Knowledge Management MIS 580

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Knowledge ManagementMIS 580

• Firm Resources and Sustained Competitive
  Advantage
• The eleven deadliest sins of knowledge management
  
• Whats Your Strategy for Managing Knowledge?

Pei Ju Yang Jaideep Vaze
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Firm Resources and Sustained Competitive Advantage

• By Jay Barney
• Texas AM University

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Agenda

• Field of strategic management
• SWOT
• Competitive environment model (external analysis)
• Resources based model (internal analysis)
• Defining key concepts
• Competition with homogeneous and perfectly mobile
  resources
• Firm resources and sustained competitive
  advantage
• Applying the framework

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Importance of this topic

• Understanding sources of sustained competitive
  advantage for firms has been the major area of
  research in the field of strategic management

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SWOT

• Organizational framework of the 1960s
• Internal analysis
• External analysis
• Matching

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Competitive environment model

• Analyze a firms opportunities and threats in its
  competitive environment. (Recent research
  focus--1984, Lamb )
• 2 assumptions
• Homogeneous resources
• Highly mobile resources

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Resources based model

• Examine the link between a firms internal
  characteristics and performance
• 2 assumptions
• Heterogeneous resources
• Highly immobile resources

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Defining of key concepts

• Firm resources strengths that firms can use to
  conceive of and implement their strategies. They
  include
• Physical capital resources
• Human capital resources
• Organizational capital resources
• Ps. Not all resources would lead a firm to
  conceive of and implement a value-creating
  strategy.

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Defining of key concepts( contl)

• Competitive advantage
• implement a value-creating strategy not
  simultaneously being implemented by any current
  or potential competitors.
• Sustained competitive advantage
• implement a value-creating strategy not
  simultaneously being implemented by any current
  or potential competitors and when these other
  firms are unable to duplicate the benefits of
  this strategy.

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Competition with Homogeneous Perfectly Mobile
Resources

• Key concept of this analysis
• If resources are homogeneous and mobile (P),
  there is no competitive advantage (Q).
• Therefore, to obtain the competitive advantage
  (Q), you must focus on resources heterogeneity
  and immobility (P).
• P ? Q Q ?P

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Resource Homogeneity and Mobility and First-Mover
advantages

• An objection to the concept in slide 10
• The first firm in an industry to implement a
  strategy can obtain a sustained competitive
  advantage over other firms.
• However, homogeneous and highly mobile resources
  would not generate the first-mover.

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Resource Homogeneity and Mobility and
Entry/Mobility Barriers

• Another objection to the concept in slide 10
• Strong entry or mobility barriers would enable
  the firms to obtain a sustained competitive
  advantage vis-à-vis firms that are not in their
  group.
• However, barriers to entry and mobility only
  exist when resources are heterogeneous and
  immobile.

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Firm resources Sustained competitive advantage

• Valuable
• Rare
• the number of firms that possess a particular
  valuable resources
  to generate perfect competition dynamics
• Imperfectly Imitable see the next slide
• Substitutability
• Similar
• Different but of the same effect

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Imperfectly imitable resources other firms
cannot obtain the resources.

• Unique historical condition
• Firms ability to acquire and exploit some
  resources depends on its place in time and space
• Casual ambiguity
• The link between the resources controlled by a
  firm and a firms sustained competitive advantage
  isnt understood
• Social complexity
• Beyond the ability of firms to systematically
  manage and influence

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Applying the framework

• Strategic Planning system
• Information processing systems
• Positive reputations

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Summary
Valuable Rare Imperfect imitable -History
dependent -Casual ambiguity -Social
complexity Substitutability
Firm resources Heterogeneity Immobility
Sustained Competitive advantage
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The eleven deadliest sins of knowledge management

• By, Liam Fahey and Laurence Prusak

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Error 1 Not Developing a Working Definition on
Knowledge

