9 Knowledge Management Strategy You have to be fast on your feet and adaptive or else a strategy is useless. —Charles de Gaulle (1890–1970) This chapter addresses the common building blocks that are developed in order to apply and gain benefit from knowledge management (KM) applications. The major steps involved in developing a KM strategy are presented: the knowledge audit, the gap analysis, the elicitation of KM objectives, the short-term road map, and the longterm KM strategy. The general KM objectives of innovation and reuse will be discussed in terms of how best to balance creativity with organizational structure. Learning Objectives 1. Provide examples of major KM objectives and how specific KM initiatives can be implemented to address them. 2. Illustrate the major elements of a KM strategy and discuss the processes involved in each step. 3. Outline the key steps in the evolution of an innovative new idea and the institutionalization of a best practice that forms the object of reuse. 4. Discuss and evaluate the different approaches that may be undertaken in order to achieve an optimal balance between creativity and organizational structure. 5. List the different types of knowledge assets that result from KM initiatives. Introduction This chapter introduces the addition of a sound KM strategy that is linked to the overall business objectives of the organization to the integrated KM cycle (see figure 9.1). 312 Chapter 9 Organizational culture KM strategy KM team Assess Knowledge capture and/or creation Knowledge sharing and dissemination Contextualize Update Knowledge acquisition and application KM technologies Figure 9.1 An integrated KM cycle The two most commonly encountered objectives of knowledge management are innovation and reuse. Innovation is closely linked to the generation of new knowledge or new linkages between existing knowledge. It is a popular misconception, however, to think that innovation occurs in isolation—in fact, innovation rests firmly on a large body of accumulated experiences, both positive and negative, based on what has worked and what has not worked in the past. Creativity often involves lateral thinking such as seeing an analogy in a completely different context. Similarly, reuse is often mistakenly equated with dull, routine, and unproductive work. In actual fact, reuse forms the basis for organizational learning and should be viewed more as a dissemination of innovation. An evolutionary framework begins to emerge in which new knowledge in the form of innovations eventually ends up becoming incorporated into organizational memory to form the object of reuse so that the benefits of this new knowledge, know-how, can be spread throughout the organization. The KM strategy provides the basic building blocks used to achieve this organizational learning and continuous improvement so as to not waste time repeating mistakes and so that everyone is aware of new and Knowledge Management Strategy 313 better ways of thinking and doing. In addition, there will be a number of important knowledge by-products that should be recognized and inventoried as knowledge assets of the organization. These will typically include familiar, tangible items such as patents as well as “softer” or more intangible assets such as core competencies. Sveiby (2001) developed a framework for categorizing the different types of KM initiatives. He uses three categories: • External structure initiatives (e.g., gain knowledge from customers, offer customers additional knowledge) • Internal structure initiatives (e.g., build a knowledge-sharing culture, create new revenues from existing knowledge, capture individual’s tacit knowledge, store it, spread it and reuse it, and measure knowledge creating processes and intangible assets produced) • Competence initiatives (e.g., create careers based on KM, create microenvironments for knowledge transfer and learn from simulations and pilot projects) Lev (2001) uses different labels for the three main nexuses of sources of intangibles: • Discovery (innovation) • Organizational practices • Human resources The sources of innovation and knowledge reuse consist of either internal or external discoveries, or stem from business practices or from knowledge workers’ competencies. More often, improvements will result from some combination of these types of sources, as is illustrated in the discussion about the World Bank (box 9.1). A knowledge management strategy should target one or more of these objectives, but the strategy must go further than high-level goals. Robertson (2004) points out that a good KM strategy should identify the key needs and issues within the organization, and provide a framework for addressing these. A number of different types of business needs may trigger the need for KM. The most commonly encountered business drivers include: • Imminent retirement of key personnel • Need for innovation to compete in dynamic, challenging business environment • Need for internal efficiencies in order to reduce cost and effort (e.g., time to market a new product) Box 9.1 A vignette: The World Bank The World Bank has distinguished itself as a KM leader due to the swiftness with which it was able to transform itself into the Knowledge Bank within only four years (Pommier 2007). One of the major concerns that drove this transformation was being able to answer queries faster and better—by drawing upon the collective knowledge of the Bank. In addition, the Bank faced the challenges of multiple databases and repositories, different IT groups and tools, inconsistent information, and poor documentation and control. The World Bank thus developed their KM mission statement: to develop a world-class repository of their development experience and their cumulative knowledge. One of the major success factors behind this rapid transformation was due to an innovative technique, storytelling, which just happened to be developed by one of their own employees, their KM champion, Stephen Denning. In fact, Denning came up with the idea of a springboard story based on his years of frustration at trying to “explain” KM and why they needed it to senior managers at the Bank. His idea was a story that would help the audience—managers and decision makers—use the story as a springboard to leap to an intuitive understanding of KM. Here is the story Denning used: A health care worker in Zambia needed an anti-malarial preparation using only materials he had on hand. He sent a query via the World Bank’s Web site and he had a workable solution within 48 hours. He was able to harness the collective experience, expertise, and know-how of the World Bank to come up with the best possible answer in a timely way. The World Bank KM program was off and running. The World Bank transformed itself into a Knowledge Bank through its strategic goal of putting knowledge at the core of the World Bank’s work. The elements of this strategy included: People A focus on knowledge workers and connecting them via knowledge communities (CoPs) Culture Shifting the culture from an individualistic focus to a team and knowledgesharing culture Accountability Clear roles and responsibilities established for knoweldge managers and coordinators Technology System to capture, organize, and disseminate knowledge to all stakeholders of the Bank Process Implement a series of small steps or quick hits and continually promoted awareness and buy-in through “relentless repetition” The World Bank has implemented corporate portals, knowledge repositories (including image banks), a library of learning objects, video on demand and web casting content, a live database, an expertise locator system, communities of practice (called “thematic groups”), after action reviews, peer learning, and field visits and site tours to enhance learning. The major focus was on the thematic communities to restructure the Bank. Today, there are about 123 thematic groups or communities of practice overseeing key areas such as poverty, community development, and rural information technology infrastructures. A small KM Board composed of five people oversees all communities of practice. This core KM team has overall coordination and facilitation responsibilities. They identify any Box 9.1 (continued) synergies or redundancies among communities, they identify opportunities for crosscommunity knowledge sharing, they provide the link to organizational learning and corporate memory systems, and they assess the value of the outputs of each of the communities. A KM Council is the governance body that provides overall KM policy formulation and has KM responsibility at the corporate level. In addition, knowledge sharing is one of the four key behaviors that are evaluated in performance evaluations. Usage and application of knowledge are behaviors that are rewarded—not numbers of hits or postings on the intranet site. This is the major contribution required from the Human Resources department. The World Bank spent roughly 3 percent of its total administrative budget on KM. Of this, less than 10 percent was on technology (web, telephone, e-mail, and videoconferencing) and 2 percent was for the operating costs of the central KM unit. The rest went to financing the thematic groups and the Knowledge Support Office (KSO). Operational managers in the communities and the regions are responsible for implementing KM. Measurement, accountability, and budgets reside within the regions. Two major forms of support are required from senior managers: that CoP leaders spend approximately 25 percent of their time on KM activities and that communities are supported by KSOs that are best described as knowledge help desks. The World Bank has established cost-effective, global connectivity with developing countries to facilitate collaboration between offices, extend operational and administrative information to staff at any location, and reduce the cost of doing business. For example, the Bank provides an electronic venue for dialogue and knowledge sharing among members of the development community. The Development Gateway is an Internet portal that supports knowledge sharing and interactions to address the digital divide and poverty. More than thirteen thousand staff in eighty countries are now linked together with high speed and high quality so that everyone has access to the same work tools and information. With the knowledge management system in place, the World Bank is able to provide not only new services but higher quality services. A primary indication that the World Bank made effective use of its knowledge is the organizational innovation and entrepreneurial culture that was fostered partly as a result of knowledge management and sharing initiatives. Some of the key concerns of the World Bank such as timeliness or speed of creation of new knowledge, access to knowledgesharing methods, and innovation were also the focus of the measurements undertaken. While it may be impossible to determine the contribution of KM with complete accuracy, as is the case with most intangibles, it is possible to talk about the contributing role of KM. In evaluating KM, a holistic approach was used in order to take into account human and social as well as technological critical success factors. In 2000, the American Productivity and Quality Centre (APQC) found the World Bank to be one of the five global best practice leaders. By 2001, The World Bank ranked fourth place in the Most Admired Knowledge Enterprises Award and was been recognized again in 2002, 2003, and 2004. The organizations in this study are recognized for their worldclass efforts to manage knowledge, leading to superior performance. Knowledge sharing had become a way of doing business at the Bank. 316 Chapter 9 The resources and skills required to develop a KM strategy depend on the size and complexity of the organizational unit and on the depth of information gathering and analysis. The ideal mix of skills on the KM strategy team would be a KM expert, access to people who are knowledgeable about the organization, and a KM advocate who will “sell” the strategy to the senior member of management who mandated the strategy development. Developing a Knowledge Management Strategy A KM strategy is a general, issue-based approach to defining operational strategy and