Knowledge Based Assets for Competitive Success - Session 1

Knowledge based assets for competitive
success

Session 1

Dr. Daniel Chandran
Faculty of Engineering & Information Technology
University of Technology, Sydney
August 2009

Dr. Daniel Chandran, UTS 1

Objectives

• What is Knowledge?
• What is Knowledge Management?
• Why Knowledge Management?
• Why KM fails?
• Business Strategy Map
• KM Implementation Strategy


Question - 1

• If you were asked to detail your specialist knowledge,
how would you describe your knowledge?

• Have you ever thought of the market value of your
knowledge and what this may be?


Question - 2

Given that there is a competitive market for your
knowledge and skills, how do you ensure that your
knowledge is state-of-the-art and kept up to date?


Data, Information and Knowledge - Distinction

• Data are the raw material of which Systems are built -
a number, a word, an image, a picture
• Information is processed data (for a purpose) or
value-added data
– Aggregation of data that makes decision making easier
• Knowledge is understanding what the information
means or implies
– Refers to information that enables action and decisions
(Info with direction)
– Key resource in determining competitive advantage and
marketplace success


Knowledge Types
• Explicit Knowledge – Expressed into words and numbers
– Can be shared formally and systematically.
– Explicit knowledge is codified and digitized
• Eg.manuals,drawings, video tapes…
• Tacit Knowledge – includes insight, intuition and hunches
– Difficult to express and formalize and difficult to share
– Based on personal experience
– Best communicated through dialogue and scenarios with use of
metaphors
– Personal, hard to formalize and complex
– Chunking knowledge – knowledge stored in an expert’s memory as
chunks
• Characteristics of Knowledge
– Can be Born, Die, Owned and Stored


Explicit and Tacit knowledge

Oral Communication
“Tacit” Knowledge

50-95%

Information Request “Explicit” Knowledge

Information Feedback Explicit Knowledge Base
5%


Definition

From a practical business perspective:
“KM is a deliberate, systematic business optimisation
strategy that selects, distills, stores, organises,
packages and communicates information essential to
the business of a company in a manner that improves
employee performance and corporate competitiveness”.
Bergeron, B.2003

It is a systematic approach to managing intellectual
assets for competitive advantage


Knowledge Management: Benefits

People more productive

Quicker to prepare outcomes

Revenue
Better quality outcomes

People costs
Reduced cost in producing
outcomes


Overlapping factors of KM

PEOPLE
(Workforce)

TECHNOLOGY ORGANIZATIONAL
(IT Infrastructure) PROCESSES


Knowledge Derivation

• Customer Knowledge – their needs, who to contact,
customer buying power, etc
• Product Knowledge – products in the market place,
who is buying them, what prices they are selling at etc
• Financial knowledge – capital resources, where to
acquire capital and at what cost
• Personnel practices Knowledge – expertise available,
the quality service they provide, how to go about
finding experts etc
Indicators of Knowledge: thinking actively and ahead; not
passively and behind


THE KNOWLEDGE ORGANIZATION

Culture Competition

Collect
Create
Organize
Techno-
logy Maintain Intelligence
Knowledge
Organization

Disseminate Refine

Knowledge
Management Leadership
Process
KM Drivers


KNOWLEDGE MANAGEMENT & INNOVATION

Existing methods/
Outside
processes
• New products
Environment
• New markets
• Smarter problem-solving
•Value-added innovation
Learning
•Better quality customer
Conversion service
PEOPLE •More efficient processes
Insights New
ideas •More experienced staff
Knowledge
Creation

Organizational
Knowledge
Benefits
Base

Codified Technology


KM Life Cycle

Four-Process View of KM:
• Capturing – data entry, scanning, voice input,
interviewing, brainstorming
• Organizing – cataloging, indexing, filtering, linking,
codifying
• Refining – Contextualising, collaborating,
compacting, Projecting, mining
• Transferring – flow, sharing, alert, push


Business Strategy drives KM

• Understand business strategy in order to develop KM
strategy

• Balanced Scorecard Strategy Map
– To align business activities to the vision and strategy of the
organisation
– Monitor organisation performance against strategic goals
– Originated by Kaplan and Norton, HBS


Mission / Values/Vision/Strategy

• Mission – why we exist?
– Starting point by defining why the organisation exists
• Values – what’s important to us?
– Remains fairly stable over time
• Vision – what we want to be (mid to long term)?
– Organisation’s direction and sets the organisation in motion
• Strategy – how do we get there?
– Evolves over time to meet the changing conditions posed by
the external environment and internal capabilities
– Strategy maps and Balanced Scorecards can be developed
for any strategic approach


The Strategy Map
Financial Perspective
Creates Value for
“If we succeed, how will we the Enterprise
look to our shareholders?”

