UNIVERSITY OF SOUTH WALES

BUSINESS SCHOOL

Strategic Systems Thinking (ST4S39)

Lecturer: Prof. Dr. Mike Nkasu

SUMMATIVE ESSAY:

“Before we measure something we must ask whether we understand what it is we are trying to
measure.”

(Gray et al, 2015)

NKIRUKA R. JOSAKWEKER
ID: R1612D2121733

Word Count

( 3,680 )

September, 2017

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 TITLE:

Strategic Knowledge base: The FCC and New Beginnings

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CONTENTS

1. Abstract/Summary 4

2. Introduction 5-6

3. Analysis 7

i. Knowledge Management/Environment
ii. Communities of Practice/Interest
iii. Intellectual Capital and Social Networks
iv. Performance Measurement (Challenges)
v. Systems Thinking

4. Conclusion
The Federal Character Commission (FCC) Proposition

5. Appendix

6. References

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Abstract/Summary
Strategic Systems Thinking would be incomplete without a Strategic Knowledge base. Countless
frameworks have been developed to the benefit of knowledge systems, whilst few have actually
sought to place this knowledge management in the larger context of strategic systems thinking.

This paper analyses the foundation and framework of the Knowledge System as a whole, whilst
highlighting its importance in the context of Communities of Practice (CoP). It also highlights the
role it assumes in Intellectual Capital (IC) - a pillar of the practice, without which IC would be
just another vague concept. Knowledge management is the head to which Performance
Management is the tail, which is a means to an end of the measurement. This paper also draws
attention to the fact that knowledge management is fuelled within a Social Network.

This paper highlights the fact that all the above; Communities of Practice, Intellectual Capital and
Social Networks are bound by the rope of knowledge, and ultimately explores these themes in the
Federal Character Commission. It also strategizes on the effective development of the knowledge
base within the FCC, surmising that the FCC needs to do more to develop theirs.

Keywords:

Strategic Knowledge; Strategic Thinking; Measurement; Federal Character Commission

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I. Introduction
In the spectrum termed life, there exists a varied range of objects and concepts that possess value,
despite being unquantifiable. Be it emotion, ambition or even knowledge. However, the question
is posed thus: can it be measured? And, if it cannot be measured, does it still possess value? On
the same wavelength, other questionable factors are; can it be stored? Moved? The answer lies
with Gray et al (2015) stating that prior to the measurement of something, the first step is to
understand what is being measured.

In the business world, in precision- the managerial world, such questions are ongoing in the field.
Can knowledge amongst others be measured? Owing to the fact that there exists a heightening in
awareness of strategic assets of value to a company that are not typical on-paper expectations, the
objective of the paper is to scrutinise imperative aspects crucial to a company, firm, organisation
and business. Some of the aspects were otherwise formally ignored, but are gaining headway, in
the pinnacle of importance to a company’s progress. In favour of this- Communities of Practice,
Performance Measurement, Intellectual Capital and Social Networks will be explored, in relation
to the strategic knowledge base which serves as a foundation for all.

‘Knowledge is power’, is a globalised expression. Wenger and Snyder (2000) echo such a view
with the outlook of the economy of the modern day time- being ‘run on knowledge’. Van den
Berg (2012), to the same end states that knowledge is at the centre of the economic locale. Being
the case, companies work assiduously to exploit on such a fact (Wenger and Snyder, 2000).

To create value, and evolve the growth of strategic theories, companies are heightening their
knowledge base (management and environment). Arrow (2000) says companies are adopting a
knowledge-based view (KBV) of production. In other words, a shift from the routine ‘planning’
standpoint, to the resource-based view of strategy. It however, must be taken into consideration
the possibility of knowledge being measured. But being conceptual and abstract is it plausible?
And if so, does this call for awareness and proactivity to knowledge existence and management or
knowledge environment? Organisations, firms and even groups like Communities of Practice are
motivated and thrive by knowledge.

A Community of Practice or Interest (CoP) is a community brought about a by a common interest.

Here, knowledge is shared. It connotes a community that involves shared learning and puts its
interest into Practice. It provides its members with a sense of belonging, and a definite seat. A
CoP is not to be confused with simply put a community, or other forms of organisations. They
have the ability to improve organisations (Wenger and Snyder, 2000), and their output is
definitely knowledge.

