies include intranets
and extranets, search and retrieval tools, content management and collaboration tools, data
warehousing and mining tools, and groupware and artificial intelligence tools like expert
systems and knowledge based systems [20]. Other papers emphasis that in the KM process, the
absorption, creation, arrangement, storage, transfer and diffusion of knowledge are all
dependent on assistance provided by IT [19].
Statistics show that nearly 70% of KM articles in 1998 focus on IT. It is obvious that IT-
based KM tools clearly play a vital role in the new knowledge era. Accordingly IT-based tools
can facilitate both the exploration of knowledge (i.e. the pursuit of new options through
knowledge creation and construction) and the exploitation of knowledge (i.e. the further use of

1
Information System
Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
things that are already known through knowledge capture and distribution) [21]. IT, such as
electronic networks and group support systems, could enhance tacit knowledge exchange
knowledge workers [22]. The application of IT to support KM apparently influences the
of knowledge collaboration within an organization [19]. IT not only helps KM processes but
also greatly enhances the value of knowledge assets due to the advancements of the Internet
[23]. Consequently IT contributes to the integration of knowledge or even to the stimulation
of new knowledge [24]. But we should consider that although IT is the foundation for
managing knowledge assets and enables people from different departments to cooperate in its
implementation, it is difficult for IT to support all the factors that have influence on the KM
[25]. Like many other types of information systems, such as ERP, that break downs are not
rooted only in technical reasons, KM have a high chance of failure due to non-technical
cultural, behavioral, and strategic factors [26].

4. KM and ERP

During the past 20 years, there was a huge change in organizations, contrasting the
physical assets age. Todays workforce is largely mobile, and technology undergoes
revolutionary changes [2]. While traditional organizations mainly focused on physical assets,
modern high-tech enterprises concern with two major types of assets, physical as well as
intellectual assets [4]. Moreover, high-tech organizations are now highly dependent on their
intellectual capital rather than their physical assets [27]. Due to the fact that both types of
assets need to be properly managed, the integration of KM and ERP becomes a strategic
initiative for providing competitive advantages to enterprises [28].
KM and ERP are two main types of information systems that affect the way any enterprise
cooperates. These two systems are widely implemented in many organization, but systematic
incorporation of KM into ERP project management is strategic and critical [29]. Sometimes
they are being implemented simultaneously, or at least their implementation cycles are
overlapped [30]. This means that it is possible to implement these two systems
simultaneously or in tandem but the interaction between them is more important issue.
Since 1990s, enterprise information systems such as ERP systems are developed and
implemented mainly for managing physical assets of an enterprise [9]. ERP systems facilitate
gathering and dissemination of information across diverse areas of business in order to
generate a more accurate measure of performance. ERP software is characterized by its fluid
and seamless integration of information across functional divisions and locations. This
integration results in more accurate information and reporting of performance data enabling
more effective decision making [31].
ERP systems emphasize the efficiency of business processes in enterprises. To achieve
this goal, they maintain mechanism for data/information consistency through high degrees of
standardization, formalization, and specialization [4]. A successfully implemented ERP can
link all areas of an enterprise including customer relation, manufacturing, human resource,
financial management, and distribution with customers and suppliers, and forming a highly
integrated system with shared data [9].The knowledge-based view of enterprises argues that
KM system is the centre of business enterprises and an enterprise's competitive advantage
depends upon the effective integration and management of knowledge assets. The
information processing-based view considers that ERP is the centre of enterprise
management - ERP enhances business performance through minimizing internal and external
uncertainties by improving information flow. Although either view has its limitation from
systems perspective, they are complementary to each other.
Although ERP and KM are based on different management philosophies, ERP and KM
systems complement each other to some extent. The distinction between information and
knowledge not only suggests their different implication and value for organizations, but also
suggests that both ERP and KM system are needed in order to provide and leverage the
respective values of information and knowledge. In perspectives of enterprises, the ultimate
goals of the two systems are to help enterprise survive in the global market by improving its
performance. In summary, ERP and KM systems manage the business from the point of
views of physical and knowledge assets, respectively [4].
Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
Some researchers consider KM as an ongoing process of any organization that is needed for
managing knowledge asset. In their papers, they suggest using the platform of ERP to provide
tools needed for implementing KM. From managers' point of view, ERP and KM systems
should be integrated to attain competitive advantage [4]. With a proper framework in which
ERP and KM can cooperate with each other, an enterprise can benefit from the advantages of
ERP and KM and be successful in global competition. Increasing requirements for extended
enterprises have stimulated the integration of KM functions into ERP systems for knowledge
asset management [9].
In the process-based point of view, KM is a process that needs a common platform for its
activities and ERP can provide such shared platform in organization [32]. ERP system provides
a platform for capturing, creating, storing, and sharing knowledge. KM manages both tacit and
explicit knowledge that may be acquired through ERP information platform [4].
Due to the inherent differences between ERP and KM, researchers suggest that it is not possible
to take advantage of integrating KM into ERP by simply adding an extra KM module into an
ERP system. It is obvious that KM has its own purpose compared with that of ERP, where such
purposes may be conflicting to each other to some extent. For example, KM emphasizes the
flexibility in business routine, whereas ERP focuses on the standardization of business routines.
In integrating KM into ERP, changes are needed in ERP to facilitate KM implementation. Such
changes may include knowledge-based management, knowledge presentation and so on. KM,
being inserted into an ERP system as a module, can support ERP for better decision making
functions. KM can capture knowledge, transfer tacit knowledge to explicit knowledge, and help
use or reuse knowledge for ERP purpose. Next generations of ERP systems may include a KM
module through achieving trade-off between their contradictions based on two managerial
philosophies [9].