objectives with specialized KM principles and approaches (Srikantajah and Koenig 2000). The result is a way of identifying how the organization can best leverage its knowledge resources. Once this fundamental KM strategy is defined, baselining and technology options may be explored. A KM strategy helps address the following questions: • Which KM approach, or set of KM approaches, will bring the most value to the organization? • How can the organization prioritize alternatives when any one or several of the alternatives are appealing and resources are limited? Once the KM strategy is defined, the organization will have a road map that can be used to identify and prioritize KM initiatives, tools, and approaches in such a way as to support long-term business objectives. The strategy is used to define a plan of action by undertaking a gap analysis. The gap analysis involves establishing the current and desired states of knowledge resources and KM levers. Specific projects are then defined in order to address specific gaps that were identified and agreed upon as being high priority areas. A good KM strategy is composed of the following components: 1. An articulated business strategy and objectives a. Products or services b. Target customers c. Preferred distribution or delivery channels d. Characterization of regulatory environment e. Mission or vision statement 2. A description of knowledge-based business issues a. Need for collaboration Knowledge Management Strategy 317 b. Need to level performance variance c. Need for innovation d. Need to address information overload 3. An inventory of available knowledge resources a. Knowledge capital: tacit and explicit knowledge, know-how, expertise, experience in the minds of individuals and in communities or embedded in work routines, processes, procedures, roles, and artifacts such as documents or reports b. Social capital: culture, trust, context, informal networks, and reciprocity (e.g., willingness to experiment, take risks or able to fail without fear of repercussions) c. Infrastructure capital: physical knowledge resources, for example, LAN/WAN, file servers, intranets, PCs, applications, physical workspaces and offices, and the organizational structure 4. An analysis of recommended knowledge leverage points that describes what can be done with the above-identified knowledge and knowledge artifacts and that lists KM projects that can be undertaken with the intent to maximize ROI and business value, for example a. Collect artifacts and exploit them, for example, a best practices database, a lessons learned database b. Store for future use, for example, data warehouses, intelligence gathering for specific issue/problem, data mining, text mining c. Focus on connecting; connect “knowers” to each other and to a problem through CoPs or expertise location systems; hypothesize to carry out scenario planning and informal cross-pollination to produce new insights and breakthrough thinking The major steps involved in developing a KM strategy are to first understand the organization in terms of its current state (as is) and its desired business objectives (to be). The analysis of the difference between the two states is often referred to as a gap analysis and the means of getting from the “as is” to the “to be” is often represented in the form of KM strategic road map. The road map typically represents a three- to five-year strategy with clear milestones or targets to be achieved throughout that time. The current or baseline state of the organization is assessed using information gathered from a variety of sources such as key documents (e.g., annual report) and by interviewing key stakeholders (e.g., senior managers, human resources, information technology and major business unit managers). It is at this point that existing KM initiatives will also be identified in the form of a knowledge audit or inventory. 318 Chapter 9 Knowledge Audit A knowledge audit service identifies the core information and knowledge needs and uses in an organization. It identifies gaps, duplications, flows, and how they contribute to business goals. A knowledge inventory (sometimes called an information audit or a knowledge map) is a practical way of coming to grips with “knowing what you know” by applying the principles of information resources management (IRM). A knowledge audit identifies owners, users, uses, and key attributes of core knowledge assets. Willard (1993) discusses five key activities of IRM: Identification What information is there? How is it identified and coded? Ownership Who is responsible for different information entities and coordination? Cost and value A basic model for making judgments on purchase and use Development Increasing its value or stimulating demand Exploitation Proactive maximization of value for money A knowledge audit is often carried out in conjunction with a KM assessment, which provides a baseline on which to develop a KM strategy (Skyrme 2001). This typically involves taking stock of current KM capabilities and is often carried out as part of a KM strategy formulation exercise. A knowledge audit would result in the following types of results: • Identification of core knowledge assets and flows—who creates, who uses • Identification of gaps in information and knowledge needed to manage the business effectively • Areas of information policy and ownership that need improving • Opportunities to reduce information handling costs • Opportunities to improve coordination and access to commonly needed information • A clearer understanding of the contribution of knowledge to business results An example from Northrop Grumman is provided (box 9.2). A KM program or system should never be implemented without a knowledge audit having been conducted. Most importantly the precursor to spending a lot of money on KM technology is a proper knowledge audit to determine exactly what tools and solutions are most appropriate to enable better KM by the knowledge people in the organization. It is people that will be required to use the newly procured technology and adapt to the new KM system. It is therefore prudent that every attempt be made to consult with all or most knowledge people in the organization before any KM Knowledge Management Strategy 319 Box 9.2 An example: Northrop Grumman Northrop Grumman faced consolidation and downsizing during the late 1990s. The Air Combat Systems (ACS) group in particular was in danger of losing the expertise it needed to support and maintain a complex machine that would be flying—carrying precious lives and cargo—for years to come. So ACS instituted KM procedures designed to capture tacit knowledge about the B-2 that was locked in its employees’ heads. But before designing a program, ACS wanted to find out what barriers, if any, prevented employees from sharing knowledge with their peers. With a good picture of the knowledge culture attitudes, ACS would then have a better road map for designing a unit-wide KM program. They conducted a knowledge audit, surveying employees about their knowledge-sharing habits, polling nearly five thousand employees with a ninety-seven-question survey (KM2) to determine their knowledge needs, sharing practices, and prejudices. The survey asked questions such as, “From your perspective, to what extent is the knowledge that you and your team generate reused by other teams?” This not only highlighted ACS’ readiness for a formal KM effort but also pointed out areas where sharing was not happening. The Delphi group was hired to conduct the audit and derive a baseline pulse of the unit’s knowledge-sharing culture. Participation was voluntary—employees were given a free lunch for giving 30 minutes of their time. The survey response rate was better than 70 percent (typically, mail-in surveys return a 10–30 percent response). Delphi consultants analyzed the preliminary results and targeted 125 employees for face-to-face follow-up interviews. ACS had established a ten-person KM team to identify subject matter experts and capture the content of their expertise. After creating about one hundred knowledge cells and identifying two hundred subject matter experts within those cells, the KM council turned their attention to knowledge capture. The team created web sites for each of the knowledge cells and logged information about the knowledge experts into an expert locator system called Xref, short for cross-reference. Using Xref, employees can search for information in any number of ways, including by employee name, program affiliation, or skill area. If, for example, the B-2 landing gear is locking up, one can find the landing gear expert through Xref. The knowledge audit helped ensure that this centralized database would not only be useful but would actually be used. The results of the knowledge audit confirmed that employees were eager to share their knowledge in an automated, centralized system but that challenges, such as integrating the systems across lines of business, remained. The willingness of employees to participate in systems intended to minimize the impact of their own eventual layoff is, of course, highly dubious. Other key findings showed employees recognized the value of their fellow employees’ expertise. For example, they spent at least eight frustrating hours each week looking for information they needed to do their job (costing $150 million annually), only 6 percent of their knowledge was reused by others, and 31 percent believed that ideas generated by junior staffers were not valued and were likely to get smothered by the ACS bureaucracy. 320 Chapter 9 Box 9.2 (continued) The ACS knowledge strategy based on these results made use of three dimensions. (1) On the human side, the KM team set out to identify experts and communities of practice to facilitate sharing among employees (e.g., the CoP of project managers on different ACS programs). CoPs exist informally—it is important to identify the ones that are strategically important, raise their visibility, and provide funding and support systems for them. (2) On the process side, the KM team focused on finding out how people captured, organized, and reused existing knowledge. A central repository was created to amalgamate knowledge previously found in personal employee files in order to share lessons learned. The F/A-18 fighter jet program, for example, now has a web-based system that capitalizes on years of technical expertise by tracking structural problems with the aircraft. When an issue arises—a cracked part, for example—the first thing an engineer does is search the tracking system’s nine hundred previously encountered experiences. If it is a new problem, he or she inputs the relevant information using a PowerPoint template that can include pictures, drawings, and notes on the appropriate sections. Each week, engineers meet to discuss unresolved issues. Once it is resolved, it is automatically entered as a lesson learned. (3) The technology piece of the strategy serves as the glue lashing the KM initiative together—the homegrown Xref system, collaboration applications, and document management systems. The five technology areas are portals, expert locator, knowledge capture, media management, and collaboration, as these address the key barriers found in the knowledge audit: paper-based filing systems, disparate locations, and inability to locate internal expertise. Other initiatives, including portals that push personalized information, are in the pilot phase. The KM team plans to conduct follow-up audits every eighteen months or so to keep tabs on the evolution of KM initiatives and the knowledgesharing culture. system is purchased and implemented. This is where the knowledge audit plays a pivotal role in a new KM initiative. The company’s “knowledge people” are the core of its knowledge audit and hence no knowledge person should be marginalized during the knowledge audit initiative/process. It is of vital importance that an organization’s KM initiators or practitioners always seek to assess the company’s current KM health, before proceeding to implement KM. The knowledge audit serves the purpose of providing evidence-based information and knowledge of the audited units current knowledge status or “knowledge health.” This evidence-based knowledge is the launching