Managing Knowledge: The Challenge

1
Managing Knowledge The Challenge

• Introduction
• To survive and compete in the Knowledge
  society, companies must learn to manage their
  intellectual assets.
• Classical production factors vs. knowledge the
  management of knowledge is in its infancy.
• This chapter shows why companies increasingly
  accept the challenge of Knowledge Management
  (KM), and what rewards they can expect for doing
  so.

2
A hot topic

• Companies are urged to make more use of the
  hidden treasure in the minds of their
  employees.
• Innovative firms set up work groups on KM.
• Professional organizers advertise workshops and
  conferences on KM, and business consultants offer
  their services.

3
Success of knowledge-intensive companies

• Many knowledge-intensive companies have achieved
  spectacular success in recent years success
  which is reflected in their stock market
  performance.
• Examples SAP, Microsoft.

4
Managers Discover Knowledge

• Moving towards the knowledge society
• Trends in industry
• Taking stock of knowledge
• Indices of knowledge
• Absence of management tools
• The first knowledge managers

5
Moving towards the knowledge society

• The long-predicted information society and
  knowledge economy are now emerging as tangible
  realities.
• Three-quarters of added value is attributable to
  the possession of specific knowledge. (James
  Brian Quinn, 19921993)
• A companys intellectual capital is often several
  times that of its material assets. (Charles
  Handy, 1990)

6
Trends in industry

• The revolution in communications technology
  enhances the importance of knowledge.
• This trend naturally affects the financial
  success of individual companies, prompting(??)
  more of them to recognize the fundamental
  importance of knowledge as a resource.

7
Taking stock of knowledge

• Its difficult for managers to produce the
  figures for their companys intellectual assets.
• One of the first companies to take stock of its
  knowledge was the Swedish Skandia Assurance and
  Financial Services (AFS).
• In 1993, AFS published the first accounts (??) of
  its intellectual assets, as a supplement to the
  traditional business results.

8
Indices of knowledge

• To provide a more systematic breakdown (??) of
  non-material assets previously known collectively
  as goodwill.
• An system of indices is used to enter the
  knowledge and skills of highly trained employees,
  together with other factors such as customer
  relations, the companys market reputation, and
  its information technology.
• Navigation mechanism provided.

9
Absence of management tools

• No progress has been made in creating
  professional tools for managing knowledge assets.
  
• As a result, organizations often make too little
  use of their intellectual resources. E.g.
  patents, employee skills, competitive strength,
  etc.

10
The first knowledge managers

• New positions have been created director of
  intellectual capital, director of knowledge,
  knowledge or intellectual assets manager.
• With different functions to work on strategic
  analyses of competencies, to develop ways of
  indexing knowledge, to create better
  communications infrastructures, to look for more
  efficient ways of managing patent portfolios.

11
The first knowledge managers(Contd)

• The common factor in their work is that all of
  them are responding to the challenge of an
  increasingly competitive environment.
  (???????????????????????????)
• Managers need to consider how the growing
  importance of knowledge might affect their own
  companys competitive position(??).
• They must therefore understand the basic dynamics
  of our knowledge oriented society.

12
The Knowledge Environment Transparent or
Turbulent?

• Environmental trends
• Specialization
• Globalization

13
Environmental trends

• The knowledge environment has three closely
  related trends the explosive rate at which
  knowledge grows, the extent to which it has
  become fragmented, and its increasing
  globalization.
• It took more than 300 years for the worldwide
  volume of information to double for the first
  time. Since then, it has doubled virtually every
  five years.

14
Specialization

• A century ago, an all-round scholar could acquire
  a general understanding of the state of research
  in almost every area of sciences
• Today, even within one subject, people of
  different specialties may have trouble
  understanding each other.
• The first two editions of the Encyclopedia
  Britannica were produced by just two scientists
  today, it takes tens of thousands of experts to
  work on each new edition.