5. Survey and the questionnaire

There are plenty of tools that can be used for KM readiness assessment some of them have
been used widely in organizations. It means that because of the different aspects of KM,
readiness assessment should address a multifaceted view, which most literature lacks to address.
Unfortunately, the measurement of an organizations readiness for KM initiatives poses a
challenge because no widely-used software package is available to do so [33]. To measure the
KM readiness, we developed a 36-item questionnaire adapted from KM enablers, KMAT, KM
critical success factors and also KM readiness factors based on similar works. We compared
these tools and extracted common factors that researchers complied as affecting the KM
readiness.
Firstly, knowledge enablers are mechanisms that stimulate knowledge creation, protect
knowledge, and facilitate knowledge sharing [14]. Technology, process, people and the
organization structure and culture are the key enablers of the KM [8]. In many respects,
existence of KM enablers implies a readiness for KM [33].Secondly, the KMAT 2 was
developed by the American Productivity & Quality Center and Arthur Andersen in 1995 to help
organizations self-assess where their strengths and opportunities lie in managing knowledge.
The tool is divided into five sections: the KM process, leadership, culture, technology,
measurement.
Thirdly, as the final aim of KM readiness assessment is to enhance the final result of KM
implementation, it is crucial to consider critical success factors in this survey because
successful KM depends on the achievement of critical success factors based on supporting
conditions [34]. Jennex and Olfman summarized and synthesized the literature on knowledge
management critical success factors [KMCSF] into an ordered set of twelve KMCSFs. The
following CSFs were identified from 17 studies which consider over 200 KM projects:
knowledge strategy, motivation and commitment, integrated technical infrastructures,
organizational culture and structure, enterprise wide knowledge structure, senior management
support, learning organization, measures, easy knowledge use, business process fusion and
security/protection of knowledge [11].

