Knowledge Management: Concepts, Practices and Effects

Knowledge Management: Concepts, Practices and Effects Abstract Today Information Technology is gaining new heights with greater leaps. This enables new age managers to develop newer tools to manage business better. IT has not only expedited the intra and inter organizational communication but also enabled us to manage a lot of data effectively. Knowledge management is emerging as a key management tool for the new century. Although it can be defined in a variety of ways, the process of organizing knowledge in order to get a sustainable development can be termed as Knowledge management. It consists of identification, representation, distribution, application and utilization of available knowledge to get improved performance. Knowledge Management in a company is carried out by systematically organizing the intellectual capital to achieve its business goals. The intellectual capital means the companys intangible assets which increase its valuation. The Core competencies of a company go together with the sustainable competitive advantage. This report explains the process of Knowledge Management to bring in Competitive advantage in the Indian IT industry. It also elaborates on the methods on how innovation can be encouraged in the company. Further, the challenges for KM like resistance to culture change and tacit knowledge sharing are discussed. In India companies have started taking knowledge management as an important aspect as it not only gives a good working culture but also improves the return on investments eventually. However, there is still a good scope of improvement in the field of Knowledge management for the Indian IT industry. The research uses questionnaires and interpretations from interviews to collect primary data .Though it gives a comprehensive analysis, it leaves a further scope for research in the field. CHAPTER 1: INTRODUCTION Knowledge Management is relatively new buzz in the corporate world. It is a tool developed to safeguard the organization from competition in future. Apparently, the physical assets and tangible capacities are not sufficient to sustain a competitive advantage in todays market place. What make difference in the long run are the intangible assets, such as Brands, Intellectual property, knowledge etc. These assets can not be bought but have to be created within organization, by the members of organization over a period of time. Aim The aim of this report is to identify and analyse the concepts and current practices of Knowledge management in order to recommend ways of propelling innovation and competitive advantage within the companies. Objective The Research Objective is to Get a comprehensive idea of the current Knowledge Management practises. Identify and analyse the challenges faced by the organizations in implementing Knowledge Management Know the ways of how companies can propel innovation and competitive advantage. Recommendations in order to improve the company culture. Suggest the methods to attain sustainable competitive advantage handling the challenges faced. Key Questions The guiding principal of my research is as follows How do companies integrate KM with their company policies? How change should be initiated? What are the levels of hierarchy? When the change does actually happen? Is KM just for innovation, competitive advantage or more? Are rewards and recognition the way to drive KM? What are the basic challenges for KM? Research Approach The research philosophy is Positivism Philosophy that involves working with an observable social reality. The emphasis is on highly structured methodology to facilitate replication, and the end product can be law-like generalisations similar to those produced by the physical and natural scientists. (Saunders, 2000) This research contains mainly qualitative data collection methods for both primary and secondary data. Primary data was obtained by interviewing the key people of some of the IT companies in India. Questionnaire was designed to get the views of the employees working in the IT industry. Questionnaires were also designed and used to obtain primary data. The response of these questionnaires is being used in order to obtain a particular result in the form of percentage. The secondary data has been collected through books, journals, websites, etc. All of the research methods will be discussed in further detail in the relevant chapter. Research Outcomes The key outcome of this research would be a perfect understanding of the knowledge management practises and to know how companies use it in India for competitive advantage and innovation. Thus using this knowledge the researcher expects to identify main problems in the current trends and evaluate solutions for them. Finally, it also determines the difference between being a multinational corporation (MNC) and small to medium enterprise (SME) with respect to knowledge management. CHAPTER 2: METHODOLOGY This chapter describes the research methodology adopted for the report. To start with, this report elaborates on the research philosophy Positivism, moving on towards the various stages of research like primary and secondary data collection methods. The reasons behind selecting the particular method are also explained in the report. 2.1 Approach This report includes both primary and secondary data collected from various sources. Secondary data refers to data already collected by someone else and primary data is collected for a specific purpose by the researcher (Saunders, 2000).The research philosophy is Positivism Philosophy that involves working with an observable social reality. The emphasis is on highly structured methodology to facilitate replication, and the end product can be law-like generalisations similar to those produced by the physical and natural scientists. (Saunders, 2000) 2.1.1 Research Strategy: This research is based on the quantitative research strategy which involves collection of data from various sources. It also proposes to collect some primary data through interviews and questionnaires from people from the IT industry in India. A survey is a method whereby a sample of subjects is drawn from a population and studied to make analysis about the population. The survey strategy enables the researcher to collect a large amount of data in a highly efficient way. 2.1.2 Sample Size: For the interviews there was no such constraint of number of questions. The interviewees were asked questions in order to know the KM practices in their organization. In case of the questionnaires due to restrictions of time and access, only 500 questionnaires were distributed to various IT company employees. The reason for distributing the questionnaires to the employees from all the levels and department was to get a clear idea of how employees take the concept of Knowledge management at their workplace. 