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Post-Industrial
Economy and Competitive Positioning Elayne Coakes, Gill Sugden and Anton Bradburn The authors' focus of interest is on the linkage of two concepts: Knowledge Management and the Learning Organisation. This article presents a summary of a much wider review of literature concerned with these two concepts. The article brings together key areas of debate centring on the term knowledge and how knowledge derives from investment in intellectual capital, which organisations can subsequently transform into novel forms of assets. The authors discuss how the practice of Knowledge Management becomes embedded in organisations through an examination of contiguous concepts including learning, change and culture. The need for supporting systems is raised and the concept of enabling Knowledge Management by information technology so that communities of practice become established is identified. Finally the authors draw from the literature to conclude with their cognitive map of the Knowledge Management field that suggests linkages between the various discourses encountered in their review. -oo0oo- Introduction "A mind that is learning never says, 'I know', because knowledge is always partial, whereas learning is complete all the time…..learning is never cumulative; it is a movement of knowing which has no beginning and no end." Krishnamuti (1995) If ever there was a need to demonstrate how rapidly environmental turbulence can be unleashed the razing of Manhattan's World Trade Centre in real time provides a terrifying example. The world competitive environment changed with astonishing speed. The downstream impact on a faltering global economy was to push some sectors of it into immediate recession. The dramatic decline in air travel and the subsequent effects on the airline industry is one instance. To survive in and then thrive after chaotic times like these some organisations will turn to their inner resources tapping their intellectual capital for creative ideas and innovative strategies. They may exploit the organisational knowledge developed from the process of organisational learning. In an uncertain economic period, such as the one after September 2001, knowledge management (KM) assumes critical importance because organisations are operating in a post-industrial economy - the knowledge economy. So KM provides a focus of significant interest to management, practitioners and researchers alike. Taking the view that KM is concerned with capturing and sharing knowledge from intellectual capital, created through the continuing process of learning (as in the quote above), to provide sustainable competitive advantage the authors of this article surveyed the current KM literature to investigate linkages between knowledge management and those enterprises with claims to being learning organisations. They searched several on-line databases covering the five year period 1996-2001. Their findings and conclusions are set out below. Differentiating data from information and knowledge Fundamental to the discourse in the KM literature, we noted, are discussions concerning the differences between knowledge and information and data (Cropley, 1998). As they have different characteristics it is possible to establish a clear boundary between knowledge and information (Blumentitt and Johnston, 1999). Data may be regarded as a commodity, value is added to data when they are processed into information and in turn information gains further value when it is applied in new contexts becoming transformed into enterprise specific knowledge. Knowledge is also defined as information to which experience, context, interpretation and reflection are added by individuals so that it becomes a high value form of information (Davenport, 1998). In these circumstances knowledge can be utilised in novel ways - making predictions, for example (Tuomi, 1999) - thereafter being retained within the organisation as organisational knowledge. Contextualised knowledge is regarded as the outcome, or product, of a learning process (Antonacopoulou, 1999), (Bertels, 1999). Because it becomes owned as organisational, such knowledge is sticky in the sense that it is both localised and contextualised (Apostolou, 1999) and thus it is argued that organisational knowledge is socially constructed because its added value derives from an intra-organisational social process - the process of sharing. Forms of knowledge Two forms of knowledge can be differentiated. The first form may be labelled as domain knowledge, which can be replaced easily; the second form is a knowledge of how work is carried out and this is difficult to replace (Hildreth, Kimble and Wright 2000). Hildreth et al also employ the terms hard and soft knowledge where hard knowledge is the same as domain knowledge while soft knowledge is likened to what Nonaka and Takeuchi (1995) refer to as tacit knowledge - that is knowledge comprising experience, which resides only within individuals. According to Platts (2000) tacit knowledge is 'knowledge-in-action' indicating that it is that which has not been articulated thereby distinguishing it from explicit knowledge which is readily accessible from within the organisational domain. Other writers focus on the way in which tacit knowledge is formed (Saint-Onge, 1996), before going on to assess the way tacit knowledge can impact on the development and implementation of corporate and business strategy and how essential it is that strategy should be aligned with an