• Knowledge must be different from data and
  information
• It is important for management to make the
  distinction between these data elements so that
  their employees support knowledge efforts
• Historically Managers have steered clear of the
  Knowledge word
• The argument against knowledge is that it
  distracts managers from the necessary task of
  managing

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Error 2 Emphasizing Knowledge Stock to the
Detriment of Knowledge Flow

• Knowledge is a flow, not a stock item
• It is developed, transmitted and leveraged by
  individuals
• It is central to day-to-day doing and being
• Ingrained in a Knowledge is a stock world
• We have been trianed since grade school to learn
  facts and regurgitate them as it tranlates to IT
• Capture Store Retrieve Transmit

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Error 3 Viewing Knowledge as Existing
Predominantly Outside the Heads of Individuals

• Knowledge originates between the ears
• Organizations seem to fall in to the trap that
  knowledge has a life of its own
• The struggle then becomes how to emulate the
  stuff in between the ears in the form of a
  knowledge base or system

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Error 4Not Understanding that a Fundamental
Intermediate Purpose of Managing Knowledge Is to
Create Shared Context

• Knowledge can be leveraged and evolve over time
• Therefore a shared forum must be developed to
  track the changes and keep current the knowledge
  stores
• Knowledge must be transferred from generation to
  generation much like a folktale

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Error 5 Paying Little Heed to the Role and
Importance of Tacit Knowledge

• Tacit Knowledge is the means by which explicit
  knowledge is captured, assimilated, created and
  disseminated
• The reason is that managers simply do not
  understand the nature of tacit knowledge, its
  attributes, or its consequences
• e.g. Organization that thought its service was
  the reason customers continued to do business
  with them

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Error 6 Disentangling Knowledge from Its Uses

• Information about customers becomes knowledge
  when decision makers determine how to take
  advantage of the information
• Most companies keep data warehouses with
  terabytes of data, but it then must be acted upon
  to develop knowledge
• Collecting, refining and perfecting data
  information is not beneficial

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Error 7 Downplaying Thinking and Reasoning

• Knowledge generation and use at the level of
  individuals and groups is a never-ending
  work-in-progress
• Organizations should allow for knowledge workers
  to think and reason through business processes to
  continually evolve knowledge
• Organizations need to attack problems from many
  angles and with many knowledge workers rather
  than standardizing solutions

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Error 8 Focusing on the Past and the Present and
Not the Future

• If the intent of knowledge is to inform and
  influence decision making, then its foces must be
  on the future
• Yet in most organizations knowledge is used for
  understanding the past and present change
• Reasons for this include the ease of collecting
  data about the past and present as apposed to the
  future

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Error 9 Failing to Recognize the Importance of
Experimentation

• Experiments are a crucial source of data and
  information necessary for the invigoration of
  knowledge
• There are many different forms of experiments an
  organization can initiate, but the culture must
  be one that accepts new ideas and is open to
  changed processes
• Once technology is in place, it tends to
  standardize approaches and processes within an
  organization which limits experimentation

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Error 10 Substituting Technological Contact for
Human Interface

• With the vast improvements in data and
  information transmission through technology,
  there is a widespread tendancy look at these new
  IT tools as Knowledge developers
• Technological contact is being equated with
  face-to-face dialogue
• Remember Knowledge is developed between the ears

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Error 11 Seeking to Develop Direct Measures of
Knowledge

• Where is the pay-off to knowledge projects?
• Metrics do not provide any sense of an
  organizations stock or flow of knowledge or its
  contribution to decision making and
  organizational performance.
• Some firms are measuring number of patents, new
  products developed, customer retention and
  process innovation

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In Conclusion

• Managers must be enthusiastic for knowledge
• Constantly correct errors in their stock of
  knowledge
• Correct errors in the generation, movement and
  leveraging of knowledge within the organization

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Whats Your Strategy For Managing Knowledge?