Social networks are important in the idea of Intellectual Capital because this was how it began. A
Network is known as a connection or association between social objects over time (Tichy et al,
1979). Hence, a social network is the breeding ground for intellectual capital, as well as value
creation. The question of whether or not knowledge can be measured ties in with the concept of
Intellectual Capital (IC). Intellectual Capital is yet another valued asset to an organisation that
Thomas A. Stewart states bears no ultimate physical form yet still possesses the capacity for

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generating profit. It is a representation of the actual hidden value of a company and promotes
‘Learning Organisations’ which are to equip the organisation for advancement in value. It pushes
forward the ideology that other than the numbers accrued over a financial period, which is paper
worthy, there are other aspects of a company- otherwise ignored, that possess characteristics
worthy of advancing an organisation in value. What constitutes IC will be developed in the essay.
However, how does it thrive may be a question.

Every endeavour or act must be judged based not only on the outcome, but it is a judgement of
the performance that narrows to a perception of the outcome. Every organisation seeks to measure
performance, for a continuous positive progression. Performance is ‘Potential’ (Lebas, 1995).
Hence, measurement steps in. In order to nurse an eye for improvement, the prior step is an
understanding of what is being measured, and then follows the decision of how to measure which
is challenging, but not impossible. The knowledge of such; is the succession of it.

Systems Thinking is a holistic view of a system, and a system is defined as a set of resources
organised in a certain manner to achieve a certain result. Hence, Systems Thinking, involves
placing importance not on the individual or a part, but on the whole, and an interaction of these
parts, to produce value. Therefore, it can be seen as an ultimate goal of strategy.

The Federal Character Commission (FCC) is a government body charged with the affairs of equal
job distribution within the state of Nigeria. It is for the allotting, monitoring and equal distribution
of jobs and resources to varied states and individuals. Hence, it monitors the utilisation of certain
budgets.

The paper aims to analyse strategic knowledge management as a central backbone of today’s
economy, and with the utilization of themes, scrutinise this in relation to Gray et al’s (2015)
statement: “Before we measure something we must ask whether we understand what it is we are
trying to measure.” The themes in relation to the topic are: Knowledge Management/
Environment, Intellectual Capital (IC), Social Networks, Communities of Practice (CoP),
Performance Management. These will all be tied to the bigger picture of Systems Thinking.

The method of investigation will strictly be literature review in relation to journals, articles,
published books and an empirical suggestive base. The scope is an analysis of the terms used,
prior research done on the topic (themes), case studies in relation to the themes on hand, the
Federal Character Commissions (FCC) strategic knowledge base, and an objective conclusive
finish.

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II. Analysis

i. Knowledge Management/Environment
Definition of knowledge, not only varies but there currently exists no universally accepted
definition. Some scholars however, have still proceeded to define it. Johnson, Scholes and
Whittington (2011) define knowledge as consciousness, awareness or familiarity gained by
learning or experience. The keyword here is ‘experience’. This connotes that knowledge grows
from activity. Bollinger and Smith (2001) state that it is a ‘Strategic asset’, Grant (1996) heightens
this definition by terming it the ‘most important strategic asset’ of a firm. Van Den Berg (2013)
argues that it is much more than ‘simply a resource’ as Eisenhardt and Santos (2002) declared, but
the ‘essential condition’ bestowing resources with strategic importance. It not only surpasses basic
resources, but it is the magic ingredient to economic growth and value. Hence, the importance of
it cannot be undermined.

There lies in importance, the compulsive condition to distinguish between existing forms of
knowledge as Von Hayek (1945) rightly suggests. There are two main types namely: Tacit and
Explicit/Codified. However, Van den Berg (2013) argues for the inclusion of one more:
Encapsulated. Nevertheless, for sake of the research scope, only the first two will be explored in
detail.

Tacit knowledge is defined as knowledge bordering on expertise, practical skill, involving

execution, and according to Nelson and Winter (1982) must be acquired, learned and accumulated
experience- wise. Termed the ‘procedural know-how’ by Kogut and Zander (1992), it possesses a
distinctive characteristic of being the interpreter of codified knowledge, and is resident in the
human mind. Its uncodified, its transference is slow, though acquirable through observation and
imitation, it manifests only in application, requires a degree of intimacy and permanence, and
according to Choo (2002) is expensive, requiring complex interactive structures.