pad into a new KM program. The knowledge audit is also extremely useful as a regular review and assessment of existing KM practices in the company. Management and exploitation of corporate knowledge is Knowledge Management Strategy 321 Box 9.3 A vignette: How do we know they need KM? More often than not, KM practitioners find themselves facing an organization that is convinced they need KM but cannot say why. In one large business unit, the stakeholders repeatedly insisted that knowledge sharing was blocked and no one knew whom to turn to for expert advice. They were convinced that “KM issues” were preventing them from carrying out one of the major mandates that was to assess the environmental health of a particularly sensitive area. Upon conducting an audit, the results quickly aggregated into one very strong theme: that of information management. Most respondents felt that they were great at sharing knowledge but they just could not get their hands on the data and information they needed. Some data sets were found to be over fifty years old but still critically needed to do trend analyses—and these old data sets were on a medium that no one had a reader for. One was eventually tracked down in an archive and the data was transferred to more modern media for preservation. A second data set was sitting in cardboard boxes because the scientist in charge of the project had retired. Actually, the boxes were originally in the scientist’s basement and his family contacted the company when he passed away, asking if they would like the boxes. The only drawback: the encryption key needed to decode the data was nowhere to be found. A Library and Information Studies intern had developed the key as a classification and finding aid fifteen years previously, and no one had thought to make a backup of the key. The knowledge audit results showed that problems existed at the information access, preservation, and retrieval level. Much like the old adage that one should “learn to walk before running a marathon,” this particular organization did not have a good sense of where the immediate needs lay. KM was relegated to a more long-term strategy recommendation and the action plan addressed more pressing information management concerns, which will in turn be needed to provide a solid infrastructure for knowledge management. intrinsically intertwined in the corporate knowledge culture, which is in turn determined and maintained by the corporate knowledge people. This is why a knowledge audit must be people-focused. Stakeholder interviews can help identify key knowledge needs to yield a knowledge map (Robertson 2004). Sample questions will typically include: • What is your job role and major responsibilities? • How long have you been working for the organization? • Who do you communicate with most frequently on work matters? • Do you have policies or guidelines for your work? If so, how do you access these? 322 • Chapter 9 What information do you rely upon during a normal working day? Where do you obtain this? • If you have a question, where do you go to find the answer? • Who asks you what types of questions? • What sort of orientation and refresher training have you received? • How do you find out what is happening in the organization? • What sorts of news do you read regularly? • What type of knowledge is needed to do your work? • How do you add value to the organization? Where do your knowledge artifacts reside? • How could knowledge flow be improved, in your opinion? • What would make your work easier? A knowledge audit is typically carried out by interviewing individuals or groups or by administering a survey questionnaire. It is highly recommended that audit questions be prepared ahead of time even if the interview method is chosen. A comprehensive questionnaire can serve as either a web-administered survey or as an interviewing guide. In the questionnaire in table 9.1 (adapted from Liebowitz et al., 2000, 5–6), knowledge categories refer to the types that you need to know to do your job; for example, a professor needs to know how to teach, conduct research, and supervise graduate students; a lawyer needs to know about legislation; a doctor needs to know about diagnostic techniques, and so on. Knowledge mapping is an ongoing endeavor—not a one-time activity. The knowledge map is a navigation aid to explicit/codified information and tacit/uncodified knowledge (Grey 1999). The map should provide an inventory and evaluation of intellectual or knowledge assets of an organization. Once the “as is” portrait of the organization has been completed through information gathering and the knowledge audit, a gap analysis can be performed. Gap Analysis The difference between the existing and desired KM state of the organization is analyzed in terms of enablers and barriers to successful KM implementation. A good gap analysis should address the following points (Zack 1999; Skyrme 2001): • What are the major differences between the current and desired KM states of the organization? Knowledge Management Strategy 323 Table 9.1 Sample knowledge audit questionnaire Question Number Question text 1 List specifically the categories of knowledge you need to do your job 2 Which categories of knowledge listed in question 1 are currently available to you? For each category of knowledge you specified in question 1, answer the following: 3 How do you use this knowledge? Please list specific examples. 4 From how many sources can you obtain this knowledge? Which sources do you use? Why? 5 Besides yourself, who else might need this knowledge? 6 How often would you and the others cited in question 5 use this knowledge? 7 Who are potential users of this knowledge who may not be getting the knowledge now? 8 What are the key processes you use to obtain this knowledge? 9 How do you use this knowledge to produce a value-added benefit to your organization? 10 What are the environmental/external influences impacting this knowledge? 11 What would help you identify, use or transform this knowledge more effectively? 12 Which parts of this knowledge do you consider to be (a) in excess/ abundance; (b) sparse; or (c) ancient/old/outlived its useful life? Answer the remaining questions for knowledge you make use of in general: 13 How is knowledge currently being delivered? What would be a more effective method for delivering knowledge? 14 Who are the experts in your organization housing the type of knowledge you need? 15 In what form is the knowledge that you gained from the experts? 16 What are the key documents and external resources that you use or would need to make your job easier? 17 What are the types of knowledge that you will need as a daily part of your job (a. in the short term (one to two years)? (b. in the long term (three to five years)? Source: Adapted from Liebowitz et al. 2000, 6. 324 • Chapter 9 List barriers to KM implementation (e.g., culture where “knowledge is power” or where individual possession of knowledge is consistently rewarded) • List KM leverage points or enablers (e.g., existing initiatives that could be built upon) • Identify opportunities to collaborate with other business initiatives (e.g., combine knowledge continuity goals with succession planning initiatives in human resources) • Conduct a risk analysis (e.g., knowledge that will soon “walk out the door” due to imminent retirements or knowledge that is considered to be at risk because only a few individuals are competent in this area and very little of their expertise exists in coded or tangible knowledge assets) • Identify redundancies within the organization (e.g., the case of the right hand not knowing what the left hand is doing) • Identify knowledge silos (e.g., groups, departments or individuals that hoard knowl- edge or block fluid knowledge flows to other groups, departments or colleagues) • Determine how the organization ranks with respect to others within the industry (e.g., are they early adopters of KM, KM leaders that are emulated by others, or are they just becoming aware of KM needs within their organization) One of the ways to perform gap analysis is to locate any gaps in knowledge. A good way to do this is to once again survey and/or interview key stakeholders to find out what types of knowledge they would like to have in contrast to what they actually have. A second set of questions (adapted from Liebowitz et al. 2000, 7), as shown in table 9.2, can help complete this step of the analysis required for a KM strategy. Next, the gap analysis will need a list of prioritized KM objectives to be addressed by the organization. This list is typically gathered through interviews with senior management and focus groups with the managers of all core business divisions. The sessions are a form of brainstorming where participants are encouraged to think “blue sky” thoughts, that is, to momentarily ignore constraints and reality checks and envision a more utopian version of their company. Typical questions would include: If all were possible, what would your ideal day be like? What are some of the thorns in your side that you would like taken care of immediately? What major changes would have an enormous impact on your company’s efficiency and effectiveness? The differences between the “as is” situation, as assessed by the first step in the audit, serves to paint a portrait of the status quo, warts and all. The second stage asks the stakeholders to put into words their visions for an improved version of their organization, one with an ideal culture, technological infrastructure, and skilled resources and, above all, with no constraints. After this brief respite, the stakeholders are then Knowledge Management Strategy 325 Table 9.2 Questionnaire to identify missing knowledge Question number Question text 1 What kinds of knowledge do you reuse? Can you think of examples where reuse would be beneficial but is not being done? 2 What types of questions do you have for which you cannot find the answers? Are these questions related to your job performance or to administrative procedures? 3 What kinds of questions do you ask repeatedly? 4 Do you know whom you should direct your question to? 5 What kinds of questions are you asked? What do you do if you do not know the answer? 6 What mechanisms might be helpful for encouraging knowledge sharing and transfer in your organization? 7 What aspects of your organization seem to provide barriers to effective KM? What constraints impede knowledge sharing and transfer? 8 What are the main reasons why you could have made errors/mistakes on the job? 9 If your organization has considered outsourcing in the last 5 years: (a. In what areas was outsourcing considered? (b. If outsourcing was rejected, why? (c. If outsourcing occurred, why? 10 How much time do you spend looking for knowledge? (a. In a given day? (b. In a given week? Source: Adapted from Liebowitz et al. 2000, 7 brought back to earth by asking them to now think about the feasibility, the cost– benefit, and the priority of each of these desired objectives. The results of the gap analysis should be validated by returning to the stakeholders who were initially involved in the information gathering and needs analysis phases. The priorities should be determined by a consensus of the organization’s key stakeholders. The result will be a KM strategy document that can be used as road map to implement short-term KM initiatives within the organization (those with the highest scores on feasibility, cost–benefit, and priority) as well as a longer-term KM strategy that will describe some of the longer, more complex initiatives. The KM Strategy Road Map The final recommended strategy would typically cover a three- to five-year period, outlining the key priorities for each year. The road map addresses issues such as: • How will the organization manage its knowledge better for the benefit of the business? 