organisation's tacit knowledge. Blumentitt and Johnston (1999) argue that information can be captured and stored in digital form, but tacit, or soft, knowledge only resides in intelligent systems by which the authors mean that the repositories of such knowledge are individuals. However, Blumentitt and Johnston go on to state that knowledge can be created, captured and encouraged to flow around organisations. This can be facilitated by KM applications in the form of systems such as corporate intranets and software like Lotus Notes. The debate about knowledge in the KM literature distinguishes between it and data and/or information. It is also clear from the discourse that knowledge has a twofold classification by means of which explicit knowledge is distinguished from tacit knowledge, but for some writers this simple division is insufficient. Typologies of knowledge Several investigators set out to provide sophisticated taxonomies of knowledge (Bloom, 1956) in which forms of knowledge are organised in an hierarchical fashion ranging from more concrete to more abstract knowledge commencing, for example, with information then ascending to understanding, application, analysis, synthesis and progressing ultimately to evaluation. Bloom defines knowledge as the recall of specifics and universals; the recall of methods and processes; the recall of pattern, structure and setting. Although some of the matter of which knowledge is composed may require transformation, knowledge is retrieved through a cognitive process of recall and is subsequently operationalised through relating. Relating requires that problems be organised and re-organised in order to surface signals and cues capable of triggering the knowledge process. This provides a system where knowledge becomes the input and the
intellectual, or cognitive, processing becomes an ascending taxonomic
sequence of comprehension, application, analysis, synthesis and
evaluation. As learning is linked to cognition and is not separable
from it, cognition leads to learning. Thus learning is the acquisition
of knowledge, rules and habits, but not necessarily in a rational
way (Brookfield, 2000). Blumentitt and Johnston (1999) define knowledge in four categories:
There are then contradictions about the relationship between information and knowledge. For some writers there is a clear separation between the two modes; for others information is a type of knowledge. For yet others, knowledge is socially constructed through interpersonal transactions and is thus social knowledge. The terms explicit and tacit knowledge seem to be in widespread use although other labels, common and embodied for instance, are sometimes used interchangeably. Some form of medium, or channel, is vital for an exchange of knowledge, especially tacit (Prusak, 1997), and sometimes enabling technologies need only be contingent. In this context the importance of conversations occurring in water cooler, or photocopier, moments should not be underestimated. Developing intellectual capital Tacit knowledge is key to the development of intellectual capital through processes of creativity and innovation. Intellectual capital is a relatively recent designation. In principle it is similar to financial capital and like money, intellectual capital can be also be invested, but to bring a return in terms of intellectual property rather than cash profit, or interest. Intellectual capital combines with intellectual property to form the intellectual assets of an organisation, which can be managed in ways that exploit, or leverage, such assets for a financial return. Ulrich (1998) makes the point that intellectual capital appreciates and that this is important in an era when the service economy sector is growing. He argues that organisations can build intellectual capital by investing in employee learning and can do this by buying, building, borrowing, bouncing and binding it. Davenport, De Long and Beers (1998) define knowledge as information plus experience, context, interpretation and reflection. They also contend that knowledge is a high value form of information. The authors argue that organisations want to create, transfer and apply knowledge because knowledge is key to the basis of future competition. Their research asserts that KM is a nascent field and has four primary objectives:
Valuing KM assets Treating knowledge as a tangible asset allows for a value to be imputed to knowledge repositories. The Danish Carl Bro group, for example, publishes a set of Intellectual Capital Accounts annually so that investors and other stakeholders can value the business for its intellectual worth. Intellectual capital statements are intrinsic to KM, and valuations form part of the history of intellectual capital (Larsen, Boukh and Mouritsen 1999). These authors provide a matrix composed of definitions of human, organisational and customer capital, which demonstrates how intellectual capital can be made visible by creating intellectual accounts using specific metrics, based on statistics, key indicators and measures of effects, but with no fixed model in view. The increased interest in more explicitly valuing intangible assets
is taken up elsewhere. Smith (1998) explores the strengths and weaknesses
of current approaches contending that overemphasis on developing
and leveraging intangible assets is counterproductive. Instead Smith
proposes a new approach labelled SKM - systemic knowledge management
- illustrating SKM using system dynamics models and demonstrating