Explicit or codified knowledge on the other hand differs from tacit knowledge in the area that its
replication is inexpensive to transfer and diffuse. It can border on observability, and information,
and can be passed without loss of integrity (Kogut and Zander, 1992). Saviotti (1998) states its
uniqueness as its non-rivalrous and non-excludable nature. Its intra-firm codified knowledge
circulation may be inexpensive, but this also creates possible misappropriation outside the firm.
Hence, Teece (1998) states that firms set up definite boundaries in strategic consideration of such.

Encapsulated knowledge differs from both Tacit and Codified in the area of its distinguished
marketability (Teece, 2000). It retains the degree of complexity, otherwise lost with the
codification of it. Its knowledge encapsulated in an artefacts design and functionality, its value
readily obtainable through the sale of commercially valuable devices or items.

Knowledge management as defined by Demarest (1997) is the systematic foundation,

observatism, measurement and optimization of the company’s knowledge economies. Demarest
also states that it is the key to effective competition. Demarest (1997) states, and as seen on the
case study of the Essex Police’s ‘Plan on a Page’, that innovation begins with the construction of

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a novel sort of knowledge within an organisation. With the knowledge of need for a change, and
equipping the workforce with both tacit and explicit knowledge, there was an innovative
transition in the police force.

Now, organisational knowledge is the topic of exploration in this paper. Ichijo and Nonaka (2006)
state that the creation of knowledge organisationally, does not mean that the organisation
members complement one another to conquer an individual’s restricted reality. However, it does
mean that this tacit, subjective knowledge held by an individual is externalised into an objective,
explicit knowledge shareable within and beyond the firm. Hence, the individuals tacit, knowledge
is enriched with this new knowledge, this is what drives an organisation forward. This is what an
organisation needs to enhance worth and value creation. This transition from personal, subjective
knowledge being synthesized and validated into a socially objective one, a ‘new knowledge’ is
what they term the SECI process (Socialization, Externalization, Combination and
Internalization). Socialization: Tacit knowledge to tacit knowledge, Externalization: tacit
knowledge to explicit knowledge, Combination: from explicit to explicit knowledge, and
Internalisation: from explicit knowledge to tacit knowledge. In turn, the market’s justification of
this new knowledge will then lead to the creation of another new knowledge.

How does this tie in with the other themes? Communities of Practice, Social Networks,
Performance Management and Intellectual Capital, all revolve around knowledge, whether it is
for the creation of it, the usage of it, or the need for/of it.

Figure 1.1, in Appendix, pg.1, displays the basic components of a knowledge-creating firm. This
image indicates that knowledge is created through dynamic interactions with ones environment. It
serves to illustrate the incessant progression of conversion between subjective, tacit knowledge
and objective, explicit knowledge. A major component of this is ba meaning the ‘shared context
in action, wherein knowledge is shared, formed, and utilized more than the description of a
Community of Practice with the learning process. And this is what organisational knowledge is all
about. It is a locale for knowledge creation.

In an organisation, it is imperative to develop both Tacit and Explicit knowledge (Nonaka and
Takeuchi, 1995). This is evident in the case study: ChevronTexacos Communites of Practice. This
firm offered insights as to how both tacit and explicit knowledge can be developed. Here, explicit
knowledge is being developed by provided links to internal and external knowledge information
nodes i.e. databases, benchmarking data and previous studies, and establishment of Global
Refining Networks which provide rapid connection between inquisitive staff and those with
fitting expertise and knowledge. Likewise, tacit knowledge is developed by enabling and
accelerating the timely and efficient adoption of new technologies, value-adding practices and
lessons learnt and network metrics. Chevron possesses a technology Rapid Execution (TRex)
networks. These transfer tacit knowledge between technical and operations staff for cost-saving
and performance-improving technology advancement.

The Federal Character Commission, in relation to knowledge Management, can be said to not
possess a sturdy knowledge base despite being an organisation in requirement of it. In this
organisation, information is more of explicit/codified than tacit. Of course there is interaction and

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training, but moreso, it is mainly ‘information’ that is made readily available.