326 Chapter 9 Box 9.4 A vignette: What should KM focus on within our rrganization? The knowledge audit and gap analysis phases of the KM strategy will help determine what the KM efforts should focus on within a given organization. While there are some highlevel goals such as efficiency or innovation and some generic KM initiatives such as implementing communities of practice or an expertise locator system, each strategy will necessarily be unique. Every organizational context is different so a “one size fits all” approach cannot work for a KM strategy. The audit or diagnostic phase ensures that the core characteristics of the organization are well-understood and taken into account in proposing KM recommendations. For example, in a public utility company, an extensive audit revealed that while explicit knowledge was formally shared quite extensively, there were few if any opportunities to meet to share knowledge informally. As a result, the lessons learned were edited so as to not cause any undue alarm, with the result that when they reached the eyes of the CEO, the reports all read a bit like “something terrible happened, we were not 100 percent prepared, we dealt with it, all is now back to normal.” In fact, the knowledge audit revealed that this organization worked exceedingly efficiently and effectively under normal operational conditions. In the context of an emergency, however, work teams no longer knew their roles, they could not collaborate in more dynamic, tacit ways preferring to keep to “the book” or manuals and rules, and they often failed in carrying out their critical duties. For this particular organization, an emphasis on tacit knowledge and informal ways of sharing this knowledge became a critical focus for the KM strategy. Employees were encouraged to meet and discuss project postmortems with peers before reporting more formally up the hierarchical levels of authority. Additional recommendations were made, including short term training of teams so that they could better perform in crisis situations through role playing and simulations in the short term; and beginning the journey to cultural change by encouraging employees to send anonymous e-mails directly to the CEO and rewarding them for risk-taking. Another organization, an international aid outfit, revealed quite a different focus for KM during the course of their KM audit. This organization had branches around the world and operated in a highly complex environment: multiple locations, multiple languages, and multiple stakeholders, including funding agencies, partners in the various countries, and a high turnover rate due to two-year mandates. The audit revealed that tacit knowledge was being well shared throughout the organization, primarily through informal contacts using Skype (voice over Internet) and occasional face-to-face meetings. A number of bottom-up or grassroots communities of practice had emerged on their own, further linking geographically dispersed workers around a common mandate theme. In fact, this organization’s evolution in KM terms mimicked that of the World Bank, which created over one hundred thematic communities to better harness the expertise that they provided to third world countries. Knowledge Management Strategy 327 Box 9.4 (continued) The gap analysis showed that the critical KM missing in this organizational context was the formal capture and sharing of explicit knowledge. Meetings were often held without an agenda, attendees changed at the last minute, and the proceedings seemed quite chaotic to an outsider. For example, the topics to be addressed were arbitrarily changed, priorities were suddenly announced, and discussions were very difficult to follow. Attendees often interrupted one another, there was no set time for the meeting to end, and there was no one to chair or to take the minutes. Employees explained that this was the “culture” of the place—where everyone was involved in everything and every decision was made by consensus. There was little systematic documentation of meeting results. There was also very little reflection on completed projects and what documentation did exist was often very difficult to track down. Reports were written for each project, but the reports varied in structure and content as each was dedicated to an external audience. KM seemed to be invoked in order to fulfill very specific demands of external parties but rarely was the KM lens turned inward. As a result, the organization had to focus KM efforts on the knowledge capture and codification side of things. This would require the organization to identify the types of knowledge they have and that they need to have, and to figure out how to render these more visible and therefore easier to access by others. • Content (management of explicit knowledge) and community (management of tacit knowledge) priorities • Identification of processes, people, products, services, organizational memory, relationships, knowledge assets as high priority knowledge levers to focus on • What is the clear or direct link between KM levers and business objectives? • What are some quick wins (i.e., early relatively inexpensive KM successes)? • How will KM capability be sustained over the long term? (e.g., defined KM roles)? A typical KM strategy document will contain the results of the audit, an inventory of what exists, what KM initiatives were implemented or tried out, what types of knowledge exists, who uses this knowledge, and how and whether or not knowledge is being shared and disseminated throughout the organization. In parallel, it is also important to assess the current status of the two key enablers of KM: the technological infrastructure and the type of prevailing culture (or microcultures within different units). All of the pieces of the audit can then be integrated to provide a snapshot of the organization at this point in time and a high-level diagnostic: for example, the level of organizational readiness for KM (based on KM maturity models, discussed in 328 Chapter 9 chapter 7), whether or not they have an intranet or other means to ensure that everyone can connect with everyone else and access existing knowledge; as well as some of the potential obstacles that may cause some issues with future KM implementations. The prioritized “wish list” developed in the next phase serves to show where the organization would like to be in the short-term (one to three years) and long-term (three to five years) time horizon. The gaps are thus the differences (measured by the width of the gap) between what is and what should be and the strategy recommendations outline how the company should close these gaps. The table of contents of a good KM strategy document is shown in table 9.3. The strategy should contain both diagnostic and prescriptive content. In addition, the recommendations should not be so generic or abstract that it is not clear how they could be implemented. In other words, the recommendations should be packaged together with the resources needed for each recommendation such as cost and human resources together with the required skill set and training (KM roles and responsibilities are discussed in chapter 12) and a way of assessing whether or not implementation was successful (KM metrics, discussed in chapter 10). An illustration of the critical importance of closely aligning KM strategy to the overall organizational business goals is described in the detailed look at Ford (box 9.5). Balancing Innovation and Organizational Structure Klein (1999) discusses the importance of maintaining a balance between fluidity and institutionalization as the dynamic equilibrium that should ideally exist between innovation and organizational structure. The fluid intellectual domain consists of individuals with ideas originating and growing from a given person (intuition), personal networks that form outside formal organizational charts (CoPs), chance encounters that occur between people, and improvisation that ignores standard procedures to discover better ways of doing things. In contrast, the organization strives to structure work, to control processes, and to measure outcomes. Explicit knowledge is clearly defined in procedures, reports, memos, and databases. This knowledge is usually selectively shared through official chains of command or organizational hierarchies. How then to strike the right balance? If the organization is too fluid, there will be no solid connection of knowledge work to business goals, and it will be difficult to have clear accountability. If the balance shifts too much in favor of institutionalization, however, the organization risks becoming too formal, which can stifle innovation and the open communication necessary for creative work to take place (see figure 9.2). Knowledge Management Strategy 329 Table 9.3 Recommended table of contents for a KM strategy Section number Section title Comments Metadata Document history/ information Include information about authors, contact person, date last revised, authority owners, and distribution limits (usually not a public document) 1 Executive summary Maximum of two pages 2 Introduction The organizational context, the business drivers that led to a KM requirement 3 KM audit—key findings Thematic summaries from stakeholder interviews; inventory of what exists (intranet, KM projects, knowledge categories); assessment of KM maturity; potential KM enablers and obstacles—where they are now 4 KM objectives Prioritized list, based on stakeholder consensus, on the company KM wish list—where they would like to be in the short and long term 5 Gap analysis—key findings Assessment of how far apart the status quo is from the desired future state; analysis showing ranked gaps—from least to greatest 6 Recommendations The way forward—the major priorities that need to be addressed, when and how and by whom 6a Short term Action plan for the next one to three years with cost-benefit analysis, resources, and metrics identified 6b Long term Strategic objectives with results projected in the next three to five years, clearly showing how this builds on the action plan 7 Conclusions Identify next steps; include governance (who approves strategy, when will it be updated, assessed, etc.) 8 Appendices Include (as documents or links to intranet) all data gathered (ensure participant confidentiality—if conferred—is fully respected) so that the reader can dig deeper to find sources and justifications if needed 330 Chapter 9 Box 9.5 An example: Ford Ford and Firestone suffered the death of a thousand cuts, in part because of a catastrophic failure to share knowledge. Information that might have alerted the companies to the calamitous mismatch of Ford Explorers and Firestone tires was scattered in different places in both companies, each item innocuous in isolation. Yet Ford’s knowledge-sharing scheme is one of the best in the world. The company’s Best Practices Replication Process has produced a billion-dollar benefit for the automaker. Why did it not help in this case? The Ford process was started in 1995 when a VP of manufacturing on a trip to Europe saw that the plant there had ideas Americans could use and vice versa. Back home, he assembled his operations people and asked them to figure out a way to share best practices. At the same time, another Ford group was addressing reengineering issues through the Rapid Actions for Process Improvement Deployment (RAPID) program. These were workshops aimed to eradicate small inefficiencies. They soon turned to the challenge of replicating the solution so the RAPID need not be reinvented again. The two merged to become Ford’s Best Practices Replication Process. In 4.5 years, more than 2,800 proven superior practices have been shared across Ford’s manufacturing operations. The documented value of this shared knowledge so far is $850 million. Another $400 million stands to be won from work in progress, bringing the grand total to $1.25 billion. Royal Dutch/Shell and Nabisco have licensed the process and portions have been patented. Ford made three key decisions: first, the process would be managed with distinct roles and responsibilities. Second, no practice would get into the system unless proven. Third, every improvement would be described in the language of the work group involved: time, head count, gallons, and quality. These work groups are communities of practice. Each CoP has a company-wide administrator, picked by the director of manufacturing. The role takes a half a day a week. At the plant level, each CoP chooses someone as the focal point and that role takes one to two hours a week. No one is paid extra. The best practices process has forty-two steps. The focal