5 Strategy
5.1 Strategy and knowledge management
5.1.2 Knowledge (management) strategy
Knowledge is considered the key resource in the knowledge-based view. A system- atic management of this key resource should have its place on the strategic map of an organization. In the literature, many authors discuss knowledge management as an initiative that encompasses the whole organization (e.g., Probst et al. 1998). In many business organizations, knowledge management has received high attention from top executives and many organizations have established the position of a Chief Knowledge Officer—CKO on the board of directors180. So far, however, the link between concepts and instruments of knowledge management on the one hand and corporate or business strategy on the other hand has not been widely dis- cussed181.
The starting point for a framework of an organization’s “knowledge strategy”
(Zack 1999b, 126) or knowledge management strategy can be seen in the tradi- tional SWOT analysis (strengths, weaknesses, opportunities, threats) in which strategy is seen as balancing the external environment of an organization (its opportunities and threats) with its internal capabilities (strengths, weaknesses).
A knowledge strategy can be defined as balancing an organization’s knowledge resources and capabilities to the knowledge required for providing products and services superior to those of competitors (Zack 1999b, 131). According to tradi- tional strategic management a strategic gap is the difference between what an organization must do to compete and what it is actually doing. Strategies try to close this gap by aligning what an organization can do considering its strengths and weaknesses with what it must do in order to act on opportunities and threats. This concept is translated to the area of knowledge strategy which addresses knowledge gaps – differences between what an organization must know to execute its strategy and what it actually knows (Zack 1999b, 135).
Knowledge maps are suggested as the instruments to identify knowledge gaps.
A knowledge map in this case represents a high-level description of the organiza- tional knowledge base. In order to position an organization against its competitors, the following three categories of knowledge have to be identified per area of com- petence, or per strategic business unit, division, product line, function or market position (Zack 1999b, 133f):
x core knowledge is the minimum knowledge commonly held by members of an industry, also considered the basic industry knowledge barrier to entry.
x advanced knowledge enables an organization to be competitively viable. Com- petitors may generally hold about the same level, scope or quality of knowledge,
180. See section 6.1.2.1 - “Knowledge manager (CKO)” on page 163, see also the empirical results in part C.
181. One of the rare positive exceptions is Galliers’ attempt at the integration of knowledge management strategy into an information systems strategy framework which in turn is linked to the business policy and environment (Galliers 1999, 231). However, this places the knowledge management strategy close to information (systems) strategy and might result in neglecting the human and organizational side of KM as has been criti- cized many times.
but knowledge differentiation can take place with competitors holding specific knowledge.
x innovative knowledge enables an organization to lead its industry and to signifi- cantly differentiate itself from its competitors.
The link between business strategy and knowledge strategy ultimately comes down to direct an organization’s KM initiatives towards closing strategic knowl- edge gaps. The knowledge gap in turn is directly derived from the strategic gap.
This is true at an abstract level, however, it remains a big challenge to identify core, advanced and innovative knowledge and even more to find out how competitors score in these three categories. Also, as Zack states as well, knowledge require- ments change quickly and what is innovative knowledge today may well be core knowledge in a matter of months. Thus, it is also important to identify and close so- called “learning cycle gaps” with which the dynamics of knowledge are addressed.
However, it seems quite challenging to come up with knowledge requirements needed to fulfill future business strategies on a corporate level which in turn are concrete enough to direct KM initiatives. Zack’s approach may be considered as a quite abstract, high-level first step in the process of designing a KM strategy which is linked to an organization’s business strategy.
Figure B-14 gives a more detailed picture of the relationships between knowl- edge management and a simplified version of the strategic management process (see also Figure B-11 on page 95). The first step of this process is the identification of the key resources related to knowledge management. The classification of resources as presented in Figure B-12 on page 99 can be used to support this pro- cess. At the same time, the competitive environment has to be analyzed in order to provide a focus for the identification of the resources. Resources are only meaning- ful and valuable because they allow organizations to perform activities that create advantages in particular markets (Porter 1991, 108). Knowledge management sup- ports the identification, development and acquisition of knowledge-related resources. Zack’s concept of knowledge gap can be found on this level.
The next step is the selection of strategically relevant resources in order to pro- vide organizational competencies or capabilities. Resources have only an indirect link with the capabilities that the firm can generate. A competence or capability consists of an integrated, linked and networked set of resources, a “team of resources” (Grant 1991, 120). Knowledge management aims at leveraging resources e.g., by concentrating them upon a few clearly defined goals, accumulat- ing resources through mining experience and accessing other firms’ resources, complementing resources, conserving them to use resources for different products and markets and recovering resources by increasing the speed of the product devel- opment cycle time (Grant 1998, 126).
