Knowledge Management Aligning Knowledge Management and Business Strategy B. Nugroho Budi Priyanto

Strategic Visioning issues What is the industry context in which your business operates? What is the level and nature of turbulence within it? How profound is the uncertainty in your business?

Knowledge transfer vs integration Knowledge transfer assumes: The two transacting individuals posses certain shared knowledge in order to effectively communicate Sufficient time is available to engage in such transfer Knowledge that is transferred remains valid by the time a transfer is completed

Knowledge transfer vs K. integration

Levels of Uncertainty

The responsiveness quadrahedron

Business models and technology influence strategic choice

Codification vs Personalization More focused on technology that enables storage, indexing, retrieval, and reuse. Suited companies that repeatedly deal with similar problem and decision. Personalization: Focused on connecting knowledge workers through networks. Better suited to companies that face “one-off” problems and depend more on tacit knowledge and expertise than on codified knowledge

KM strategies: codification and personalization (1) Business Strategy Question Codification Personalization What type of business do you think your company is in? Providing high-quality, reliable, fast, and cost effective services Providing creative, rigorous and highly customized services and products How much old material, such as past project data, existing documents, and archived projects, do you reuse as a part of new projects? You reuse portions of old documents to create new ones. You use existing products to create new ones. You know that you need not begin from scratch to deliver a now product or service. Every problem has a high chance of being a “one-off” and unique problem. Although cumulative learning is involved high creative solutions are often called for What is the costing model used for your company’s product and services? Price-based competition. Expertise-based pricing; high prices are not detrimental to your business; price-based competition barely (if at all) exists.

KM strategies: codification and personalization (2) Business Strategy Question Codification Personalization What are your firm’s typical profit margin? Very low profit margins; overall revenues need to be maximized to increase net profits. Very high profit margins. How best can you describe the role that IT plays in your company’s work processes? IT is a primary enabler; the objective is to connect people distributed across he enterprise with codified knowledge (such as reports, documentation, code, etc.) that is in some reusable form Storage and retrieval are not the primary application of IT; IT is considered a great enabler for communications; applications such as email and video conferencing are considered the most useful applications; conversation, socialization; and exchange of tacit knowledge are considered to be the primary uses of IT.

KM strategies: codification and personalization (3) Business Strategy Question Codification Personalization What is your reward structure like? Employees are rewarded for using and contributing to databases such as Notes discussion database Employees are rewarded for directly sharing their knowledge with colleagues and for assisting colleagues in other location/offices with their problems How is knowledge exchanged and transferred? Employees refer to a document or best practices database that stores, distributes, and collects codified knowledge. Knowledge is transferred person to person; intrafirm networking is encouraged to enable sharing of tacit knowledge, insight, experience, and intuition. Where do your company’s economies of scale lie? Economies of scale lie in the effective reuse of existing knowledge and experience and applying them to solve new problems and complete new projects. Economies rest in the sum total of expertise available within the company; experts in various areas of specialization are considered indispensable.

KM strategies: codification and personalization (4) Business Strategy Question Codification Personalization What are your typical team structure demographics? Large teams; most members are junior-level employees; a few project managers lead them. Junior employees are not an inordinate proportion of a typical team’s total membersihip. What company’s services do your company’s services resemble? Anderson Consulting, The Gartner Group, Delphi Consulting The Boston Consulting Group, What company’s products do your company’s product resemble? Pizza Hut, Dell Computer, A custom car or bycycle manufacturer, Boeing,

Knowledge maps to link knowledge to strategy Effective KM strategies using such “knowledge-maps” can help companies build a defensible competitive knowledge position.

Knowledge Classification Core knowledge Required to “play the game” Creates barrier to entry You must have it, distinguishes it from its competitors Advanced knowledge Competitively viable Differentiate its product from the competitor Innovative knowledge Allows a company to lead its entire industry Clearly differentiates it from competitor

A high-level Zack Framework-based strategic knowledge gap analysis

Creating knowledge map to evaluate corporate knowledge

Aligning knowledge and business strategy

The process of articulating the link between business and knowledge strategies

A recap on strategic alignment

Assessing Focus The challenge of business and KM is to address the three-way strategic alignment between: Business Knowledge, and Technology used to support the first two

Some “first” questions that often surface: (1) How can we turn the knowledge we have into something that adds value to markets in which we operate? What do we know or think we know about different aspects of our customers? Are we actually doing something with what we know about them? How can we generate meaningful knowledge, rather than simply flooding our organization with indiscriminate information? How can we create a knowledge-supportive organizational culture in which everybody is convinced of the contribution that knowledge can make to the success of the company? Can we cut costs, reduce time to market, improve customer service, or increase margin by more effectively sharing knowledge and leveraging what we already know? Could such knowledge be applied to the activities of other divisions of our company, in other locations, and in foreign manufacturing sites? How can we ever transfer them and then make them work?

Some “first” questions that often surface: (2) Are there any fundamental errors in what we think we know as a company? What will be the consequences of these errors? How can these be proactively fixed? How can we manage our people, who will increasingly become knowledge workers or professionals, motivating them to generate knowledge and share it with their peers? Which of these people actually play critical roles in developing and testing new knowledge and information that gets used here? Are exciting ideas emerging within the company but failing to be commercialized? If these ideas are not reaching the market, what incentives, structures, or management processes seem to be blocking them? How can valuable knowledge that exists within the company be actually applied and benefited from?

Some “first” questions that often surface: (3) Maybe our company has more money than ideas. Are there opportunities to form partnerships with companies that may be more in the flow of innovative ideas and knowledge? Given different cultures, how can this ever work? Is the “not invented here” syndrome so strong that we are missing attractive business opportunities? Could knowledge-based collaboration (i.e., integration of external knowledge) with a wider range of innovative companies increase our value? How does tacit knowledge – skills, intuitive abilities, employee experience – affect the generation and transfer of explicit forms of knowledge in our company?

How business can be missing vital opportunities by adopting the wrong high-level KM strategy

Critical success factors There is now silver bullet A working definition of knowledge is needed Saleability requires value demonstration Tacit knowledge cannot be ignored Focus on the future, not the past Respect confidentiality Secure management support

Lessons learned An effective KM strategy begins with a vision Shift from strategic programming to strategic planning Data extrapolation is a fallible predictor Create internal competitive, and industry-wide knowledge maps to give you a reality check Focus on one but don’t choose between codification and personalization Balance exploitation and exploration Determine the right diagnostic questions to ask Mobilize initiatives to help you “sell” your KM project internally