point looks for a neat new process (or its inventors go to him or her). He or she makes up a web page that prompts him or her to quantify benefits such as time or material saved. The focal point then e-mails it to the community administrator, who compares it with other plants, and if it passes muster, designates it as a gem. It is then immediately posted on the intranet and e-mailed to every focal point in the community. One way or another, each focal point must report a decision: to adopt or adapt it, and say when; to investigate it; or to reject it and explain why. The web displays a scorecard to all users—by community and by plant. It may show, for example, that of sixty-one gems in painting, the St. Louis plant has done or agreed to forty-two, was investigating two, had rejected seven as inapplicable and nine as economically not feasible, and had originated and contributed two. Knowledge Management Strategy 331 Box 9.5 (continued) So if Ford is so good at knowledge sharing, why did no one know about the tire problem? Two reasons: first, knowledge is best shared within communities—people with something in common talk more than strangers do. Neither Ford’s nor Firestone’s social networks were rich enough to support the kind of extramural communication that might have uncovered the problem. Second, the more widely dispersed the knowledge is, the more powerful the force required to share it. Every year, Ford headquarters hands down a “task” to managers—they are required to come up with a 5–7 percent gain in, say, costs, throughput, or energy use. The best practices database is the first place they turn to—like a magnet, the task draws knowledge from its hiding places. This is an important lesson for KM: if KM isn’t tightly linked to your business model, it will never amount to much. Where is the high-value IC?? Fluid • Spontaneous • Creative • Dynamic • Experimental Institutional • Structured • Codified • Controlled • Measured Knowledge Tacit Explicit Figure 9.2 Balance between fluidity and institutionalization (adapted from Klein 1999) 332 Chapter 9 Some companies such as Buckman Labs, 3M, Kao in Japan, AES, and others have managed to strike the right balance (Klein 1999). Some of their critical success factors were: • Consistency between core values, business strategy, and actual work environment • Stress placed on personal freedom, cooperation, and community • Top leaders serve as good role models—they “walk the talk” AES set up a task force to conduct a historical study of the company’s ten biggest mistakes. They also provided physical meeting space and time for people from different parts of the company to meet and share what they were doing, and to get advice on problems. 3M incorporated stories into their corporate training. 3M adopted the slogan “conservatism with creativity” and the company realized that 30 percent of revenues come from products that are less than four years old. Technology was used to connect knowledge workers to a database so they could share their expertise systematically. The 15 percent rule was used: 15 percent of each employee’s time should be set aside to pursue personal research interests. 3M also instituted a storytelling culture with such chestnuts as “remember the time they tried to kill the Thinsulate idea. . .”). KAO is a company that focused on organizational learning and based its approach on values derived from Buddhist principles. Continuous cross-functional interactions were encouraged and every meeting at KAO is open to all. The value-added network (VAN) is KAO’s digital memory. ECHO is a system that adds customer call information to VAN and they can receive about 250 calls per day. In this way, corporate experiences are preserved and made available for future customer interactions. Buckman Labs developed K’Netix as their knowledge network. This knowledge repository is available in the ninety countries where Buckman has its offices. The users are both the sales and technical workforce. K’Netix connects the Buckman CoPs. The KM application consists of e-mail and forums residing in the knowledge repositories. Each forum has a message bulletin board, library, and virtual conference room. In configuring for a balanced knowledge framework, successful companies such as these need to identify strategic business drivers: What is the business all about? This is the logical starting point to decide how to organize and manage intellectual assets. They need to identify products, services, cost, value, quality, and differentiating factors, and they need to characterize the environment in terms of competitive forces, regulations, and socioeconomic trends. The organization can then establish the knowledge core and interrelationships: What are the knowledge assets needed to maximize value for customers, shareholders, employees, and other stakeholders? Both tangible and intangible assets (e.g., values, culture, people, technology, business capabilities) need Knowledge Management Strategy 333 to be clearly identified together with where this critical knowledge exists and where it goes (knowledge flow analysis). The knowledge flow can then be further analyzed to assess how fluid or how institutionalized the knowledge has become and whether any gaps in key competencies exist. In summary, there is a need to continually monitor and rebalance, to reconfigure or expand an organization’s knowledge assets as triggered by mistakes, changes in environment, changes in competencies, and/or changes in performance. It is important to remember that an organization is a complex adaptive system operating in a complex dynamic environment, and the ultimate goal is that of a dynamic equilibrium between fluidity and institutionalization pressures. Just-in-time discipline can be applied, together with a focus on culture. The speed and accuracy with which knowledge is transmitted must be optimal. The best example of nonoptimal conditions is a reenactment of the telephone game—when the message that is transmitted to the first individual becomes progressively more garbled with each repetition. Other useful questions to ask are: • How changeable is the knowledge? • What is the useful half-life of knowledge? • What type of information technology is being used for knowledge sharing? • What about innovation support systems? Types of Knowledge Assets Produced Intellectual assets (IA) are the intangible and often highly valuable assets that can include brands, employee know-how, trade secrets, and technical information. IA also covers intellectual property (IP), those assets such as patents and trademarks that are formally protected by statute law. Generally, intellectual capital refers to the difference between a company’s market value and its book value. It consists of organizational knowledge and the ability of the organization’s members to act on it. Intellectual capital is often used synonymously with the terms intangible assets, intellectual assets, or knowledge assets. Intellectual capital includes not only traditional intangible assets such as brand names, trademarks, and goodwill, but new intangibles such as technology, skills, and customer relationships. It is the resources that an organization could—and should— make the most of to obtain competitive advantages. Many present-day business managers are intrigued by the potential hidden value that the intellectual capital perspective suggests lies untapped within their businesses. However, managers do not know what kinds of value they could obtain from their 334 Chapter 9 company’s intangible assets or how they might go about it. They just know that there is hidden value in their companies and that it is somehow wrapped up in the thoughts, skills, innovations, and abilities of their employees. They want to learn more about this value: how to harness it, direct it, and extract value from it (Sullivan 2000). Intellectual assets are intellectual materials that have been formalized, captured, and leveraged to produce higher value for the firm. As organizations more fully recognize the role these assets play in marketplace success, efforts to more accurately identify and value them are becoming a top priority. While most managers readily recognize that their most important organizational investments are in talents, capabilities, skills, and ideas, often they must rely on surrogate, tangible-resource measures such as people, capital, inventory, and money for performance decisions. Historically, the intangibility of intellectual assets has made them difficult to measure and manage. The accounting concept of “goodwill,” which is simply the amount left after deducting measurable costs from the selling price, has and continues to be used by many organizations as a type of miscellaneous category where intellectual assets can be put in. A more organizationally appealing approach was introduced by Stewart (1997) where intellectual assets are classified as: • A semipermanent body of tacit and explicit knowledge about a task, person, or organization • The capital resources (human, structural, and relational) that augment this body of knowledge This classification scheme, if applied properly, produces intellectual asset measures that can be targeted for KM value assessment. Bolita (2001) states that with more than half the value of US corporations now considered intellectual assets, organizations are increasingly looking for ways to identify, quantify, and capitalize on those intangibles. Over the last seven years, the value of intellectual assets has increased by 700 percent. An organization’s intellectual assets are computed in a number of ways (none of them precise). The difference between a company’s book value and the value of all its fixed assets is one measure. The CocaCola Company (www.thecoca-colacompany.com) is often cited as a reference model for evaluating intellectual assets. Discounting the extensive value of the sugar, water, bottling facilities, and distribution system, the bulk of the company’s value lies in the formula to make Coke, and the brand awareness the company has established. For example, Microsoft (www.microsoft.com) paid $425 million for WebTV (www .webtv.com), a company with few fixed assets and only modest revenue. However, WebTV held 35 patents for delivering the Internet over television. For that intellectual Knowledge Management Strategy 335 property and the expectation of revenue it could generate, Microsoft was willing to pay dearly. Documents, recordings, or images—all different structured data types, may represent intellectual capital. Those data types embody the knowledge and a substantial portion of the value of a company. Quantifying an organization’s intellectual property should therefore begin by making it as tangible as possible. By converting ideas, processes, concepts, and business intelligence into archived documents, CAD drawings, database entries, procedure manuals, or even patents, organizations are much better able to count intellectual assets in their bottom line. Edvisson and Malone (1997) propose that knowledge assets can be placed in one of these categories: • Human capital, or all the brainpower that “leaves at 5 PM.” Human capital represents the knowledge inherent in employees and contractors, and it is difficult to calculate. The best way of assessing it is to calculate the potential inherent in human knowledge—the value that has not yet manifested itself. • Structural capital, or all the brainpower that “stays after 5 PM.” Structural capital includes policies and procedures, customized software applications, training courses, patents, and the like. The financial community can more easily calculate the value of structural capital because it has physical properties. • Customer capital (also called relationship capital), or all the corporate relationships with customers and prospects. The value of customer relationships can be calculated in terms of the business the customers have provided and the trend in those relationships. (The value of future relationships or lapsed contracts is difficult to calculate.) Organizations can take an inventory of these assets and, in some cases, can sell them to others. (For example, organizations can sell training courses and license patents.) Identifying and extracting intellectual assets is the process of determining the obvious and nonobvious assets that a company owns. Often as a company goes through a systematic process of inventorying its known assets, it finds many surprises. For example, a company might start an inventory by listing its patents and patentable discoveries. It then becomes clear that some of the company’s most valuable intellectual assets are in the form of processes or know-how that are not patentable. Examples that should be included in an inventory of intellectual assets are product formulas, manufacturing processes, new product plans, packaging specifications, product compositions, research directions, test methods, alliance relationships, business plans, strategic directions, vendor terms, competitive analyses, customer lists, marketing plans, sales projections, budgets, financial projections, pricing analysis, and employee lists. 