Figure B-14 also shows a circle model visualizing the four dimensions of capa- bilities: skills and the organizational knowledge base, technical systems, manage- rial systems and the values and norms associated with organizational knowledge (Leonard-Barton 1992a, 113f). Capabilities can be compared to the competition.
Capabilities and competencies are considered core if they differentiate a company
strategically. The resulting capability differentials give rise to competitive advan- tages which can be realized by applying the competencies in selected strategic business fields. It is important that competencies are identified spanning strategic business fields, hierarchies and functional areas (Probst/Raub 1998, 135), thus showing which complementary competencies are spread across different strategic business units. Many organizations today orient their activities around their (core) competencies. In the ILOI study done in 1996, 57% of the organizations reported that they had established competence centers to support the core competence approach (ILOI 1997, 28f). Competencies are difficult to imitate because the func- tioning of these networks is hard to understand for a competitor. Competencies are in other words the results of processes of organizational learning.
FIGURE B-14. Relationship between knowledge management and strategic management
Knowledge management supports the integration of resources into capabilities, the valuation of capability differentials and drives the dynamics of the organiza- tional learning cycle as sustained capability differentials require continuos improvement of the competencies. This organizational learning cycle is also closely related to the “meta-capability” of organizations which supports the perma-
superior revenues knowledge resources
individual skills/knowledge organizational knowledge base (routines,
technical systems (esp. ICT) knowledge assets) organizational culture
competitive environment industry attractiveness
organizational positioning
(core) competencies skills knowledge base
technical
systems managerial
systems culture
strategic business fields
product/service- market-combinations select,
combine, integrate,
link, network
apply, use
identify, develop and acquire strategically relevant knowledge assets (knowledge life cycle) identify “knowledge gaps”
value capability differentials in comparison with competition
support dynamics of organizational learning cycle identify “learning cycle gaps“
support application of core competencies, feedback knowledge life cycle realize “competitive advantages”
support by
knowledge management
nent process of integration, combination, linking and networking of resources into new competencies, also called dynamic capabilities (Teece et al. 1997). This meta- capability determines how efficiently an organization can change the competencies it applies. Organizational competencies are used to carry out those activities which an organization commands so that these activities differentiate the organization from its competition.
Dynamic capabilities can be described in terms of the organizational and mana- gerial processes which are the basis for the coordination and integration of resources into capabilities, the learning cycle and the reconfiguration and transfor- mation of capabilities to rapidly changing environments (Teece et al. 1997). This viewpoint has been called the dynamic capabilities perspective, a new paradigm in strategic management which bases its theory on a Schumpeterian model of compet- itive advantages generated by “creative destruction” (Teece et al. 1997, 526f).
The Knowledge Management Maturity Model (KMMM) was suggested in anal- ogy to the well-known Capability-Maturity-Model (CMM, Paulk et al. 1993) which can be used to analyze an organization’s position with respect to its meta- capabilities in knowledge management (Ehms/Langen 2000). Like the CMM, the KMMM distinguishes between five steps: initial, repeatable, defined, managed, optimizing. It analyzes the organization’s (1) knowledge goals and strategy, (2) environment, cooperations and alliances, (3) employees’ skills and competencies, (4) culture, (5) the managerial systems and management support, (6) knowledge structures and contents, (7) technological infrastructure and (8) processes, roles and organization. The organization’s knowledge strategy is then stated depending on the step on which the organization’s KM is and aims at bringing it to the next, higher step with respect to the eight areas of analysis which can also be seen as the main points of intervention into an organization’s way of handling knowledge.
Knowledge management should also support the application of competencies which provides feedback for the development of (complementary) resources. KM research has often concentrated on the identification and creation of knowledge and neglected the application side (Wiig 1999). Ultimately, these strategies should lead to sustained superior revenues for the organization.
Thus, KM activities do not directly provide or improve competitive advantages, but ideally support the development of knowledge-related resources, their integra- tion, linking and networking into organizational competencies, as well as their application which realizes the competitive advantages.
The main aim of a business strategy is to develop competitive advantages. The main goal of a knowledge management strategy is to support the development and application of organizational competencies. A knowledge management strategy can be seen as the general, abstract, high-level approach to align an organization’s knowledge resources and knowledge-related capabilities to the knowledge require- ments of its business strategy (also Zack 1999b, 135ff). Thus, the knowledge man- agement strategy tries to close the organization’s knowledge and learning cycle gaps.
There is still a lot of research work to do to clearly define the concept of organi- zational competence or the concept of collective or organizational knowledge.
Thus, even though this model provides a theoretical foundation for the develop- ment of a KM strategy, there is still a lot of room for improvisation in the imple- mentation of these strategies. In the following, process-orientation will be used as an instrument to further detail the implementation of KM strategies.