Based on the SECI model, Figure 1, in Appendix, pg.1, the FCC by establishment should be a
knowledge-creating firm. It possesses the Knowledge Vision: our reason for existence? However a
lot of the organizations personnel are not intellectually inspired to create this knowledge because
of a lot of the top managers who staunch this passion. But a firm’s vision is more than empty
words, its Driving Objectives is the concrete motivation or goal that ‘triggers’ or fuels the
knowledge-creating process. However, at FCC the motivation of the employees are lost on most
of the top managers, who are self-motivated. In Choong’s (2008) article on Skandia AFS for
example, the driving objective was highlighting and making tangible a company’s hidden value
making it worth much more than the book value. It was also saving costs and enhancing the speed
of strategic learning. Dialogues are the synthesis of thoughts. Nonaka and Toyama (2002) state
that the synthesis of contradictions gives birth to knowledge creation. Rather than the ‘Soft
Dialetic’ (Nonaka and Ichijo, 2006) which encourages contradictions, the FCC adopts more of a
Hegelian dialectic which doesn’t. Some managers and employees may highlight contradictions
however, only when fallen into the right hands, is this addressed leading to the creation of new
and appropriate knowledge and consequently synthesis. Practice via shared experience, lays the
groundwork for tacit knowledge (socialization). Here practice isn’t just ‘action’ but ‘reflection in
action’. A discard of preconceived notions, and an objective observation of ‘reality as is’ is
foremost here. Does the FCC do this? It is in their directive to do so, but on ground, is a converse
case. Ba signifies a place for knowledge creation. Do they possess Knowledge Assets, yes, is it
being utilised? Not really. Their Environment Ecosystem is ripe for the consumption and creation
of knowledge, but the members of this system aren’t- the top management.

ii. Communities of Practice/Interest (Learning Networks)

Communities of Practice evolved from informal networks (Wenger and Trayner, 2011). According
to Wenger and Snyder (2000), it is a new organizational form, made up of an informal group
united by shared expertise and passion for combined enterprise. They share knowledge and
experiences in creative, free-flowing ways to thread novel approaches to problems. It isn’t simply
a ‘community’ as it possess the ability to develop peoples professional skills, open new streams of
businesses, help drive strategy, promote best-practices, and assist companies in recruiting and
retaining talent. The elements of CoP are: The domain of interest, Community, and Practice. The
concept is being applied in organizations, government education, associations, international
development, social sectors and the web. All these are potential knowledge creating avenues. A
typical example of a CoP is ChevronTexaco case study. Here they use CoPs in their Operational
Excellence strategy (which works across all networks) helping business units to close
performance gaps and meet corporate potential.

CoP’s possess great potential for developing knowledge due to the focus on shared activities. This
is because they are not restricted by formal structures, they give practitioners ample room to self-
manage needed knowledge, they can tackle tacit, dynamic and explicit aspects of knowledge
sharing, they create a direct link between learning and performance because the same people in

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CoPs can also be in teams and business units. Members can meet regularly in no rigid location
and not constrained by time.

The challenge here however, is in the relationships these have to the organisation. This can be
seen in the Figure 2. Table 1 in Appendix pg. 1. In summary, this highlights possible
relationship gaps between the organisation and the CoP. Another question to pose is a possible
clash between an individual’s interest in a particular knowledge area, and the organisations
strategic drivers. Wenger (1998) also describes possible cliques between certain individuals
within a CoP thus stemming not only organisational benefit, but also a personal one.

The FCC has no affiliation whatsoever with a Community of Practice.

iii. Intellectual Capital and Social Networks

By Social Network, Nahapiet and Ghoshal (1998) term it a ‘Social Collectivity’, because it
involves the presence of people- in an organisation, firm or even an ‘Intellectual Community’. In
such a setting, there are bound to be bonds and relationships formed both internally and externally
termed ‘Social Capital’: the central definition being that networks of relationships form a precious
resource for the conduct of social affairs. (Nahapiet and Ghoshal, 1998). It comprises of
structural, relational and cognitive dimensions. It creates intellectual capital (IC) as seen in
Figure. 3, pg. 2 of Appendix. It’s one of the main categories that create balance in Intellectual
Capital. The others are: Human Capital, Structural Capital and Customer Capital.

Human Capital: refers to the people within the organisation: skills, learning ability, quality
management, core competencies, competence and knowledge base of its employees. Structural
Capital: refers to the processes and operations of the organisation, cultural set up and the
innovativeness in its operations. The Customer Capital: refers to the value of external
relationships, and how customers are treated and valued in the organization: ‘Goodwill’.