how this approach is relevant to strategic planning and operational
decision making. Alternative approaches to surfacing and conserving tacit knowledge revolve around the concept of intellectual capital and the role of tacit knowledge in the three constituent elements of intellectual capital: human capital, consumer capital and structural capital. Like Geisler other writers (Saint-Onge, 1996) also consider how tacit knowledge is formed, the impact it has on strategy development and implementation and how tacit knowledge can be aligned in support of strategy. Embedding KM in organisations The paradoxical nature of tacit knowledge somehow serving as an adhesive binding an organisational entity, yet at the same time being difficult to access and make manifest resonates in several areas of the KM literature. One of the richer treatments of this adhesive paradox (Darling 1996) regards intellectual capital in organisations as analogous to social capital (Putnam, 1995) at national level. Darling's work links with Bertels and Savage (1999) in terms of the metaphor of organisational glue. Tacit knowledge is labelled as organisational knowledge and recognised as an intangible asset yet paradoxically organisational knowledge is also the only asset that offers the assurance of a thriving competitive future. Interestingly Darling observes that KM is concerned with managing abundance rather than scarcity and in this respect it differs markedly from the traditional factors of production. Thus structuring and applying knowledge assets become more of a challenge to organisations than obtaining them, Darling argues, although this view would be strongly contested by others, who consider accessing and surfacing tacit knowledge to be the major challenge. Darling describes the Canadian Imperial Bank of Commerce as a learning organisation but also points out that a barrier to motivating individuals is the threat to their position in the organisations if they share their tacit knowledge. This reflects a similar view held by Geisler above. Fostering appropriate organisational values, attitudes, beliefs and expectations could enable a knowledge culture that might free an organisation from these mindsets. Is such a knowledge culture, however, commensurate with a learning organisation? Darling sees knowledge culture as associated with:
She thus suggests there are four key learning elements to make a knowledge culture achievable:
Deriving sustainable competitive advantage from KM It emerges from the literature that the knowledge base for the foundation of the organisation's core competence is composed of both explicit and tacit forms of knowledge. Tacit knowledge is embedded in the social tissue of the organisation's processes, dynamic routines and internal communication paths and provides an organisation-specific resource to sustain competitive advantage (Lei, 1997). There is a distinction between competitive advantage deriving from strong product/market positions and the resource based perspective, which involves sustained and continuous learning aimed at developing and exploiting assets, skills and capabilities that influence a firm's evolution, competitive strategies and growth paths. Generic competitive strategies such as those proposed by Ansoff (1968), Porter (1985) and Bowman (1992) are of little use in the longer term because they are transparent to competitors and easily imitated. A strategic focus on building and applying core competencies may, however, provide the basis for sustainable competitive advantage. This route to competitive advantage requires a highly dynamic competence building process relying on continuous organisational learning, the ability to fuse technologies, the acquisition and internalisation of embedded knowledge and multiple approaches to product development and production. In this approach organisational learning creates new forms of organisational knowledge. Lei (1997) sees strategic alliances as key to building sustainable competitive advantage. Such alliances are likely to be in the form of close co-operation and interaction between partners along every aspect of the product's value chain, or underlying technology. Sustainable competitive advantage is more likely to result from building core competencies possessing a high component of tacit knowledge that is embedded in the organisation. Explicit knowledge is often a product rather than organisationally embodied. It is also codifiable and not context specific. Tacit embedded knowledge, though, is difficult to learn without close interaction and collaboration with the strategic partner, so competence building involves two distinct stages of learning and knowledge accumulation. These are acquisition/transformation and extension/application. Competence building thus becomes an ongoing, evolutionary process that depends on sustained organisational learning and the cumulative growth of the organisation's knowledge base from current and earlier periods. Identifying a learning organisation Our contemporary concept of organisational learning originated in the organisational practices of Reg Revans, Fritz Schumaker and Jacob Bronowski at the UK National Coal Board circa 1945 (Garratt, 1999) evolving out of an action learning process into learning circles and subsequently quality circles before emerging eventually as the learning concept we recognise today. Continual learning, as a process occurring from time to time, helpfully differentiates between organisational learning as the process by means of which both individuals, and whole