2
KMAT: Knowledge Management Assessment Tool
Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
6. Analyzing

We assess some measures which the literature emphasize on them and can affect KM
readiness. These measures are KM process, leadership, organizational culture, KM
technology, and some specific KM measurements. We use 5 ordered response level questions
in Likert scale where an item is simply a statement which the respondent is asked to evaluate
according to any kind of subjective or objective criteria; generally the level of agreement or
disagreement is measured.
We analyzed the KM process readiness by measuring the following indexes. First, whether
the staffs work seriously to capture/generate new ideas where the answer was at low level.
Second, whether the quality of information that is needed for every day job of staff is
available for them and it is in an appropriate level. It means information that is available to
staff can address their needs where the answer was at high level. This occurs because of the
appropriate documentation tools that ERP software brings forth to the staffs. Third, whether
in the organization the gap between the in hand knowledge and needed knowledge have been
identified structurally and appropriate process have been launched for bridging this gap. For
example, upon strategic alliances some sort of courses has been designed to improve the
knowledge level of staff. The answer was at middle level. Forth, whether in organization for
transferring the experiences and lessons
learned, there is a formal documented process
or not where the answer was at very low level.
Fifth, to what extent the structure of jobs
designed based on KM and in the way of
storing and sharing knowledge where the
answer was at very low level. Sixth, whether
there is an advanced and ethical mechanism
for capturing individual information and
enterprise knowledge or not, where the
answer was at middle level. Seventh, whether
tacit knowledge in the organization is
valuable and shared or not where the answer
was at very low level.
We analyze the leadership part of KM readiness by
measuring the following indexes. First whether the
CEO supports KM and implements the culture of KM in
the organization or not, which the answer was high.
Second whether organizational strategy designed based
on organizational knowledge or not. It means that long
term plans formed based on storing and protecting of
knowledge during the age of organizational activities
which the answer was at middle level. Third, whether
organization knows how to earn money by its invisible
assets and has some sort of strategy for marketing and
selling this knowledge or not which the answer was high. Forth, whether Organization learns
from its administration abilities and makes new
abilities and usage of it which the answer was
high. Fifth, whether staffs evaluated and awarded
by participating in expanding organizational
knowledge. It means making new knowledge and
transferring knowledge, and whether staffs have
been awarded for developing organizational
knowledge which answer was low.
We analyzed organizational culture in KM
readiness by measuring the following indexes.
First, whether organization leverages sharing
knowledge and awards by sharing knowledge
Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
which the answer was high. Second, weather the organization is aware of publishing and storing
benefits of the knowledge which the answer was middle. Third, whether there is a trust
atmosphere of organization or not which the answer was middle. Forth, whether there is an open
atmosphere in an organizational culture or not which the answer was high. Fifth, whether in the
organization, team work is valuable and also the organizational culture supports working as a
team or not which the answer was high. Sixth, whether creating value for customer is the main
goal of KM or not which the answer was very high. Seventh, whether flexibility and motivation
for innovation is an actuator of teach or not which the answer was very high. Eighth, whether
there is a trend of change in the most of staffs or not which the answer was middle. Ninth,
whether the vision of change is one of the motivator factors for change among staffs which the
answer was middle. Tenth whether the culture of learning from failure is a norm between staffs
or not which the answer was little. Eleventh whether in the organization, fail is not just criticize
but learning and experiencing from fail is important which the answer was middle and the final
whether the staffs get the responsibility of their learning which the answer was high.
We measure the KM technology factor in KM
readiness by measuring the following indexes. For KM it
is important that technology connect all the staffs and also
it connects to external resources. In our case technology
in very high level connects all the staffs.
In KM implementation, having a good and practical
organization memory is important. So it is important that
IT creates an organizational memory which is available
for all staffs. In our case study the answer was high.
Technology should connect organization to their
customers. In our case study the answer was high. For
KM implementation the organization should develop the infrastructure of IT base on human
factors. In our case study the answer was middle. Technology should support the coordinating
in the job which is available for staffs on time In our case study the answer was middle. IT tools
that have been used in the organization should support from sharing the knowledge between
staffs. In our case study the answer was middle. For KM implementation information system
should be online, integrated and intelligent In our case study the answer was high.
We analyzed KM measurements by the following
indexes. First whether staffs believe that special
KM in the organization has some sort of priority
which the answer was low. Second, whether human
resource manager cares the culture of KM and also
awards the culture of KM among staffs which the
answer was middle. Third whether staffs are
optimistic to implementing the KM and also using
the benefits of it or not which the answer was
middle. Forth we measures whether chief managers
lead their resources to develop their knowledge base
which the answer was low. Fifth whether the staff
innovate some sort of ways of connecting to the knowledge and reaching its finance results from
the knowledge which the answer was very low.

7. Conclusion

The results show that in this organization the KM process factors were in the low level, while
leadership factors were in the middle level. It is obvious that because staffs, previously, by
implementing ERP experience the change, they have a good support of leadership which lead to
ERP implementation successfully. Organizational culture was in the middle level. By using the
infrastructure of information technology which is available for organization through ERP
software, the KM technology factors were in the high level. But the most important thing is
Measuring KM factors which were in the low level. It means that while there is a good and
adequate infrastructure of technology for KM but still there is not an appropriate care for tacit
Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi
knowledge. So it is recommended for this organization to enhance the process of KM and
also change the beliefs and behaviors of their staffs toward KM. which directly effects KM
implementation.

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Measuring Knowledge Management Readiness in ERP Adopted Organizations: A Case of Iranian Company
Golnaz Azhdari, Fariborz MousaviMadani, Mahdi ZareBahramabadi

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