2.2 Research Stages 2.2.1 Secondary Data Collection: The first stage of the research was a critical literature review to obtain the secondary data. Secondary data collected includes the information and concepts from books, journals and websites based on Knowledge management, Organisational behaviour, Knowledge Integration etc. The list of various sources referred can be viewed from the relevant chapter of the report. Access to the books and journals was through Coventry University Library and electronic library databases like FAME, Engineering Village2 etc. Case studies of various companies as mentioned in the appendices were analysed by the researcher in order to get the relevant information and to decide on certain concepts considering them as the evidences. 2.2.2 Interviews: The second stage of the research was to interview some key people of various IT companies in India. Selection of these companies for the interview was done on the basis of how KM practices are being carried out there. These vary from the Market leaders to the new entrants in the IT industry. Many companies are such that they have been practising good KM processes since a long time, but a few have just started to get into it. This was done so because it gave researcher a clear idea of the current scenario in the Indian IT industry. Selecting the best companies alone would not have helped in introducing the scope of improvement for the research. The interviews were face to face interviews and the researcher has written down the important points from the session. The people who have been interviewed were mainly the Knowledge Management Executives in the companies. These were the people who knew exactly what processes are being practised in the company, so interviewing them was the best way to get the details about the KM practices in the companies. Their designations were like senior knowledge officers, Chief knowledge officers etc. Confidentiality was requested by the interviewees so company names are not mentioned anywhere. 2.2.3 Questionnaires: The final stage for primary data collection was through questionnaires. The questionnaires designed were distributed to the employees of junior level in the IT companies. It had just 10 questions but they were selected in such a way that the they would serve the main purpose of the survey to understand the current scenario in Indian IT industry among that class of employee by whom the KM practices are expected to follow. Questions selected were simple to answer so that the respondents are interested in answering till the end of the questionnaire. This also makes it possible to collect maximum responses. These questionnaires were not passed on to the management level or the KM people as the interviews were carried out with them. The researcher wanted to extract information from the employees in the Indian IT companies regarding their views about the Knowledge Management processes in their companies. This was also helpful in getting an overview of the facts about the how aware the Ind ian corporate world is in regards with knowledge management. CHAPTER 3: CRITICAL LITRATURE REVIEW 3.1 Introduction 3.1.1. What is knowledge? Definition of knowledge provided by Schulz (2001) beginning with the 1992 American Heritage Dictionary: ‘knowledge is what has been learned from experience or study. Knowledge is a broad concept that usually includes insights, interpretations, and information. Organizational knowledge refers to knowledge and information that all, part, or parts of the organization share, and that is frequently stored in standard operating procedures, routines, or rules. Today, knowledge has emerged and is accepted as the most critical resource available to an organization (Bartlett and Ghosal 1993, Davenport and Prusak 1995, Drucker 1993, Leonard-Barton 1992, Nonaka 1991, Nonaka and Takeuchi 1995, Nonaka et al. 2001, Stewart 1997 and 2001, Toffler 1990 and World Bank 1998). Knowledge can be defined as the understanding of a concept gained by education, experience or even by mere observation. To acquire knowledge means processing of information with the help of learning, communication, perception, reasoning and linking. It is the theoretical or practical understanding of information and facts which is obtained by correctly processing the raw data. Here arises the need to understand the difference between data, information and knowledge. Data is the collection of certain facts or values about a particular concept. Information is the processing done on data using relevant theory. The organization of data is nothing but information. The extraction of information on the basis of proper understanding is Knowledge. This can be further explained by considering an example of solving a quadratic equation. The variables are in the form of information, a value of the variable is data and the operation we carry out with them for calculating the answer is our knowledge. The following figure shows the DIKW (Data Information Knowledge Wisdom) hierarchy as stated by Clark, 2004. Figure 1: The DIKW hierarchy (Clark, 2004) Knowledge is generally personal, subjective and inherently local it is found â€Å"within the heads of employees† (www.ichnet.org/glossary.htm 2004) 3.1.2 Classification of Knowledge: Knowledge can be classified as: 1. Tacit Knowledge This type of knowledge is hard to formulate and communicate because it is gained by experience. Tacit knowledge is personnel and context specific. People carry tacit knowledge in their brain, thus it is not easy to share it. There is no systematic approach to store tacit knowledge as people are many times unaware of their tacit knowledge. However it is the most valuable form of knowledge as it is can be acquired only by experience and is not easily found written anywhere. 