336 Chapter 9 Intellectual assets also come from widening the aperture of the lens used to see intellectual assets. For example, by looking to contractors and consultants who develop intellectual assets for the company, the company is likely to discover assets it owns that had not been considered. In the process that links identifying intellectual assets to extracting them for profit, a company will often see opportunities to create new intellectual assets. A company can cultivate creativity to create assets, which can be identified and extracted for profit to the organization. Lev (2001) views intangible assets as nonscarce. Deployment of an intangible asset is possible at the same time in multiple uses. Intangibles increase in value when used. This is also referred to as scalability: the value of intangibles increases when the scale at which they are used increases. Intangibles are not subject to diminishing returns as are tangible assets, but have increasing returns. Intangibles also have strong network effects. Although not exclusively applicable to intangibles, network effects are characteristic for intangibles in the sense that intangibles often form the core of important networks. Intangibles create future value. All intangibles are future-oriented and because of this they are ignored by traditional accounting systems based on conservatism and materialism. Intangibles are difficult to manage and to exclusively control. Taking full advantage of the tacit knowledge residing in employees is more difficult than exploiting the value of a building or a machine to its maximum. Copying or re-engineering of intellectual assets is often relatively easy, and we have limited ability to protect using property rights. Cost accounting systems are not well geared toward intangible assets, and are even wholly inaccurate for managing intangible assets-intensive corporations. Intangibles cannot be owned (except legal property rights). Intangibles investments are therefore typically more risky due to the fact that intangibles play the most dominant role in the early stages of the innovation process. Proper management can deal with this, that is, R&D alliances and diversified innovation project portfolios. Intangible assets are nonphysical and therefore inherently difficult to trade. Legal protection is weak. There are large sunk costs and low marginal costs. Open exchanges for intangibles are in their infancy. Intangibles cannot directly be measured. Valuing intangibles is difficult. Intangibles are not evidenced by financial transactions (as tangibles are). Key Points • KM auditing is often the first step in any KM initiative as it serves to inventory what knowledge-intensive resources exist within a company. This provides a snapshot of Knowledge Management Strategy 337 the “as is” or current state of the organization with respect to KM, and helps in measuring progress toward organizational culture change and other KM goals. • The two most commonly encountered KM application goals are reuse and innovation. • A good KM strategy will diagnose the existing status of the organization, compare this with what stakeholders want to achieve in the future, and come to an assessment of how far apart the two are: a gap analysis. • A short-term horizon of one to three years is best for detailed recommendations—an action plan that includes cost, resources, and measuring components. • The proposed KM strategy should not only clearly address business objectives (not KM objectives) but should be compatible with the prevailing cultural and technological enablers of the organization. • It is crucial that a balance be maintained between fluidity and institutionalization in a given organization. Discussion Points 1. Compare and contrast KM applications that are driven by an objective of reuse versus those driven by an objective of innovation. 2. What are the major steps involved in developing a KM strategy? What sorts of information is needed in order to recommend a KM strategy to an organization? List the major categories of stakeholders who should be involved in the strategy formulation process. 3. What are some of the pros and cons of a web-based questionnaire versus face-toface interviewing when conducting a knowledge audit (refer to chapter 4)? 4. Why is it important to conduct an audit before eliciting stakeholder objectives? 5. What are some criteria that may be used to prioritize both KM objectives and KM recommendations? 6. What are the major differences between the short-term and long-term strategy? How do they fit together? 7. Why is it important to maintain a balance between fluidity and institutionalization? What are some of the mechanisms that can be used to achieve this balance? How can KM applications upset this balance? 8. List and provide examples for some different types of knowledge assets. What are some typologies that can be used to categorize them? 338 Chapter 9 9. What are the relationships among human, structural, and relationship capital? 10. Why are intellectual assets difficult to manage? References Bolita, D. 2001. Intellectual assets—Corporate value moves from top minds to bottom lines price on (what’s in) your head. KM World 8 (2). http://www.kmworld.com/Articles/Editorial/Feature/ Intellectual-assets–Corporate-value-moves-from-top-minds-to-bottom-linesa-price-on-(what’sin)-your-head—9062.aspx / (accessed June 4, 2010). Edvisson, L., and M. Malone. 1997. Intellectual capital: Realizing your company’s true value by finding its hidden brainpower. New York, N.Y.: Harper-Business. Grey, D. 1999. Knowledge mapping: A practical overview. http://kmguru.tblog.com/post/98920. (accessed June 4, 2010). Klein, D. 1999. The strategic management of intellectual capital. Boston: Butterworth-Heinemann. Lev, B. 2001. Intangibles – management, measurement and reporting. Washington, D.C.: Brookings Institute Press. Liebowitz, J., B. Rubenstein-Montano, D. McCaw, J. Buchwalter, C. Browning, B. Newman, and K. Rebeck. 2000. The knowledge audit. Knowledge and Process Management 7 (1):3–10. Pommier, M. 2007. How the World Bank launched a knowledge management program. http:// www.knowledgepoint.com.au/knowledge_management/Articles/KM_MP001a.html (accessed June 4, 2010). Robertson, J. 2004. Developing a knowledge management strategy. KM Column. August 2. http:// www.steptwo.com.au/papers/kmc_kmstrategy/ (accessed June 4, 2010). Skyrme, D. 2001. Capitalizing on knowledge: From e-business to k-business. Boston, MA: Butterworth-Heinemann. Srikantajah, T., and M. Koenig. 2000. Knowledge management for the information professional. Medford, NJ: Information Today. Stewart, T. 1997. Intellectual Capital—The New Wealth of Organizations, 1st ed. New York: Doubleday / Currency. Sullivan, P. 2001. Value driven intellectual capital: how to convert intangible corporate assets into market value. New York: John Wiley and Sons. Sveiby, K. 2001, A Knowledge-based theory of the firm to guide astrategy formulation, Journal of Intellectual Capital 2 (4):344–358. Zack, M. 1999. Developing a knowledge strategy. California Management Review 41 (3):125–145. Willard, N. 1993. Information Resources Management. Aslib Information 21 (5):201–205. 7 The Role of Organizational Culture As the soil, however rich it may be, cannot be productive without cultivation, so the mind without culture can never produce good fruit. —Seneca (Roman Senator, c. 60 BC–c. AD 37) This chapter examines the role played by organizational culture in more detail. Different types of organizational cultures are described with a view to better understanding the key dimensions of the different microcultures that thrive in organizations. Cultural enablers and obstacles to knowledge sharing are presented together with a discussion on how to institute desired organizational changes to better accommodate knowledge management. Finally, the long-term nature of organizational culture dimensions is addressed by presenting major organizational and KM maturity models. Learning Objectives 1. Define what organizational culture is. 2. Understand the relation between organizational culture and the business context. How does culture contribute to organizational innovation and success? 3. Appreciate the contribution of organizational culture to the management of change; understand the analytic elements of organization culture, such as different types of cultures and organizational maturity models. 4. Describe how organizational culture intersects with KM. 5. Discuss the key organizational culture enablers and the key obstacles to effective knowledge sharing and KM. 6. List the major phases involved in initiating organizational change and review how the organizational culture would have to evolve so that KM goals can be attained. 7. Discuss to what extent organizational culture can be managed. 224 Chapter 7 Introduction There are a number of common myths that persist in the field of KM. Among these are the “build it and they will come” myth. Unfortunately, people rarely take the time to learn new tools, technology does not always give them what they want/need, and they often are not in a position to even know what they need. A second myth is that “technology will replace face-to-face.” However, valuable tacit knowledge sharing and the important role of informal networks and peer-to-peer learning cannot and should not be ignored. The third common KM myth is that “the first thing to do is change the organizational culture to one of learning.” While a number of successful KM initiatives grew in organizations that already had a solid learning culture, in other organizations it is very hard and it takes a very long time to change (and subsequently maintain) cultural change. If you begin with this challenge, you will end up waiting a long time for KM to succeed. Most organizations can be envisaged to sit on a KM readiness gradient: some are already “there” while others have to move up to a cultural state that will more readily accommodate or enable KM to succeed. Regardless of position, one thing is certain: the cultural environment that the organization finds itself in will play a crucial role on what happens to knowledge management within that organization (see figure 7.1). What is organizational culture? The literature on organizational culture borrows heavily from anthropology and sociology. Originally an anthropological term, culture refers to the underlying values, beliefs, and codes of practice that makes a community what it is. The customs of society, the self-image of its members, the things that make it different from other societies, are its culture. Culture is powerfully subjective and reflects the meanings and understandings that we typically attribute to situations, and the solutions that we apply to common problems. The idea of a common culture suggests possible problems about whether organizations have cultures. Organizations are only one constituent element of society. People join organizations from the surrounding community and bring their culture with them. It is still possible for organizations to have cultures of their own as they possess the paradoxical quality of being both part of and apart from society. They are embedded in the wider societal context but they are also communities of their own with distinct rules and values. Culture has long been on the agenda of management theorists. Culture change must mean changing the corporate ethos, the images, and values that inform action and this new way of understanding organizational life must be brought into the management process. There are a number of central aspects of culture. There is an evaluative element involving social expectations and standards, the values and beliefs that The Role of Organizational Culture 225 Organizational environment Organizational culture Assess Knowledge capture and/or creation Knowledge sharing and dissemination Contextualize Update Knowledge acquisition and application Figure 7.1 The cultural component in an integrated KM cycle people hold central and that bind organizational groups. Culture is also a set of more material elements or artifacts. These are the signs and symbols that the organization is recognized by, and further, they are the events, behaviors, and people that embody culture. The medium of culture is social interaction, the web of communications that constitute a community. Here a shared language is particularly important in expressing and signifying a distinctive organizational culture. This is particularly apparent in communities of practice where members tend to have their own “jargon” or “brand.” There are, not surprisingly, many definitions of culture. One of the earliest definitions was provided by Morgan (1977) who more recently (1997) describes culture as “an active living phenomenon through which people jointly create and recreate the worlds in which they live” (p. 141). For Morgan, the three basic questions for cultural analysts are: • What are the shared frames of reference that make organization possible? • Where do they come from? • How are they created, communicated, and sustained? 