organisations, develop and use their stock of knowledge and a learning organisation as one that both teaches and learns from itself continuously. Synthesising a learning process model from learning theory and deriving a practical model for practitioners in management to apply to team and organisational learning is described in work carried out at Nottingham Trent University (Buckler, 1998). This empirically based project identifies some of the systemic barriers and the leadership skills necessary to create a learning organisation and draws attention to the UK's poor performance in innovating and continuously improving performance. Buckler examines linkages between learning and performance improvement and advocates the need for change. Both incremental and continuous improvement in terms of doing better things, or doing things better over time can be achieved by looking outwards to consider products and services from the customer perspective and by looking inwards at organisational processes. The author defines learning as 'a process that results in changed behaviour in ways that lead to improved performance' and having examined the competitive advantage of innovating concludes that a top down command and control style is inimical to a learning culture. Herbert (2000) makes the point that knowledge is perishable, thereby implying the critical concern for organisations is to ensure that continual or preferably continuous learning occurs within the entity. Organisational transformation In discussions of KM some studies employ the term learning organisation as a metaphor for organisational change. One example of a successful learning organisation frequently mentioned in the KM literature is the Canadian Imperial Bank of Commerce (CIBC) which in 1992 recognised the competitive advantages in changing to become a learning organisation (Smith, 1999). Smith describes how such change initiatives can be sabotaged by organisational resistance with relative ease. Consequently Smith posits that any development towards becoming a learning organisation needs to be introduced by stealth rather than directly by attempting to change organisational culture as a first step. This kind of strategy sees Vision as both the starting point and the incentive for innovating. Innovation becomes a challenge and the challenge requires learning to take place so that on the way to becoming a learning organisation the enterprise 'develops dynamic capabilities which are the organisational abilities to learn'. Smith points to the need to bring together 'two conceptually simple and intuitively attractive concepts in combination'. These are:
At CIBC workplace based learning utilised an adapted form of Deming's Quality Circle framework. This required a range of enablers to be introduced into the learning process so that it became similar to action learning with historical links to the UK National Coal Board in the late 1940s and early 1950s. The CIBC performance framework was driven by the desired business outcomes. In the CIBC case the business outcome was that the Bank would become a customer obsessed company (Peters and Waterman 1982). Although it took 3½ years to complete the transformation, the CIBC case suggests that those organisations wanting to become learning organisations need to examine the relationship between learning and knowledge. In some of the failures reported on in the KM literature it becomes clear to us that there is little understanding of how learning processes and knowledge product are related. Organisational culture The learning organisation has been heralded as a proactive structure to address the turbulent environment within which modern businesses operate. A learning culture enables managers to meet the expectations of both internal and external stakeholders. A four phase model supported by IT in the form of an intranet, showing how a learning culture may be engendered, is proposed by Harvey, Palmer and Speier (1998) for the implementation of learning within an organisation. Following the four categories of culture provided by McGill and Slocum (1993):
Harvey et al establish the properties of each category in terms of its interaction with IT and identifies three learning processes based on Argyris and Schon's 1978 model - single, double and deutero, or triple, loop learning. He focuses attention on various information technologies utilised in information exchange including e-mail, groupware and discussion groups and argues that these are inferior to intranets as the most effective IT architecture to support a learning organisation. There are frequent references to organisational culture in the literature published about KM. Organisational culture is the abstract notion of intangible forces, which bind organisations together and it has been conceptualised as super-ordinate goals, or more simply as shared values (Peters and Waterman 1982), while Johnson and Scholes (1993; 1997) conceptualise it as a series of intangible forces swirling around a central paradigm comprised of common values, beliefs, assumptions and expectations, which serve to explain how things are done in any particular organisation. Writing as the Corporate Director for KM for Arthur D Little Inc (ADL), Chait (1999) outlines the knowledge management system implemented in the ADL organisation. He identifies and discusses three factors that have been most important to setting up ADL's KM system:
