In a knowledge economy, a key source of sustainable competitive advantage and profitability lies in how a company creates and shares its knowledge (Allee, 1997;
Davenport & Prusak, 1998; Earl, 2001). The benefits of incorporating KM into strategy design can take many forms and occur at many levels (Alavi, 1999; Allee, 1997; Davenport & Prusak, 1998). It can help reduce the costs of producing goods and services and thereby help an organization compete on the basis of price. Al- ternatively, the incorporation of KM techniques and tools can help an organization enhance or differentiate its service offerings. This unique aspect of KM; namely that it can facilitate an organization to increase its competitive advantage at many levels is due to the complex nature of the knowledge construct and thus makes it imperative in a knowledge economy that KM is indeed incorporated into an organi- zations strategic vision. By incorporating KM into the strategic vision, this ensures that knowledge is given the high priority it needs and that this vital knowledge resource will be managed rather than being entrusted to serendipity (Holsapple &
Joshi, 2002). Furthermore, the incorporation of KM into the strategic vision enables the firm to achieve the vision and realize its value proposition (Davenport, 2003).
Thus, it is necessary to have a framework to formulate a KM strategy. We depict such a framework in Figure 8.
Specifically, Figure 8 brings together the key elements of KM; namely the technologi- cal infrastructure, human infrastructure and business infrastructure, in other words the resources within the organization and how they impact the development of the KM strategy and KM strategic vision. Furthermore, it is important to emphasize that such a process is iterative and should be continuous; hence the use of double arrows to reflect this in Figure 8.
An in-depth study by Wickramasinghe (2003), which analyzed the KM initiatives at various consulting companies found that key to the success of the respective KM initiatives was the fact that KM was articulate and incorporated within the strategic vision. Table 2 highlights some other important findings with respect to KM and strategy from this study.
These findings are reflected in other organizational examples that have also had success with their KM initiatives. Buckman Laboratories for example embarked upon a KM initiative in the late 1990s (HBS, 2003). Their success and significant Figure 8.
Table 2. KM and strategy
KM and Strategy in Practice KM articulated in strategic vision KM supported from the top
All aspects of strategy design incorporated KM
All strategy discussions included the need for KM and how KM would help realize the goals and objectives of the organization Development of internal and external KM focus
1. KM Vision 2. Business
Performance Gaps
3. Can KM make a difference?
4. Alternatives
5. Fit and Feasibility
6. Specific KM initiative
Technological Infrastructure
Business Infrastructure Human
Infrastructure
sales growth was attributed mostly to their KM system K’Netix, while the success of K’Netix can be seen to be the result of the drive and support from top manage- ment and the incorporation of KM into the strategic vision. We see similar success in the many consulting companies’ respective KM initiatives KPMG (HBS, 1997), American Management Systems (HBS, 1998) and Andersen Consulting (HBS, 2002) as well as Du Pont’s AI system (1995). Thus, the connection between a successful KM initiative, strong leadership and top management support and the articulation of KM as part of the strategic vision is necessary but not sufficient for ensuring success.
Knowledge management strategies should aim to set forth the criteria for choosing what knowledge a firm intends to pursue, and how it will go about capturing and sharing that knowledge (HBS, 1997). As a rule, a good starting point is to decide the kind of value the company intends to provide and to whom (suppliers, customers, etc.). Only then can knowledge and KM in particular begin to be articulated within a strategic vision and key questions as to what is the relevant knowledge, who are the key people and how to actualize such an approach can they be addressed.
It is important to realize that the knowledge requirements for different types of firms will by definition be different. For example the knowledge requirements for a low cost producer are significantly different to the knowledge requirements from a firm that wishes to pursue a differentiated strategy. This means that a strategy audit must be conducted to assess the current state of the firm’s knowledge and its gaps. From such an audit choices can then be made as to the required knowledge to be sought after and obtained. Earl (2001) develops this idea further by identifying three dis- tinct schools of knowledge management. These include (1) Technocratic—since the KM strategy is largely focused on the use of technologies and information systems.
Within this broad category, however, Earl (2001) identifies three sub-categories: (a) systems—for example Xerox’s knowledge-based systems, (b) cartographic—for example AT&T’s online directories of the location of expertise, and (c) engineer- ing—for example HP’s Intranet and knowledge-base that focus on improving designs and areas for continuous improvements. (2) Economic—where the KM initiative explicitly creates revenue streams from the exploitation of knowledge and intellec- tual resources, with one such example being Dow Chemicals. (3) Behavioral which again has three sub-categories: (a) organizational, which tries to foster communities of practice, such as the oil companies Shell and BP Amoco, (b) spatial, where the design of open spaces is to encourage discourse and the sharing of knowledge—for example British Airways, and (c) strategic, which sees KM as a key dimension of competitive strategy—such as Unilever. It is important to note that incorporating KM as part of the strategic vision is as important to all these schools of KM for truly effective and successful KM initiatives to be realised.