226 Chapter 7 Schein (1999), who is generally considered the father of organizational culture, provides the following definition: “organizational culture is a pattern of basic assumptions—invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration—that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems” (p. 385). Organizational culture can also be defined both in terms of its causes and effects. Using an outcomes perspective, culture can be defined as a manifest pattern of behavior, between-individuals behavioral consistencies, or “the way we do things around here.” Culture thus defines consistent ways in which people perform tasks, solve problems, resolve conflicts, treat customers, treat employees, and so on. Using a process perspective, culture can also be defined as a set of mechanisms such as informal values, norms, and beliefs that control how individuals and groups in an organization interact with each other and with people outside the organization. Morgan (1977) found that some key elements of organizational culture include: • Stated and unstated values • Overt and implicit expectations for member behavior • Customs and rituals • Stories and myths about the history of the group • Shop talk—typical language used in and about the group • Climate—the feelings evoked by the way members interact with one another, with outsiders, with their environment, including the physical space they occupy • Metaphors and symbols—may be unconscious or embodied in other cultural elements Other authors define corporate culture is the set of understandings (often unstated) that members of a community share in common. Shared understandings consist of norms, values, attitudes, beliefs, and paradigms (Sathe 1985). Webster’s New Collegiate Dictionary defines culture as the “integrated pattern of human behavior that includes thought, speech, action, and artifacts and depends on man’s capacity for learning and transmitting knowledge to succeeding generations.” Organizational culture can be taught to new members of the organization as the “correct” or accepted way to think, perceive, and feel with respect to organizational work, problems, and so forth. Although every organization has its own culture, strong or weak, most organizations do not create their culture consciously. Culture is created and ingrained into people’s lives unconsciously. Unless special effort is taken, people will not recognize The Role of Organizational Culture 227 that the attitudes, beliefs, and visions they have always taken for granted are actually standardized assumptions that they may pass to future generations. The difficulty of making sense of culture lies in the fact that even though the artifacts of culture can be easily sensed, the core of the culture, values, which are defined as “broad, nonspecific feelings of good and evil, beautiful and ugly, normal and abnormal, rational and irrational are often unconscious and rarely discussable” (Hofstede et al. 1990, 291). Cultural artifacts are both conceptual (such as language) and material. They mediate interaction with the world, coordinating people’s activities with the physical world and with each other. There is a reciprocal relationship between organizational culture and communication (Pepper 1995). On the one hand, communication is the tool that helps to transmit organizational culture to each other and to the newcomers of the organization, and it also enables the culture to be maintained and developed in its particular way. In a sense, culture comes into being through constant communication among the members of the organization, and communication changes the cultural assumptions over time. On the other hand, culture deeply shapes and alters the communication within this specific culture. “The culture encourages certain topics for communication and discounts others. The culture often determines who talks with whom, on what occasions, and covering what matters” (Neher 1997). Organizational culture, therefore, may be thought of as the manner in which an organization solves problems to achieve its specific goals and to maintain itself over time. Moreover, it is holistic, historically determined, socially constructed, and difficult to change (Hofstede et al. 1990). Different Types of Cultures Of course, people do not always behave as expected, and the above cultural profiles are very generic. There is a good analogy between organizational culture and the climate control of a large building: although the temperature may be set at room temperature throughout the company, there are in fact a series of different microclimates depending on which part of the building you are in, how the office furniture is arranged, the number of people, the number of plants, and so forth. A similar situation exists with organizational culture: although an organization as a whole may be characterized as having a particular type of culture, there will be in fact many different types of microcultures in evidence throughout the company. Some of these may be picked up in examining the CoPs that exist, the different types of professionals or skill sets that make up the company’s human capital, and so forth. 228 Chapter 7 Table 7.1 Four types of organizational culture High solidarity Low solidarity High sociability 1. Communal culture 2. Networked culture Low sociability 3. Mercenary culture 4. Fragmented culture One way of exploring cultures is to classify them into types. There are many ways to differentiate organizational culture. Goffee and Jones (2000) identified four types of organizational culture. In their research, they used two dimensions to create the four distinct types. The first dimension, sociability, is a measure of friendliness. A high sociable culture indicates that people within the culture tend to be friendly to each other without expecting something in return. Sociability is consistent with a high people orientation, high team orientation, and focus on process rather than outcomes. Solidarity, the second dimension, measures the task orientation. High solidarity means that people can work together toward common goals very well even they may have personal disputes or conflicts. This classification scheme produces four types of organizational cultures as shown in table 7.1. These are described in greater detail below: • A communal culture can give its members a sense of belonging, though it also is task-driven. Leaders of this culture are usually very inspirational and charismatic. The major negative is that they often exert too much influence and other members are rarely heard from. • In a networked culture, members are treated as friends and family. People have close contact with each other and love each other. People are willing to help each other and share information. The disadvantage of this culture is that people are so kind to each other that they are reluctant to point out and criticize the poor performance. • A mercenary culture focuses on strict goals. Members are expected to meet the goals and get the job done quickly. Since everyone focuses on goals and objectivity, there is little room for political cliques. The negative is that those with poor performance may be treated inhumanely. • In an organization with a fragmented culture, the sense of belonging to and iden- tification with the organization is usually very weak. The individualists constitute the organizations, and their commitment is given first to individual members and task work. The downside is that there is a lack of cooperation. The Role of Organizational Culture 229 There are a number of other ways of characterizing culture, and organizational cultural analysis must be one of the first steps to be taken in any KM initiative. One of the fundamental prerequisites to a culture that fosters rather than hinders KM is the notion of trust. When organizational members feel they are respected, that they can expect to be treated in a professional manner and that they can trust the other members of their group, then knowledge sharing is greatly enhanced. Trust removes any potential barriers due to lack of confidence that the person on the receiving end will not attribute authors of knowledge or that they will make inappropriate use of the knowledge shared. Organizational Culture Analysis Culture surrounds us all, and we need to understand how it is created, embedded, developed, manipulated, managed, and changed. To understand the culture is to understand your organization. Schein (1992) approaches this issue through his three levels, as shown in table 7.2. The third level is ultimately the basis for all values and actions. Artifacts are easy to detect (e.g., a dress code) but they may be difficult to understand. They represent “the tip of the iceberg,” and it remains a challenge to discern or decipher what lies underneath them (i.e., what is the reason for this type of dress code or other visible structures and processes?). General and abstract statements that express certain ideas and truths about human beings usually represent basic assumptions in organizational culture. They are the expression of a philosophy, of a general concept on individuals and society. Given the diversity of such concepts and the contradictory characteristics they have, these assumptions often have an eclectic, heterogeneous, fragmentary, and unilateral aspect. The values shared by the members of an organization represent the second layer in culture analysis. From an organizational perspective, values express essential Table 7.2 Levels of culture Cultural level Description Artifacts The visible organizational structures and processes Values The stated strategies, goals, philosophies and justifications Assumptions The basic underlying assumptions, unconscious, taken for granted beliefs, perceptions, thoughts, and feelings Source: Adapted from Schein 1992. 