Intellectual capital (IC) is also known as Intangible Assets (IA) because it considers those assets
of a company that cannot be touched, but still makes you rich (Thomas A. Stewart, FORTUNE).
Hence, Edvinsson and Malone (1997, p.22) say they’re intangible because they have no physical
existence, but they are still of value to the company. Rastogi (2003) defines it as the holistic
prowess and potential of a firm, for making or creating value. The same duo describes IC as “the
difference between the firm’s market value, and its book value of entity”. IC says that a firm is
much more than a stated outcome, it is all the people, ideas, relationships, experiences, skills,
training etc. that creates more value for the company. Skandia AFS is imperative to this analysis
because it illustrates how IC can be measured.

Choong (2008) listed Kaplan and Norton’s (1996, 2000) balanced scorecard method, as one of the
widely established methods. This was how the indices (Human, Structural and Customer Capital)
emerged. A Base ratio was developed for each of these items- Innovation, Number of Customers
and Development. Measurement is important because it not only aids in the systematic
management of these hidden values, but can also provide deeper insight into future growth and
reveal values vital to the organisations strategic future (Edvinsson, 1997). The challenge to

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measurement however is the complicated measurement of measuring the intelligence of a
corporation, being dependent on subjective evaluation.

iv. Performance Measurement

In strategizing in complex systems, performance measurement helps develop the knowledge base
of an organisation. It’s valued for its insight on its illumination of whether leaders are on the
correct path to the achievement of strategic goals. The challenge is measurement. There are too
many to choose from, and how does one begin. However it is imperative because it enables the
evaluation of business results in different units, hence improving upon management making
informed decisions e.g. recruitment, budget concerns or make efficient the business process
(Worth, 2016). In order to measure, ‘Performance Management Systems’ , ‘Quality Improvement
Systems’, ‘Dashboards’, ‘Metrics e.g. Skandia AFS’, and the ‘Balance Scorecard’ as in Skandia
AFS are used. To enable measurement certain steps must be taken: a definition of clear objectives,
identification of Critical Success Factors, Key Performance Indicators (KPI) and then targets are
set. A crucial factor is KPI. Worth (2016) states that KPIs chart an organization to success,
measure progress, and are so crucial that the wrong KPIs can drive an organization to ruin.
A successful scenario is the Essex Police Force, with their Plan on a Page they achieved
consensus in strategic goals, and a clear communication of their priorities.

v. Systems Thinking
All these and their strategic knowledge base tie into the concept of systems thinking. Reisman
(1979) defines Systems Thinking as an array of resources, organized in such a way that the
desired results are obtained owing to the organization of their designated functions. In this sense,
systems’ thinking is only possible with a sound knowledge base. It advocates, interaction,
interconnectedness, and holistic improvement which is what all the themes addressed in this paper
are about i.e. CoPs, Social Networks and IC, Performance Management and Knowledge
Management.

vi. The FCC Proposal

In order for the Federal Character Commission to develop their strategic knowledge base, they
must become ba. Refer to Appendix pg. 1, Figure 1.1. In other words they must become
knowledge advocators, not just creators (Top Management): become Self-organized with parallel
purpose, restructure their objectives, possess a definite direction, and mission. They must also
create a shared sense of principle. They must support variety of knowledge. Should open
boundaries, and be dedicated to participants. What is their IC? Have they measured performance?
Would they advocate CoPs both internally and externally? Are they ready for new beginnings?
And just like Ackoff’s car, they need to work together. In conclusion, new knowledge creation
must be a continuous process, this is how any and every organisation will remain valid in an ever
changing society.

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5. APPENDIX

1. Figure 1: Basic Components of a Knowledge-Based Firm.

Figure 1.1 Basic Components of a knowledge-Based Firm

Source: Adapted from Nonaka, Sasaki and Senoo (2004)

2. Figure 2.1. Table 1: Issues Arising Between an Organisation and a CoP on

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 Different degrees of Institutional Involvement.

Figure 2.1 Issues between Organization and Communities of Practice

Source: Adapted from Wenger (1998)

3. Figure 3. Social Capital in the Creation of Intellectual Capital.

Figure 3.1 Social Capital in the Creation of Intellectual Capital

Source: Adapted from Nahapiet, J. and Ghoshal, S. (1997)

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