Knowledge and Competence as Strategic Assets

1. Knowledge and Competence as Strategic Assets Goriola Dawodu Diomede Richard Hong Qi

2. Knowledge Competitive and strategic asset of a company • Firm Repository of knowledge embedded in business routine and business process, technology competence, knowledge of customers and suppliers • The knowledge outcome • Reflects the maturity level of the firm and the competitive advantage of the firm

3. Competitive advantage Ability for a firm to combine knowledge asset with other asset to create a value “Economic prosperity rest upon knowledge and its useful application” ---------Teece, 1981 Advances in developed countries economy signify knowledge and its management.

4. Knowledge asset and Intellectual property (IP) • Growth of IT has amplified the meaning of IP to include knowledge asset • Requires same protection and treatment as other IP • Knowledge asset are difficult to copy when compared to other IP

5. Growth importance Developed economies have undergone a transformation from largely raw material processing and manufacturing activities to the processing of information and development, application and transfer of new knowledge. Consequence of this includes replacement of diminishing return with increasing returns this is usually paramount by knowledge-based industries.

6. Outcome • Positive feedback reinforced the winners and challenged the looser • Market tilts in favor of provider that gets out in front. These firms are not the pioneer and need not have the best product

7. Capturing value from knowledge and competence Introduction Distinction between creation of new knowledge and its commercialization. Creation of new knowledge as domain of individuals, or of research laboratory or of autonomous business units.(No complex organization needed- better designed for smaller organization.)

8. Capturing value from knowledge and competence Commercialization of new technology as domain of complex organization. Some requirements: ---challenges requiring new organization form and development of new dynamic capabilities. ---understanding of the nature of knowledge and competence as strategic assets. ---The nature of knowledge is critical to the strategic nature of knowledge and competence.

9. Nature of knowledge Codified /Tacit Taxonomy Relationship between codification of knowledge and the costs of its transfer Good and relative economical result for a transfer of a codified item of knowledge or experience(technical property). The transfer of information has a meaning to those who received it due to the fact the info is codified.

10. Nature of knowledge Uncodifiedknowledge is slow and costly: required face to face contact to eliminate the ambiguities surrounding that nature of knowledge. Positive/negative knowledge Taxonomy. Positive knowledge know as Discovery most focus on promising areas, tend to avoid blind alley(failures)

11. Nature of knowledge Negative knowledge or knowledge of failure Necessary to concentrate on negative knowledge to allocate better resources into promising sectors and projects Autonomous/systematic knowledge Autonomous knowledge: no major modification of the system to implement new knowledge. Systematic Innovation: modification of the sub-system.

12. Replicability, Imitability, and appropriability Replication: transfer or redeployment of competences from one concrete economic setting to another.(possible if knowledge is fully coded, or productive knowledge transfer has been prior tested) Knowledge assets normally rather difficult to replicate Imitation is a replication performed by competitor

13. Replicability, Imitability, and appropriability Link between replication and imitation ---Factors that make replication difficult also make imitation difficult ---Ease of imitation determine the sustainability of competitive advantage Two types of strategies to explain replication. ---Ability to support geographic and product line expansion to support customer where needed. ---ability to replicate using the foundations in place for learning and improvement

14. Replicability, Imitability, and Appropriability . Appropriability: ease of imitation. Appropriability is strong when a technology is inherent and difficult to imitate by competitor. Appropriabilityis easy to replicate(weak) when intellectual property protection is unavailable or ineffectual

16. Appropriability and Markets for know- how competence Strong profitability support asset as source of competitive advantage Competence can be embedded in other corporate assets (like complementary to knowledge asset) Understanding the limits on the market for know-how help to understand how firms can capture value from knowledge assets Challenges presented by the know-how and intellectual property

17. Inherent tradeability of Different Asset ---Recognition of trading Opportunities ---Disclosure of performance Features ---uncertain Legal rights ---Item of Sale. ---Variety --- Unit of consumption

18. Sectoral differences in the market for Know-how

19. Complementary Assets & Dynamic capabilities Complementary Assets & Technologies External Sensing Inherent replicability of the product timing Profits from knowledge assets ($$$) standards basic (operational) competencies of the firm price/performance characteristics of the product

20. Complementary Assets & Dynamic capabilities Organizational actions Role of external resources and internal resources in working together to seize and maximize opportunities

21. Implications for the Theory of the Firm • The firm is a repository for knowledge • The knowledge is embedded in business routines and process • The firm’s knowledge base includes its technological competences as well as it knowledge of customer needs and supplier capabilities

22. Implications for the Theory of the Firm • The essence of the firm is its ability to create, transfer, assemble, integrate and exploit knowledge assets • Knowledge assets underpin competences, and competences in turn underpin the firm’s product and service offering to the market

23. Implications for the Theory of the Firm • Dynamic capabilities • ---The firm’s ability to sense and seize opportunitie • --- The firm’s ability to reconfigure its knowledge assets, competencies, and complementary assets • ----The firm’s ability to select appropriate organization forms, • ---The firm’s ability to allocate resources astutely and • price strategically

24. Implications for the Theory of the Firm • Dynamic capabilities reflect the firm’s entrepreneurial side of management. Comparative advantage flows from both management and structure. • The emphasis on the development and exploitation of knowledge assets shifts the focus of attention from cost minimization to value maximization.

25. Conclusion • Knowledge, competence and related intangibles have emerged as the key drivers of competitive advantage in developed nation • The value-enhancing challenges facing management are gravitating away from the administrative and towards the entrepreneurial. This is not to deny the importance of administration, but merely to indicate that better administration is unlikely to be where the superior profits reside • It is no longer in product markets but in intangible assets where advantage is built and defended.