230 Chapter 7 meanings of basic assumptions. Therefore, values define a set of organization expectations from its members. Values are expressed and often imposed by the managerial elite and become, in some ways, a reference system for activity assessment. They are included in attitudes and behaviors, in the organizational habitat. The two levels, assumptions and values, represent the content of what we call an organization expressive area or expressive culture. Its origins can be found both in organization history, and in the personal history of its members. Norms form the instrumental and visible area of organizational culture. They represent the most evident layer for someone who comes in contact with the organization for the first time. They derive from culture values and basic assumptions. Norms are expressed in a set of rules and expectations that orient people’s behavior within the organization. This is why, even for the organization personnel, norms constitute their contact with culture and are the conveyor of values and basic assumptions. There are two basic categories of norms: formal, institutional norms, produced by managers or experts, hired for this purpose alone, and made mandatory; and informal norms, produced by the organization’s personnel or by certain groups and disseminated through legends, stories, or myths, or reflected in ceremonies or rituals. They are the expression of informal culture, based on certain values spread in an informal space. An expressive culture is one that reflects the emotions, feelings, and aspirations of the organizations’ personnel. An illustration of different styles of practice appears in box 7.1. Norms are directly involved in the change process, since they allow for interventions in a field that is very accessible to individuals. Those who want to comprehend organizational culture refer to its philosophical and value layers. Those who want to change culture and use it as a maintenance or development tool, refer mainly to its normative layer or as a normative culture. A normative culture is one based on a set of formal rules, norms, prescriptions, positions, and hierarchies; and it is a culture that emphasizes compliance with the rules. On the other hand, norms represent one of the premises for cultural unity, the reference system for managers in personnel assessment. Such assessments strengthen norms and are often accompanied by bonuses. Norms are thus a reference system for personnel as well, whose attitude toward them represents the framework that produces an organizational ethos. Schein (1999) argues that the pattern of basic underlying assumptions can function as a cognitive defense mechanism for individuals and the group; as a result, culture change is difficult, time consuming, and anxiety provoking. Cultures are deep-seated, pervasive, and complex, and it can be extremely difficult to bring the assumptions to The Role of Organizational Culture 231 Box 7.1 A vignette: Imagine the following situation (adapted from Kotter 1996): Four groups of about ten individuals are all in the same park at the same lunch hour. Soon, ominous rain clouds loom, threatening a serious downpour. In the first group, one person gets up and says, “It is going to rain, follow me, this is what we will do. . . .” In a second group, someone says, “I have a plan: each one of us will stand up, we will walk in pairs of two towards the covered tent, we will maintain a distance of two feet from the person in front and the person behind us. . . .” In a third group, a few people start conversing, each putting out a different idea, “why don’t we go over to that big tree there? But what if there is lightning, it wouldn’t be safe. How about the tent? That makes more sense plus there are picnic tables where we could continue our picnic lunch.” In the last group, someone stands up and says: “This reminds me of the adventure we had during the last rainstorm. Let me tell you that story. . . .” The above illustrates four different types of microculture in evidence: Group 1: Authoritarian doctrine Group 2: Micromanagement Group 3: Grassroots brainstorming, collaborative, consensus-driven Group 4: Storytelling to share knowledge of lessons learned and best practices. the surface. He uses the classic three-step approach to discuss change—unfreezing, cognitive restructuring, and refreezing. The key issue for leaders is that they must become marginal in their own culture to a sufficient degree to recognize what may be its maladaptive assumptions and to learn some new ways of thinking themselves as a prelude to unfreezing and changing their organization. A number of instruments exist that can help diagnose organizational culture (e.g., Harrison and Stokes 1992). These are typically surveys or questionnaires that help to identify the critical aspects of an existing culture and will provide a profile of your organization’s culture, typically in the form of an orientation. The most important dimensions of an organizational culture are that culture promotes an ideal that mobilizes learning institutions in achieving it and that culture can bring uniformity and unity, as well as diversity. Culture is customs and rights and the organization’s “own way,” its norms, values, behavior patterns, rituals, and traditions. Culture implies structural stability, patterning, and integration. It arises from shared history, and adaptation and change are not possible without making changes that affect the culture. It is not always rational. For large organizations, there are issues around the development of subcultures and the integration of newcomers. Organizational learning, development, and planned change cannot be understood without 232 Chapter 7 considering culture as the primary source of resistance to change (Schein 1999). It is at this junction—the resistance to any change in the organizational culture, that we first encounter the intersection between organizational culture and KM. Culture at the Foundation of KM KM implementations almost always require a cultural change—if not a complete transformation, at least a tweaking of the existing culture in order to promote a culture of knowledge sharing and collaboration. In almost all cases, KM will trigger a change that will in turn trigger a maturing or evolutionary process. However, the instigator of change rarely meets with a receptive audience. People do not necessarily always oppose change just to be contrary, but they will oppose change if they perceive the proposed change as an imposition rather than an improvement in their personal work lives. They are also often left out of the loop and feel neither ownership nor vested interest in whether or not the change succeeds. A knowledge sharing culture is one that is built upon the foundation of trust and as such it is imperative to inform, involve, and inspire organizational participants during the organizational changes that are needed. Corporate culture is a key component of ensuring that critical knowledge and information flow within an organization. The strength and commitment of a corporate culture will almost always be more important than the communication technologies that are implemented to promote knowledge sharing. Traditionally, knowledge flows were vertical, from supervisor to supervisee, following the lines of the organizational chart. Organizations today need to change their culture to one that rewards the flow of knowledge horizontally as well. Communication systems can be thought of as the disseminators of culture (Bloom 2000). In more ancient times, physical transportation routes fulfilled this role. For example, the Egyptians used the Nile to unite towns across four thousand miles. The Phoenicians sailed to shuttle goods and ideas 2,400 miles away. St. Paul used the Roman highway systems to send his Epistles on 170-mile journeys. The Chinese used land and river routes to pull together a three-million-square-mile empire. In all of these systems, ideas flowed, were shared, exchanged, or integrated. The Romans did not just build highways—they spread a common language. The Chinese disseminated a common writing system, and the Incas disseminated a uniform system of accounting based on knots. Knowledge dissemination therefore needs some type of lingua franca, something in common like a language, standards, norms, protocols, and so on. The Role of Organizational Culture 233 The types of ideas that need to be disseminated for KM to be successfully implemented include a change from perceiving knowledge and knowledge creation as being a proprietary and a solo undertaking to a perception of participation and collaboration. This idea can be linked back to earlier discussions on the social construction of knowledge, and an understanding of the individual differences and organizational contexts that can influence such perceptions. A knowledge-sharing culture is one where knowledge sharing is the norm, not the exception, where people are encouraged to work together, to collaborate and share, and where they are rewarded for doing so. A paradigm shift has to occur from “knowledge is power” to “sharing knowledge is more powerful” and culture will determine what you can and will do with the knowledge assets of the organization. Sveiby and Simons (2002) suggest that a collaborative climate is one the major factors influencing effectiveness of knowledge work. They surveyed 8,277 respondents from a diverse group of public and private organizations. The degree to which an organizational culture is collaborative can be assessed, and this in turn will provide a good indicator of how successful KM will be. It is not a surprise that the study found that distance was bad for collaboration, that is, the more dispersed a company, the less the climate is collaborative. Gruber and Duxbury (2000) conducted an in-depth study of the research and development department of a high technology company. They looked at the linkages between organizational culture and knowledge sharing and used the variables of trust, openness, top management support, and the reward structure of the organization to try to explain any correlations. They interviewed 30 employees and their initial questions addressed the sharing of explicit knowledge. It was found that this was mostly through databases, intranets, and shared drives, but 28 percent was still through faceto-face contact (see table 7.3). The face-to-face sharing typically involved questions such as “Where is it? How do I get it? Who should I go see?” Table 7.3 Explicit knowledge sharing Knowledge-sharing medium Percentage of respondents who selected this Database (LotusNotes) 55 % Intranet 40 % Face-to-face 28 % Shared drive 25 % Source: From Gruber and Duxbury 2000. 234 Chapter 7 The study also elicited some information on what made it hard to share explicit knowledge and suggestions as to how it could be made easier. The major difficulties mentioned were that it was hard to find, there were different systems and no standards, the information was not where it should be, the tools were difficult to use, and the database was difficult to access. Some suggestions that were made were to conduct training on knowledge retrieval, to define a knowledge strategy that would categorize in a standard way, to standardize the information technologies, and to create project web sites. Next, the authors looked at how tacit knowledge was shared. The most popular means used was face-to-face (90 percent), followed by informal networks (25 percent). Some of the factors that made it difficult to share tacit knowledge included attitudes that knowledge was power, not knowing who the expert was, not knowing if the knowledge exists, and loss of knowledge when people left the company. Some suggestions that were made to improve tacit knowledge sharing included recognizing the value of tacit knowledge, improving relationships within the organization, and increasing opportunities for people within different parts of the organization to interact. The ideal knowledge-sharing culture would thus emphasize communication and coordination between groups, experts would not jealously guard their knowledge, and knowledge sharing would be actively and visibly encouraged at all levels of the hierarchy through the recognition and rewarding of knowledge sharing and through embedding such statements in corporate and individual performance objectives. A culture that promotes knowledge sharing would be one were tools and taxonomies are standardized to make access and exchange easy, where there are a significant number of semi-social events such as workshops for sharing with experts and other groups, where organizational goals explicitly include knowledge sharing, where trust is prevalent in all interactions, and where the communication channels flow across geographical, temporal, and thematic boundaries. Gruber and Duxbury (2000) concluded that an environment that truly supports the sharing of knowledge has the following characteristics: Re…
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