Knowledge Management MIS 580

1. Knowledge ManagementMIS 580 Firm Resources and Sustained Competitive Advantage The eleven deadliest sins of knowledge management What’s Your Strategy for Managing Knowledge? Pei Ju Yang Jaideep Vaze

2. Firm Resources and Sustained Competitive Advantage By Jay Barney Texas A&M University

3. 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

4. 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

5. External analysis Internal analysis Strength Weakness Opportunity Threats Resource based model Environmental model of competitive advantage SWOT • Organizational framework of the 1960’s • Internal analysis • External analysis • Matching

6. Competitive environment model • Analyze a firm’s opportunities and threats in its competitive environment. (Recent research focus--1984, Lamb ) • 2 assumptions: • Homogeneous resources • Highly mobile resources

7. Resources based model • Examine the link between a firms internal characteristics and performance • 2 assumptions • Heterogeneous resources • Highly immobile resources

8. 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.

9. Defining of key concepts( cont’l) • 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.

10. 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

11. 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.

12. 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.

13. Firm resources &Sustained competitive advantage • Valuable • Rare: • the number of firms that possess a particular valuable resources < the number of firms needed to generate perfect competition dynamics • Imperfectly Imitable: see the next slide • Substitutability • Similar • Different but of the same effect

14. Imperfectly imitable resources: other firms cannot obtain the resources. • Unique historical condition • Firm’s 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 firm’s sustained competitive advantage isn’t understood • Social complexity • Beyond the ability of firms to systematically manage and influence

15. Applying the framework • Strategic Planning system • Information processing systems • Positive reputations

16. Summary • Valuable • Rare • Imperfect imitable • -History dependent • -Casual ambiguity • -Social complexity • Substitutability Firm resources: Heterogeneity Immobility Sustained Competitive advantage

17. The eleven deadliest sins of knowledge management By, Liam Fahey and Laurence Prusak

18. 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

19. 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

20. 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

21. Error 4:Not 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

22. 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

23. 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…

24. 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

25. 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

26. 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

27. 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

28. 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 organization’s 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

29. 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

30. What’s Your Strategy For Managing Knowledge? By Morten T. Hansen, Nitin Nohria and Thomas Tierney

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

32. 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”

33. 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 1990’s have chief executives started talking about knowledge manament

34. 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

35. 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 doesn’t

36. Andersen and E&Y • Theses firms have pursued a codification strategy • Randall Love at E&Y: • 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 don’t share knowledge through dialogue but the codification strategy is emphasized at these firms

37. 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 Bain’s “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

38. Technologies in use • Andersen and E&Y • 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.

39. 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

40. 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

41. 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

42. 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 MBA’s who like problem solving and can tolerate ambiguity • Reward people for directly sharing knowledge with others

43. 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?

44. Questions? Pei Ju Yang Jaideep Vaze