• By Morten T. Hansen, Nitin Nohria and Thomas
  Tierney

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Agenda

• Knowledge Management
• Codification vs Personalization
• Management consulting firms
• The different strategies at play
• Other Industry perspectives
• Choosing a strategy

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Other Industries

• Health Care
• Access Health
• Uses the codification and reuse model
• Asses customers symptoms
• We are not inventing a new way to cure disease.
  We are taking available knowledge and inventing
  processes to put it better to use.
• Memorial Sloan-Kettering Cancer Center
• Many experts collaborate on each patients case
• We coordinate intensive face-to-face
  communication in order to that knowledge is
  transferred between researchers and clinicians

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Knowledge Management is nothing new

• Owners of family businesses have passed their
  commercial wisdom on to their children for
  hundreds of years
• Master craftsmen have taught their trades to
  apprentices
• Only in the 1990s have chief executives started
  talking about knowledge manament

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Two Main Strategies for KM

• Codification Strategy Knowledge is carefully
  codified and stored in databases, where it can be
  accessed and used easily by anyone in the company
• Personalization Strategy Knowledge is closely
  tied to the person that developed it and it is
  shared mainly through direct person to person
  contacts

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Management Consulting Firms

• Knowledge is the core asset of consultancies
• Consulting firms were among the first businesses
  to pay attention to, and make heavy investments
  in the management of knowledge
• Also among the first to explore the use of
  information technology to capture and disseminate
  knowledge
• Studying these firms provides good insight into
  what works and what doesnt

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Andersen and EY

• Theses firms have pursued a codification strategy
• Randall Love at EY
• Preparing a bid for an industrial manufacturer to
  help install ERP
• Used electronic knowledge repository to gain
  industry knowledge and previous solutions
• Saved time, offered bid within 2 months rather
  than norm of 4-6
• This is not to say that these consultants dont
  share knowledge through dialogue but the
  codification strategy is emphasized at these firms

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Bain, Boston Consulting and McKinsey

• Here the personalization strategies are
  emphasized
• Marcia Blenko, a partner a Bain solved her
  problem by
• A financial firm in Britain wanted to expand by
  offering new products and services
• Blenko knew several partners with expertise in
  this area, she left voice mails for them and
  checked Bains people finder database for more
  contacts within the company
• She found many contacts and set up meetings to
  brainstorm and solve the financial firms problem

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Technologies in use

• Andersen and EY
• Emphasis is on building knowledge databases that
  have structured (codified) data that is
  accessible to all
• Bain, Boston Consulting and McKinsey
• Invest heavily in buiding networks of people
• Knowledge is shared not only face-to-face but
  also over the telephone, by e-mail and via video
  conferences.

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Strategies Economic Model

• Codification
• Invest once in a Knowledge asset
• Use teams with a high ratio of associates to
  partners
• Focus on generating large overall revenues
• Personalization
• Charge high fees fro highly customized solutions
  to unique problems
• Small teams with low ratio of associate to
  partners
• Maintain high profit margins

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Strategies Knowledge Management

• Codification
• People-to-Documents
• Develop electronic document system that codifies,
  stores, disseminates, and allows reuse of
  knowledge
• Personalization
• Person-to-Person
• Develop networks for linking people so that tacit
  knowledge can be shared

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Strategies Information Technology

• Codification
• Invest heavily in IT the goal is to connect
  people with reusable codified knowledge
• Personalization
• Invest moderately in IT the goal is to
  facilitate conversations and the exchange of
  tacit knowledge

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Strategies Human Resources

• Codification
• Hire new college graduates who are well suited to
  the reuse of knowledge and the implementation of
  solutions
• Reward people for using and contributing to
  document databases
• Personalization
• Hire MBAs who like problem solving and can
  tolerate ambiguity
• Reward people for directly sharing knowledge with
  others

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Choosing a Strategy

• Do not Straddle
• Companies that use knowledge effectively use one
  strategy predominantly and use the second to
  support the first
• 80-20 split
• Things to consider
• Standarized or customized products?
• Mature or innovative products?
• Explicit or tacit knowledge to solve problems?

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Questions?

• Pei Ju Yang
• Jaideep Vaze