2. Explicit Knowledge Explicit knowledge is transmittable into a formal systematic language with the help of tacit knowledge. Thus, the codification of ones tacit knowledge results into explicit knowledge. Explicit knowledge can be in the form of books, manuals, notes, documents etc. The definition of some phenomenon is the explicit part whereas the practical understanding behind the phenomenon is tacit. 3. Embedded Knowledge The knowledge contained in some kind of physical form is known as embedded knowledge. For example the design of an artefact gives us the basic idea of where it can be used. 3.1.3 Knowledge Management. Knowledge management is defined as the process of getting the right information to the right people at the right time, and helping people create knowledge and share and act upon information in ways that will measurably improve the performance of organization and its partners. This means providing access to information at the time people need it to make the best decisions possible for mission safety and success. According to Wally Block of The Intranet Journal, the following points make up the generalized term: Knowledge Management. Knowledge management is the way that organizations create, capture and reuse knowledge to achieve organizational objectives. Knowledge management can also be defined as a process with four parts that comprise a loop. Knowledge is created. This happens in the heads of people. Knowledge is captured. It is put on paper in a report, entered into a computer system of some kind or simply remembered. Knowledge is classified and modified. The classification can be the addition of keywords; it may be indexing. Modification can add context, background or other things that make it easier to reuse later. The test of this steps success is to determine how easily people in the organization will be able to find and use the knowledge when they need it. Knowledge is shared. When knowledge is shared and used, its modified by the folks who use it. This takes us back to knowledge creation. The process of organizing knowledge in order to get a sustainable development can be termed as Knowledge management. It consists of identification, representation, distribution, application and utilization of available knowledge to get improved performance. Knowledge Management in a company is carried out by systematically organizing the intellectual capital to achieve its business goals. The intellectual capital means the companys intangible assets which increase its valuation. 3.2. Knowledge Creation: According to Nonaka â€Å"the key to knowledge creation lies in the mobilization and conversion of tacit knowledge†. The process of Knowledge creation is done my transformation of tacit and explicit forms thus giving rise to four forms of transformations. This can be further explained with the help of the following diagram: Fig: Nonakas Spiral model. Source: Nonaka, I.   (1991)   The knowledge creating company. Harvard Business Review, 69, (Nov-Dec) Tacit to Tacit: Socialization Team meetings are held to share the experiences of the team members. This provides everyone to share their ideas and also solution of similar problem in the past can be used. Tacit to Explicit: Externalization This can be done by having question answer sessions. Here the senior employees are capable of solving the queries of their juniors. Explicit to Explicit: Combination Sharing of documents is the best example of this type of transformation. The case studies, notes etc can be exchanged in order to have a faster creation of knowledge. Explicit to Tacit: Internalization Internalization can be done by reading and understanding documents prepared by others. Extracting knowledge from an e-mail received from a colleague is the best example of this. 3.3 Knowledge Capture 3.4 Knowledge Sharing The World Bark (1998) identifies and discusses the most important decisions that an organization must make in establishing its knowledge management program. These are: Deciding with whom to share; deciding what to share; deciding how to share; and deciding to share. 3.5 Learning Organization: A Learning Organization is one in which people at all levels, individually and collectively, are continually increasing their capacity to produce results they really care about. The learning organization focuses on enhancing its systems (including people) to continually increase the organizations capacity for performance. The concept of learning organization can be better understood by considering the following points: Development An organization learns many important aspects of business, skills and technology during the process of learning. For an organization to grow in a competitive world, it is very important to never let the learning process end. 3.5.2 Levels of learning: Aligning learning with corporate priorities Designing learning for maximum impact Using e-business technologies to enable formal and informal interactions Obtaining recognition by the entire organization that learning is a critical enabler to success Community of Practice Ardichvili, Page and Wentling (2003) study community of practice at Caterpillar Inc and find that when employees view knowledge as a public good belonging to the whole organization, it flows easily. However, even when individuals give the highest priority to the interest of the organization and of their community, they tend to shy away from contributing knowledge out of fear of criticism or misleading the community members. Trust increases knowledge sharing. Essex (2000) discusses a study titled .Beyond knowledge Management: New ways to Work and Learn undertaken by the Conference Board in New York