If we can accept that societally, nationally, globally we have transcended our former industrial epoch and are now economically speaking in the knowledge era then the logical determinism and zeitgeist of our new age compels changes in organisational culture. Not only cultural change, but new ways of conceiving the culture of knowledge organisations. This is a new context and perhaps we should not even be using the C word any longer; perhaps instead of change we should be adopting the vocabulary of transformation (Bertels, 1999). Open and sharing are key ideas with which to underpin contemporary forms of organisational culture. The Danish enterprise, Oticon, provides just one example of an open culture supportive of sharing knowledge throughout the organisation (Kolind 1994). What we observe from the Oticon example is the importance of a novel form of sub-structure within the overall organisational structure. This is a technological sub-structure, or infostructure (Burns and Gittines 1993), and it is claimed that such an infostructure is pre-requisite to the success of knowledge organisations. If true, then we must regard an effective infostructure as KM critical. If we do regard an infostructure in this way then the implication is that we must be prepared to abandon our mindsets of the 1980s and 1990s informed by the 7-S model, Ansoff, Porter, Bowman and the Boston Box, for instance, as no longer adequate and we must be prepared to embrace emergent business entities such as hypertext organisations (Nonaka and Takeuchi 1995), fractal enterprises (Warnecke 1995) and spaghetti companies (Kolind 1994). If we buy into the logic of the knowledge era then the challenge will be to transform organisational cultures into cultures of trust so that extrinsic control, normally exercised through various styles of management, will give way to self-management and intrinsic control. US chemical manufacturer Buckman Laboratories International set about achieving its goal to be faster and more innovative than competitors by developing competences in knowledge management through the investment in a computer-based knowledge sharing infostructure, known as K'Netix. This technological infrastructure features systems which include: e-mail; personal home pages for each employee; a number of forums such as a message bulletin boards, a library and a virtual conference room; and access to the Internet's World Wide Web. Graham and Pizzo (1997) reveal how employees initially reacted to the system and the company's knowledge networkers' continuous endeavours to make K'Netix a more effective management tool. Buckman could not be considered to have been a knowledge era organisation at the time this cultural transformation was implemented and the initial culture shock was handled through notions of respect for the individual embodied in the company's code of ethics. The emergent culture supported by K'Netix has since differentiated the company from its competitors thereby providing competitive advantages and facilitating not only knowledge sharing interactions within the organisation, but also an interface between its customers and the entire company. Information technology and information systems Herbert (2000) develops the argument that KM is driven by Information Technology (IT), which, in view of the discourse in the KM literature concerning this topic, can be viewed as an over-simplification and a contentious perspective. KM is concerned with collecting, rationalising, codifying, storing and disseminating all knowledge within an organisation and a key theme of KM is to transform tacit into explicit knowledge, which might require a change in organisational culture. This author's contention that KM is IT driven is countered by others, who see IT not as a driver, but as an enabling technology (Allee, 1997). This is particularly the case where self-directed learning is an organisational objective and where corporate intranets and Lotus Notes software are concerned. Allee starts from the premise that organisational knowledge represents a crucial competitive tool for survival in competitive environments, which depends on an organisation's ability to innovate. In order to do this successfully knowledge is required that will enable organisations to learn, adjust and change. Buckman Laboratories found that communities of practice developed as an effect of the introduction of information technology and that in turn these communities of practice became an important driver of organisational transformation. Darling (1996) also recommends a variety of tools to facilitate the four kinds of learning set out above. Others, such as Blumentitt and Johnston (1998), discuss the advantages of corporate intranets and the use of software such as Lotus Notes. While concurring with Blumentitt and Johnston, Darling additionally recommends internal web sites, guides, templates and questionnaires. Communities of practice Communities of practice (CoPs) enable organisations to develop what Liedtka (1999) refers to as meta-capabilities, which she states can include elements ranging from organisational learning, participative leadership and collaboration, to strategic thinking and total quality management. In a rich and well-argued article Hildreth, Kimble and Wright (2000) cite the work of Lave and Wenger (1991) in their exposition on CoPs. Communities of practice can be seen as a form of apprenticeship of knowledge and a CoP is regarded as 'an intrinsic condition for the existence of knowledge' and also a place where 'learning as legitimate peripheral participation' occurs. Effectively CoPs are network entities in which interpersonal