Forster N. - Maximum performance (2005)(en)

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It allows new employees to skill up quickly and cost effectively instead of reinventing the wheel. And it integrates with existing systems, minimising the costs and delays of ripping and replacing. Combine this with the Lotus Discovery Server, the most comprehensive knowledge server available today, and you’ll have everything you need to capitalise on your knowledge like never before. So, talk to IBM now and get your company’s knowledge flowing everywhere but out the door.’

(IBM advertisement for codified knowledge management systems, The Australian, 9 October 2001)

Third, the continual pressure to reduce costs, increase internal efficiency and cope with fast-changing business environments is forcing more companies to consider how to use their corporate knowledge and other intangibles (for example, ‘human intellectual capital’) more intelligently and effectively. For example, one-third of the entire annual healthcare budget of the USA – about $US350 billion – consisted of the costs of storing, processing and retrieving information during the 1990s (Evans and Wurster, 2000: 4). Fourth, a failure to share knowledge can be disastrous for companies. For example, the antagonistic Ford/Firestone split of 2001 happened as a direct result of their failure to share knowledge about the performance parameters of Ford’s four- wheel-drive vehicles and the Firestone tyres that were being used on these. Ford had a sophisticated Intranet system in place, the ‘Best Practice Replication Process’, which contained some 2800 proven quality practices across the company, and had generated cost savings of $US850 million since its inception. Unfortunately, their external knowledge management links with Firestone were weak and information that might have alerted them to the impending ‘exploding tyres’ fiasco was scattered in different places throughout the two companies. As a result, no one picked up the warning signs until it was too late. Furthermore, neither company had sufficiently rich informal knowl- edge-sharing systems that might have uncovered this problem (Stewart, 2000a: 129). This eventually led to a multimillion-dollar bill for the faulty tyres on their customers’ four-wheel-drives, the sacking of Ford’s CEO Jacques Nasser and, ultimately, to a severing of a 100- year-old business partnership.

Fifth, effective knowledge management provides important bridges between organizational change, innovation and learning. Managing knowledge well enables the four primary sources of competitive advantage (human intellectual capital, creativity, innovation and information) to be synthesized, disseminated and utilized more effectively. Sixth, the need for more efficient knowledge management is also driven by the realization that the global business environment is changing so quickly that organizations have to get better at creating

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constellations of competencies that can be quickly reconfigured to fit marketplaces characterized by rapidly changing customer needs and preferences. This inexorable trend towards a global knowledge-based economy is increasing the need for more systemic and formalized knowledge management processes in many organizations. Seventh, computing capabilities, advances in the ‘intelligence’ of software and increasing connectivity are making the systemic monitoring and utilization of internal and external knowledge assets an easier task than ever before (but, as we will see later, only if these are utilized in the right way).

All the indications suggest that managing employee knowledge and intellectual capital will become even more important in the future, as products quickly become obsolete, as markets grow, die, shift and change with increasing rapidity, and as new technologies continue to proliferate at a mind-boggling speed. The most successful organizations in the future will be those that can access their employees’ ideas and knowledge, disseminate them rapidly, and quickly embody these in new products or services. Knowledge is fast becoming one of the most important renewable resources that a company can capture and leverage in order to improve its effectiveness and competitiveness. For the visionary and far-sighted management commentator, Peter Drucker, knowledge and innovation have become the only meaningful resources in post-industrial economies, and one of the key roles of business leaders now is to ensure the generation and application of new knowledge at a faster and faster rate in their organizations (Drucker, 1993). Research evidence accumulated during the 1990s and 2000s indicates that successful knowledge management can reap considerable benefits for organizations, in spite of the difficulties that can be encountered when introducing this. And, while knowledge management is certainly growing as an organizational practice, it has often been implemented in companies without a full understanding of its systemic consequences, and how it needs to be integrated with other facets of organizational management.

In the remainder of this chapter, we will consider what organizational knowledge ‘is’; where it ‘resides’, and look at organizational strategies for creating and managing knowledge more effectively (which is linked to the process of meta-learning described in Chapter 9). We will see that knowledge comes in many forms, is often difficult to articulate and that knowledge that exists outside an organization’s boundaries can be as important to performance as internal knowledge. We will also look at some real-life examples of companies that have introduced knowledge management initiatives and the lessons that can be learnt from their experiences. We will conclude this chapter by asking

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if effective knowledge management relies on something more than the use of technology, and briefly examine the links between organizational culture, learning, innovation and knowledge management.

The theory and practice of knowledge management

How can an organization decide if it needs to introduce more formalized systems for managing knowledge? If its leaders answer ‘Yes’ to all or most of the following questions, then it should be considering this.

•Does your organization operate in an environment characterized by rapid change?

•Do you need to find more cost-effective and efficient ways of utilizing and sharing your employees’ expertise and knowledge?

•Do you routinely face new competition for your products or services?

•Is your organization heavily dependent on your employees’ knowledge or intellectual capital to maintain and improve its competitive position?

•Do you have to be at the cutting-edge of the markets you operate in in order to grow and prosper?

•Do you need to attract, recruit and retain creative and innovative employees? Do you operate in the private sector?