15
Globalization

• The continuing trend towards a global economy has
  led to globalization of knowledge.
• All these changes mean that it is now impossible
  to know about all existing products, product
  variants, production technologies, or patterns of
  competitive advantage among countries, even at a
  general level.
• At the beginning of the 1970s, the USA still
  produced more than 70 of the worlds new
  technologies now, centers of scientific and
  technical excellence are spread around the
  world.India

16
The Knowledge Environment
17
More Knowledge Threat or Opportunity?

• Intelligent products
• Sensitivity to environmental conditions
• Functions of knowledge in service provision
• Strategic relevance of knowledge
• Transfer of competencies

18
Intelligent products

• Innovative companies are finding that they can
  increase the value of products which have
  relatively simple basic functions by making them
  more knowledge-intensive.
• This may mean enabling a product to adapt itself
  to changing conditions, or to collect and store
  information and apply it for the benefit of the
  user.
• Examples Credit card (Switzerland)

19
Sensitivity to environmental conditions

• Other relatively simple examples , Textiles,
  Window glass.
• More sophisticated applications Goodyear, for
  example, is working on an intelligent tire,
  which registers sinking air pressure via a
  computer chip and triggers a warning signal.

20
Functions of knowledge in service provision

• There many ways in which the value of a service
  can be increased by adding a knowledge component.
  
• Citibank has a system which recognizes atypical
  spending patterns in the use of credit cards,
  thus alerting customers to the possibility of
  loss or misuse.
• Many hotel chains and travel companies record
  individual preferences.

21
Strategic relevance of knowledge

• If a company with a well-developed knowledge base
  operates in a knowledge-intensive environment, it
  is possible that its specific competencies will
  develop a dynamic of their own, thus creating new
  strategic opportunities.
• Massey-Ferguson, the American tractor
  manufacturer, developed a satellite-supported
  system to help optimize harvests. The harvesting
  machine is equipped with a satellite positioning
  system which records the yield of each square
  meter.

22
Transfer of competencies

• Companies in other industries have also developed
  new areas of business on the basis of existing
  competencies.
• Airlines, having highly productive booking
  systems, have been able to transfer this
  competence to the hotel trade and the
  entertainment industry.

23
Case Study Kuoni (Swiss Travel agency)

• Knowledge-intensive services in the business
  travel sector cost analysis using Knows.
• In the 1990s, providers of business travel
  services specialized rapidly, and the technology
  that they use became more complex. Many business
  trips are international, and there are many ways
  of making bookings and arrangements. This has
  increased the pressure on those employees who are
  responsible for arranging a companys business
  travel they often feel overwhelmed at the
  prospect of organizing it all themselves.

24
Case Study (Contd)

• When companies seek support from travel agencies,
  they expect high levels of organizational ability
  and technical competence. In addition,
  transparency of costs may be a critical factor,
  because of the growth in company expenditure on
  business trips after salaries and IT, travel is
  often the third major expense category.
• In view of the vigorous growth of the business
  travel sector, Kuoni decided to transform itself
  from a simple travel agency into a Business
  Travel Information Management Company.

25
Case Study (Contd)

• It planned to offer its customers the kinds of
  information they need in order to improve their
  management of business travel. success
• Kuoni now consistently publicizes the
  knowledge-intensive components in its business
  travel services. In its efforts to become the
  trustee of the travel budget, it offers
  customers a comprehensive range of services,
  including special offers (????) and special trips
  to trade fairs (?????), as well as ordinary trips.

26
Case Study (Contd)

• Kuonis computerized customer files contain all
  data relevant to business travel in the companies
  it serves. For each employee, it can store class
  of travel, car rental category, and personal
  preferences regarding seating or food. This
  system called Knows.
• Knows helps the customer to monitor business
  travel more efficiently, and also to locate
  opportunity for bulk bookings which carry
  discounts. This additional service helps Kuoni to
  retain all of a customers business in the long
  term.

27
Knowledge Management

• Any company which accepts the challenge of
  knowledge management must first create a clear
  picture of what it knows and what it does not
  know.
• It will then be in a position to develop
  strategies based on its competencies.

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Summary

• Most companies now operate in an increasingly
  dynamic knowledge environment. Products and
  processes are more knowledge-intensive.
  Forward-looking managers will take appropriate
  action.
• A companys intellectual assets can be analyzed,
  balanced (??), and managed, but we need other
  approaches and instruments (??) than managing the
  traditional production factors.

29
Summary

• The present study of knowledge management
  includes an overview of the necessary concepts
  and methods.