Knowledge Management

CE00543-M

Knowledge Strategy 1
Dr Alan Eardley
Staffordshire University
Based on the work
of Prof. Michael Zack
Northeastern University College

KM Research Seems to
Indicate
Knowledge is considered the most strategically important
resource in many business organisations
Organisational learning is the most strategically important
capability for many business organisations
Many initiatives to develop and exploit organisational
knowledge are not explicitly linked to the organisations
business strategy
Most knowledge management initiatives are viewed
primarily as information systems projects
While many managers believe that strategic advantage
can come from knowing more than competitors, they
cannot articulate the link between knowledge and
business strategy.

Knowledge Management

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Intellectual Capital
For years many organisations have initiated a range of
knowledge management projects & programmes
For some, focus has been on developing new IT
applications to support handling of the organisation's
explicit (i.e. documented) knowledge
Others believe the most valuable knowledge is the tacit
knowledge that exists within peoples' minds, handled via
interpersonal interaction and social relationships
These are experimenting with new organisational cultures
and personal interactions social factors
Many are experimenting with new organisational cultures,
forms and reward systems to enhance those social
relationships

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IT is not the whole answer

Properly aligned and integrated technical and
organisational initiatives can provide an infrastructure to
support KM processes
But, while an appropriate IT infrastructure can enhance
an organisation's ability to create and exploit knowledge,
it does not ensure:
that the organisation is making the best of its resources
that it is managing the right knowledge in the right way

How should an organisation determine:

which efforts are appropriate
which knowledge should be managed and developed

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Linking KM and Strategy

The most important context for guiding a KM
initiative is the corporate strategy
The organisations strategic context helps it to
identify KM initiatives that:
support its purpose or mission
strengthen its competitive position
create shareholder value
The link between KM and business strategy,
while often talked about, has been widely ignored
in practice
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Lack of Strategic Linking

Models
Many executives struggle to articulate the relationship
between their organisation's intellectual resources and
capabilities, and its competitive strategy
They do not have well-developed strategic models that
help them to link knowledge-oriented processes,
technologies and organisational forms to business
strategy
They are unsure of how to translate the goal of making
their organisations more intelligent into a strategic
course of action.
They need a practical yet theoretically sound model of
knowledge strategy suggested by Michael Zack

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The Companies in Zacks Study

Image Corp. was a leading US photographic imaging firm,
manufacturing products such as film and photo processing
equipment (i.e. physical products requiring assembly)
Buckman Labs was a large manufacturer of specialised chemicals,
(i.e. physical products but not assembled)
Lincoln Re was one of the world's largest life/health re-insurers, and
provided knowledge-based products and services (i.e. not physical)
LeaseCo was an industrial clothing and equipment leasing firm,
providing a service based on physical products
Big6 was a large public accounting and professional services firm,
providing knowledge-based services.
Together, Zack says these companies demonstrate the importance of
knowledge strategy regardless of industrial sector

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Zacks Knowledge Strategy

Framework

The framework is
illustrated using
examples from
five companies
representing the
spectrum of
physical and
knowledge-based
products and
services

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Zacks View of Strategy

Links the (traditional?) resource-based view of
strategy with a (more up to date?) knowledgebased view
Presents a framework to help managers relate
their knowledge and learning requirements
business to their strategy
Raises important implications for companies
competing with knowledge
Based on SWOT and 5-forces analysis
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SWOT Analysis

An acronym for Strengths, Weaknesses,

Opportunities and Threats
A framework for reviewing the strategy, position
and direction of a company or business system
A subjective assessment of data which is
organised in a logical order that helps
understanding, presentation and discussion

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SWOT Analysis Grid

Present

Future

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SWOT Functioning
SWOT analysis works like this:
Strengths
Opportunities
Use the Strengths
Exploit the Opportunities
Weaknesses
Threats
Stop the Weaknesses Defend against the Threats
Emphasise the Strengths and Opportunities.
Focus on the Strengths that differentiate company from
competitors
Analyse the Weaknesses & Threats that might occur

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Strength and Weakness Factors

May be present or absent in varying degrees, e.g.:
Resources: financial, intellectual, location
Cost advantages from proprietary know-how
and/or location factors
Creativity (e.g. ability to develop new products)
Valuable intangible assets: intellectual capital
Competitive capabilities giving advantage
Effective recruitment of talented individuals

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Opportunity and Threat Factors

May be present or absent in varying degrees, e.g.:
Expansion or down-sizing of competitors
Activities (or inactivities) of competitors
Market and product trends
Economic conditions in the market
Technology developments
Changes in market size and/or conditions
All other environmental conditions
National and global influences
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Porters 5 forces of Competition

Model

Updates Porters
1985 work to
include ecommerce
Bargaining power of
suppliers & markets

Substitute products/services

Rivalry among
existing competitors

Barriers to entry

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Examines the
effect of ecommerce on
competition
Bargaining power of
channels & end users

Porter M (2001)
Strategy and the Internet
Harvard Business
Review. March.

Porters 5 forces of Competition

Model
Model focuses on the external side of strategy,
helping firms to analyze the forces in an industry
which give rise to opportunities and threats
Industries that enable firms to dictate terms to
suppliers and customers, and to provide barriers
to new entrants and substitute products are seen
as favourable
Strategy becomes a matter of choosing an
appropriate industry and positioning the firm
within that industry according to a generic
strategy - low cost or product differentiation.
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Porter's Model has come under

criticism
The model addresses the profitability of industries rather
than individual firms - it does not help to identify and
exploit unique and sustainable advantages
Its underlying economic theory assumes that the
characteristics (including resources and knowledge) of
particular firms do not matter with regard to performance
It is the overall pattern of relationships among firms in the
industry (i.e. the market) that makes the difference
If the industry as a whole has sufficient barriers to entry
and impediments to competition, then all firms should
prosper.
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Resources and Capabilities

Approach
Suggests that firms should position themselves strategically based
on their unique resources and capabilities rather than their products
and services
Resources and capabilities can be thought of as a platform from
which the firm produces products for various markets
Deploying resources and capabilities across many markets and
products, rather than targeting specific products for specific markets,
becomes the strategic driver
While products and markets may come and go, resources and
capabilities are more enduring - a resource-based strategy provides
a more long-term view than the traditional approach
Competitive advantage based on resources and capabilities
therefore is potentially more sustainable than that based solely on
product and market positioning

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The Advantage of Knowledge

By having superior intellectual resources, an organisation
can understand how to exploit and develop its resources
better than its competitors, even if some or all of those
resources are not unique.
Knowledge can be considered the most important
strategic resource, and the ability to acquire, integrate,
store, share and apply it the most important capability for
building and sustaining competitive advantage
KM can therefore enhance the organisations
fundamental ability to compete it tends to be unique
and difficult to imitate
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Why Knowledge is Power

Unlike many traditional resources, it is not easily
purchased in a ready-to-use form
To acquire similar knowledge, competitors have
to engage in similar experiences
Acquiring equivalent knowledge through similar
experience takes time
Competitors are limited in how they can speed
up their knowledge through greater investment
unless they can recruit the firms staff
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The Cases in Zacks study

The Cases in Zacks study will be the subject of
the next KM tutorial

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Reading
Zack M.H. (1999) Developing a Knowledge Strategy.
California Management Review, Vol. 41, No. 3, Spring,
Pp. 125-145.
Nonaka, I. (1994) A Dynamic Theory of Organizational
Knowledge Creation. Organization Science, Vol. 5, No. 1,
Pp.14-37.

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