Customer Perspective

“To achieve our vision, how must
we look to our customers?”

Internal Process Perspective

“To satisfy our customers, which
processes must we excel at?”

Learning & Growth Perspective Knowledge
“To achieve our vision, how must our Management
organization learn and improve?”


Business Strategy Map: cause and effect GAME PLAN
Financial
Long-Term Revenue
Outcomes
Productivity Shareholder value Growth

Customer Perspective
Relationship Customer
Image
Product/Service Attributes
Partnership
Outcomes
Brand
Price Quality Time Function

Value-Creating
Manage Processes
Manage Manage Regulatory &
Manage
Operations Innovation Social
Customers
Processes

Learning & Growth Perspective
Intellectual
Human Information Organisation Assets and
Capital Capital
Capital Activities to
create value

Learning and Growth Perspective: Intangible
Assets

Knowledge that exists in an organisation to create
differential advantage or the capabilities of the
company’s employees to satisfy customer needs.

Intangible Assets must be aligned with the strategy in
order to create value.
– E.g. TQM and CRM
• Human capital
• Information capital
• Organisation capital



• Manage operations
• Manage Customers
• Manage Innovation
• Manage regulatory & social Processes


Customers Perspective
• Target segments
– How the organisation will create differentiated, sustainable value to
targeted segments
• Growth targets by segment (product mix & product performance
required)
– Customer Retention
– Customer Acquisition
• Revenues per customer (lifetime value/profitability) vs Cost per
customer
• Customer value proposition: Define the conditions to create value for
the customers: cost leadership? product leadership? Customer
intimacy?
– Product/service attribute
• Price, quality, availability, selection, functionality
– Customer relationship / experience
• Service, partnership
– Image / brand strength



• Growth targets (overall & by customer, by
product/service)
– Selling more
– Spending less
– Revenue growth by deepening relationships with existing
customers
• Banks – Home loans
• Introducing new products e.g. Woolworths - Petrol
• Cost/productivity targets
– Lowering direct and indirect expenses
• Spending less on people, energy and supplies
• Utilising their financial and physical assets more efficiently
• To deliver the vision / outcomes desired


5 Ps of Strategic KM

1. Planning
• Defined knowledge needs
• Systems and processes
2. People
• Participants commitment
• Sharing culture
• Leadership values
3. Processes
• Alignment of strategy, Principles, Processes and practices
4. Products
• Capture
• Distribution
5. Performance


KM Implementation Strategy

• Why – Intent? (From Business Strategy)
– E.g. Business ability to cross-sell product lines based on customer needs
• Who – knowledge worker?
– E.g. Financial Advisor, Senior Manager etc
• What knowledge?
– Customers
– Products
– Processes / systems
– Business relationships
– Competitors
– Partners / suppliers
– Regulations
• How – Infrastructure?
– Formalized knowledge process (create, store, distribute, collaborate,
protect)
– System Assets (Customer, Product Databases)
– Training & informal best-practice knowledge sharing
– Certification institutions


Successful Knowledge Management…when

• Strategy aligned with the Business Strategy
• Supported people in their work and activities to create
value
• Inculcated as a business discipline (corporate culture)
supporting critical business processes
• Used to improve the business processes
• Measured against the strategic objectives


Conclusion - Business Challenges

• Optimize the performance of operational processes to
reduce costs and enhance quality

• Commercialize the products at the lowest price possible


References
• Awad, E.M. and Ghaziri, H.M. (2004). Knowledge Management.
Pearson.
• Becerra-Fernandez, I, Gonzales,A and Sabherwal, R. (2004).
Knowledge Management: Challenges, solutions and technologies.
Pearson.
• Davenport, T.H. and Probst, G.J.B.(2002). Knowledge Management
Casebook. John Wiley.
• Debowski, S.(2006). Knowledge Management. Wiley.
• Kaplan, R.S. and Norton, D.P. (2004). Strategy Maps: Converting
intangible assets into tangible outcomes. Harvard Business School
Press.
• Nonaka, I. And Takeuchi, H(1995). The Knowledge Creating
Company. OUP.
• Thompson and Strickland. 2010. Crafting and executing strategy.
McGraw-Hill.


Knowledge Exercise

• 5 groups to present on the following scenario:
“Suppose you were asked to do a 15-minute
presentation before the managers of a small retailer
about the pros and cons of KM. What would you
say? Outline the content of your talk.”


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