You can also ascertain if you are currently working for a knowledge creating company by answering this question: Does your organization put the creation, acquisition and dissemination of employee knowledge and intellectual capital at the centre of its strategic and human resource policies?

Before reading through the remainder of this chapter, please complete Exercise 10.1. This provides an opportunity to assess the existing knowledge management capabilities of the organization you work for.

Exercise 10.1

Does your organization have a knowledge management culture?

Please go through each of the scales on the following pages and indicate, with a circle (O) on each 1–7 scale, where you feel your organization needs to be in order to remain successful over the next five years. Then go back through the scales and indicate, with a cross (X) on each scale, where you believe your organization is now. When you’ve done this, plot your scores (O and X) in the table at the end of the questionnaire. If you are not currently in full-time work, assess an organization you have worked for in the past or one you are familiar with.

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Scoring your results

Please insert your scores in this table. The GAP score is the value of O minus X

A.Vision

B.Senior management

C.Openness

D.Communication

E.Learning

F.Inventory

G.Access

H.Transfer

I.Leveraging

J.Creation

K.External knowledge

L.Measurement

M.IT

N.Rewards

TOTALS

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Interpreting your score

Gap score =

X total =

The items with the biggest gaps indicate the largest differences between where your organization is now and where it would like to be in the future.

80–98: Transforming potential: knowledge is systemically created, shared and utilized to give the organization a competitive edge in the marketplace. Reward and promotion systems actively encourage the use and sharing of organizational knowledge.

55–79: Developing potential: knowledge is still managed in a rather ad hoc way. There is a gap between knowledge management rhetoric and managerial practices, and information is not always converted into innovative business ideas or practical policies.

29–54: Locked-in potential: valuable knowledge generated every day remains locked up in the minds of individual employees. Knowledge sharing is limited by hierarchical and bureaucratic restrictions. There is a reluctance to share knowledge openly. Reward and promotion systems do not support the use and sharing of organizational knowledge.

14–28: Rock-bottom potential: the organization is unable to leverage any knowledge that it might possess in order to gain competitive advantage. The organization’s culture is based on old-style management practices that are resistant to embracing knowledge management initiatives.

Note: if you work in a business or organization where knowledge management is not part of its daily working practices or operating culture, it may have been quite difficult to accurately rate the statements on this questionnaire.

Source: Adapted from Bagshaw and Phillips (2000); used with permission.

Introducing knowledge management systems into an organization

While there was an explosion of publications in the field of knowledge management in the 1990s and early 2000s, there is still little agreement amongst researchers and consultants about the number or blend of elements that need to be in place to support the introduction of knowledge management initiatives into an organization. The elements that have been identified include a clear and well articulated vision; committed and empowering leadership from the top; mapping sources of internal expertise and knowledge; a cultural shift in the organization to support the introduction of personalized and/or codified knowledgesharing systems; the establishment of a new knowledge team to champion the changes;1 open two-way communication with employees; sufficient resources for new hardware and software; educating and developing staff; a commitment to team-based working systems; systemic approaches for managing the collective knowledge of the whole organization; the creation of both formal and informal knowledge

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We noted in Chapter 8 that organizations are, in the most basic sense, simply collections of people working together, nothing more or less. In this sense, organizations cannot be said to be ‘knowledgable’. Hence, while all large organizations now have reservoirs of knowledge and intelligence in the form of company documentation, operating policies and databases, it is individual employees who still create, own and use these. And, while there have been remarkable advances in electronic facilities to gather, store and disseminate information, all new knowledge creation still starts and ends with employees. All recent research on knowledge management shows that individual human creativity is still the primary driver of learning, innovation and knowledge creation in organizations. This will be so until intelligent and creative artilects are developed for use in organizations (see, for example, Devinney, 2001; Brown and Duguid, 2000; Hansen et al., 1999; McLean, 2000; Ruggles, 1998; Nonaka, 1991).

Variously described as ‘intangible’, ‘human’, ‘individual’, ‘internal’, ‘personal’, ‘implicit’ and ‘tacit’ this type of knowledge is the product of the individual’s unique personal biography, education, work experiences and what they have learnt from the different organizational contexts they have worked in. The knowledge sets of individuals consist of a constellation of skills, experiences, beliefs and perspectives, mental models and creative and intuitive capabilities that are deeply ingrained and largely taken for granted. These knowledge sets enable them to cope with the range and complexity of their work tasks on a weekly or monthly basis, and also help them cope with activities that may extend far beyond the formal requirements of their jobs. This type of knowledge can be very difficult to measure, identify, formalize, articulate, communicate and transfer, unless the organization has systems in place to support these processes.

We will always know more than we can say. (Michael Polanyi, philosopher of science, 1970)

When action grows unprofitable, gather information. When information grows unprofitable, sleep. (Ursula K. Le Guin, The Left Hand of Darkness, 1969)

Because of its implicit nature, knowledge of this kind is still best shared face-to-face, and it often is in both informal groups and formal work teams (and, hence, one of the five pillars of the Learning Organization, described in Chapter 9). In fact, one of the primary catalysts of knowledge creation and dissemination remains the formal and informal ‘communities of practice’ that form within all organizations (Wenger and Snyder, 2000). However, without the right kind of structures and working practices to support good employee interaction, the transfer