in early 2000. It says that management support and corporate culture, not technology, drive successful KM projects. CHANGE what draws people to share varies from organization to organization and matches the core values and other processes. Alignment with the current culture and a practical purpose to share is, specifically, what draws people most strongly to share knowledge. (Blue http://gbr.sagepub.com/cgi/reprint/7/1/119) The concept of a community of practice (often abbreviated as CoP) refers to the process of social learning that occurs when people who have a common interest in some subject or problem collaborate over an extended period to share ideas, find solutions, and build innovations Communities of Action Communities of Circumstance Communities of Interest Communities of Position Communities of Purpose (Source: Shin and Bickel (2008) in Chris Kimble and Paul Hildreth (2008). Communities of Practice: Creating Learning Environments for Educators. Information Age Publishing) Obstacles Performance Management NECESSITY OF KNOWLEDGE MANAGEMENT A systematic capture, transfer, and use of internal and external know-how are a vital part of any business strategy. With no common processes for sharing information among employees, partners, and customers, limited information exchange will occur among suppliers and the engineering, manufacturing, and service functions. Consequently, the organization will experience ineffective design reuse, and product launch mistakes will be repeated. If there is no company standard expertise locator or people finder, then the inability to locate subject matter experts will result in lost opportunities, lost time, and being incapable of applying the right resources to significant problems. And with too many different systems, proposals, and pricing sheets, sales representatives cannot have access to information they need when they need it. This can prolong the sales cycle and lead to less-than-best sales solutions offered to the client With retirement and turnover, knowledge is walking out the door everyday. New hires do not have the benefit of past experiences and lessons learned, yet their time-to-competence needs to be compressed. Mergers and acquisitions result in two bodies of knowledge and expertise and two cultures that must assimilate quickly. Portals and e-business are drivers of knowledge management. People want information they can use and trust from a single point of access. Also, an often neglected point is that customers want access to your knowledge and to their business transactions with you. Another driving factor is e-learning. Firms now must know where and how knowledge is really being created and acquired. Knowledge management can set the framework for how learning fits into the overall picture of developing employees and making them productive. The key component of a good knowledge management system is the content itself. If the knowledge management system does not provide users with timely, accurate information, inform them of best practices, and link them to expertise, organizations will not realize the full value of their investment in the system. One of the key steps in the strategic design of knowledge management systems is identifying the information already in use within an organization.   Although, in theory, an effective knowledge management system is a central database of data, information, and knowledge contained within the organization, the act of actually creating, maintaining, and using such a central repository is a challenge in practical terms. One of the many benefits of knowledge management is the learning that occurs when a user takes a piece of information from one place, personally transforms it, and creates something new. Although the designers and developers of the knowledge management system can facilitate this type of learning by encouraging those who have the knowledge to capture it, and by designing a system that links end users to information that they might find helpful, neither the designers nor the developers could have planned or predicted such this particular act of learning. It happened informally, without the guidance of an instructor and without the suggestion of a designer.† (Carliner, section 1) Knowledge Management takes advantage of a companys information experience and expertise to serve customers better and respond quickly to changing marketing conditions. Successful companies build a corporate environment that fosters a desire for knowledge among their employees and that ensures its continual application, distribution and creation.   Less successful companies tend to take a top down approach: pushing knowledge to where it is needed.   Besides creating an environment that encourages knowledge pull, successful companies excel in applying, distributing, and creating knowledge.   (Hauschild, 2001) Companies link all their information together and build models that improve processes, product and customer relations.   Such companies understand that true knowledge management requires them to develop ways of making workers aware of those links and goes beyond infrastructure to touch almost every aspect of business. COMPONENTS OF KNOWLEDGE MANAGEMENT SYSTEM â€Å"The key component of a good knowledge management system is the content itself. If the knowledge management system does not provide users with timely, accurate information, inform them of best practices, and link them to expertise, organizations will not realize the full value of their investment in the system. One of the key steps in the strategic design of knowledge management systems is identifying the information already in use within an organization.   