relationships, communications and knowledge transactions can combine to generate competitive advantage in the market place. In organisations where CoPs are identified they serve as indicators of an organisational culture supportive of learning, enabling the creation and sharing of explicit and tacit knowledge in addition to creativity and innovation all of which are held to be key to successful KM and prospering in the knowledge era. Drawing from their case study the authors (Hildreth et al) provide five metrics as indicators of CoPs being present in an organisation - contact, dialogue, sharing, swapping and learning in which the concept of bandwidth, the capacity to transfer knowledge in large volumes, becomes prominent. Hildreth et al make the connection between a CoP and a team. The two terms are not synonymous, but a CoP can become a team and vice versa given certain conditions. It is also possible for CoPs to become virtual, but this seems to contradict one of the success criteria established earlier by other writers, which expressed the importance of face-to-face contact. However the authors contend that the two key aspects of successful virtual CoPs are a 'shared domain language and knowledge'. IT systems can support virtual CoPs, but when CoPs function in distributed international environments there is a requirement for distributed cognition, or the process of how work gets done, and IT systems need to be capable of supporting this need. Sustainable competitive advantage relies on distributed knowledge. Through the transfer of core competences organisations could position themselves to compete more effectively in turbulent conditions. Within certain conditions information technologies can assist in meeting this need. Accessibility to organisational knowledge and distribution of it need to be facilitated. While virtual communities of practice could provide a mechanism for accessibility to organisational knowledge as well as a means for its distribution this is not the whole story. The review of the KM literature above identifies a number of areas for further consideration, which are more closely focused into three key issues in the concluding section below. Conclusions The first of the key three issues drawn from the preceding literature review flows around concerns with how to measure any organisational benefits resulting from KM. Where benefits are said to exist, discourses in the literature recognise the distinctions between organisational preferences for either financial, or non-financial, metrics - hard, or soft, evaluation. Other debates in the literature contend that KM generates barely any discernible benefits for organisations and that the overwhelming majority of projects fail. Can these differing viewpoints be reconciled in any way? Where benefits are concerned the transformation of data into information and ultimately into organisational knowledge incurs transfer costs so it is astonishing to find that many organisations fail to measure the outputs of KM activity in any way at all. To assure shareholders and other stakeholders that KM is not merely an ephemeral, sometimes expensive whimsy, requires some form of cost/return analysis. The notion of value added can be applied here, but of course this relies on measurements. What kind of metrics ought to be utilised remains a strongly contested area. KM practitioners are prone to claim added value in terms of qualitative outcomes. But such soft benefits do not transfer to the bottom line in annual accounts. Shareholders might well demand to know just what returns an investment in KM generates. To justify a knowledge management system requires some numbers putting to it. The information technologies supporting KM systems offer possibilities for measuring both the growth and the use of knowledge repositories. Tracking these activities through to the profit line, though, needs an audit trail and hard financial measures. Another of the key issues centres on the cause and effect relationship
between organisational culture and KM. Is it a precondition of KM
success that organisational culture must change first in order to
nurture KM, or can the culture be transformed by the introduction
of KM so that a learning organisation emerges as a result? Know-
ledge is a product of learning, but the data are contentious about
whether organisational culture requires to be transformed as a precursor
to an enterprise becoming a learning organisation, or whether the
culture within the enterprise is transformed as a result of a KM
initiative. The issue about culture and organisational change rests
in an ambiguous arena. Sustainable competitive advantage it would seem relies on distributed knowledge. A cognitive map can be drawn that indicates the linkages between this distributed knowledge and the ideas and theories which have been discussed in this paper (Figure 1).
Figure 1: Links between the concept of distributed
knowledge and Distributed knowledge is related to the ideas of learning organisations, core competencies, and intellectual capital and is supported by relevant technology and developed through CoPs. Competitive advantage relies on organisations being able to scan, interpret, learn and adapt from the changes in the external environment, to be able to put into practice the learning, and, through assessing their intellectual capital being able to demonstrate to shareholders the inherent value of the knowledge they demonstrate in their activities. For the interested reader
ELAYNE COAKES, GILL SUGDEN, ANTON BRADBURN |