Although, in theory, an effective knowledge management system is a central database of data, information, and knowledge contained within the organization, the act of actually creating, maintaining, and using such a central repository is a challenge in practical terms. One of the many benefits of knowledge management is the learning that occurs when a user takes a piece of information from one place, personally transforms it, and creates something new. Although the designers and developers of the knowledge management system can facilitate this type of learning by encouraging those who have the knowledge to capture it, and by designing a system that links end users to information that they might find helpful, neither the designers nor the developers could have planned or predicted such this particular act of learning. It happened informally, without the guidance of an instructor and without the suggestion of a designer.† Knowledge Management takes advantage of a companys information experience and expertise to serve customers better and respond quickly to changing marketing conditions. Successful companies build a corporate environment that fosters a desire for knowledge among their employees and that ensures its continual application, distribution and creation.   Less successful companies tend to take a top down approach: pushing knowledge to where it is needed.   Besides creating an environment that encourages knowledge pull, successful companies excel in applying, distributing, and creating knowledge. Companies link all their information together and build models that improve processes, product and customer relations.   Such companies understand that true knowledge management requires them to develop ways of making workers aware of those links and goes beyond infrastructure to touch almost every aspect of business. ENTERPRISE KNOWLEDGE MANAGEMENT Enterprise knowledge management entails formally managing knowledge resources in order to facilitate access and reuse of knowledge, typically by using advanced information technology. KM is formal in that knowledge is classified and categorized according to a prespecified—but evolving—ontology into structured and semi structured data and knowledge bases. The overriding purpose of enterprise KM is to make knowledge accessible and reusable to the enterprise. Knowledge resources vary for particular industries and applications, but they generally include manuals, letters, summaries of responses to clients, news, customer information, competitor intelligence, and knowledge derived from work processes. A wide range of technologies are being used to implement KM systems: e-mail; databases and data warehouses; group support systems; browsers and search engines; intranets and internets; expert and knowledge-based systems; and intelligent agents. In artificial intelligence, knowledge bases are generated for consumption by so-called expert and knowledge-based systems, where computers use rule inference to answer user questions. Although knowledge acquisition for computer intervening is still important, most recent KM developments make knowledge available for direct human consumption or develop software that processes that knowledge. Historically, KM has been aimed at a single group—managers—through what has been generally referred to as an executive information system. An EIS contains a portfolio of tools such as drill-down access to databases, news source alerts, and other information— all aimed at supporting managerial decision making. More recently, however, KM systems are increasingly designed for entire organizations. If executives need access to information and knowledge, their employees are also likely to have an interest in and need for that information. In addition, KM technology is ideally suited for non management groups—such as customer support, where customer service requests and their solutions can be codified and entered into a database available to all customer service representatives. IMPLEMENTING KNOWLEDGE MANAGEMENT As organizations store an increasing amount of information and knowledge in data and knowledge warehouses and in data and knowledge bases, they are attempting to manage that knowledge in more efficient ways. Historically, organizational knowledge has been stored on paper and in peoples minds. Unfortunately, paper has limited accessibility and is difficult to update. And when people leave, they take most of their knowledge with them, so reuse is not always feasible. Thus, firms have moved to data and knowledge warehouses and to data and knowledge bases to improve accessibility, updatability, and achievability of data and knowledge. Data warehouses In many companies, one of the first KM tools is a data warehouse. A data warehouse acts as a central storage area—a warehouse—for an organizations transaction data. Data warehouses differ from traditional transaction databases in that they are designed to support decision making rather than simply efficiently capturing transaction data. Typically, data warehouses contain multiple years of transaction databases stored in the same database. Data warehouses are not updated on a transaction-by-transaction basis. Instead, the entire database is updated periodically. The size of data warehouses can be substantial. A leading bank in US has a 560-Gbyte data warehouse, for example, and MasterCard On-Line is a 1.2- Tbyte database available to member companies for a fee. With all the data accessible in one place, relationships between data elements can be more effectively explored. Users can browse the data or establish queries, though this type of analysis generally results only in knowledge for particular individuals. An alternative approach is to use a process called knowledge discovery to determine whether there is additional knowledge hidden in the data. Knowledge warehouses Rather than the kind of quantitative data typical of data warehouses, knowledge warehouses are aimed more at qualitative data. KM systems generate knowledge from a wide range of databases including Lotus Notes databases, data warehouses, work processes, news articles, external databases, Web pages (both internal and external), and people. Thus, knowledge warehouses are likely to be virtual warehouses where the knowledge is dispersed across a number of servers. In some cases, a Web browser can be used as an interface to a relational database. For example, Ford Research and Development uses a browsable Oracle database. The database contains manuals and design rules, specifications, and requirements. A