Knowledge Management Most Cited 13

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Knowledge Management Most Cited 1-3

• Presented by Lana Abu-Shaheen
• Undergraduate Senior in Management Information
  Systems

October 18, 2005
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Overview
Firm Resources and Sustained Competitive
Advantage Jay Barney Published March 1991 The
eleven deadliest sins of knowledge
Management Liam Fahey, Laurence Prusak Published
Spring 1998 Whats your Strategy for Managing
Knowledge? Morten T. Hansen, Nitin Nohria,
Thomas Tierney Published March/April 1999 Cross
Cutting Themes Critique Additional Information
Resources
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Firm Resources and Sustained Competitive Advantage

• Firms obtain sustained competitive advantage by
• Exploiting internal strengths
• Responding to environmental opportunities
• Neutralizing external threats
• Avoiding internal weaknesses

Internal Analysis
External Analysis
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Strengths Weaknesses
Opportunities Threats
Resource Based Model
Environmental Models of Competitive Advantage
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Firm Resources and Sustained Competitive Advantage

• Recent research analyze opportunities and
  threats in competitive environment
• Porters Five forces model
• describes attributes of an attractive industry
  and thus suggests that opportunities will be
  greater, and threats less, in these kinds of
  industries
• Lesser emphasis on impact of idiosyncratic firm
  attributes on a firms competitive advantage
• Two assumptions
• Firms within industry are identical
• Resource heterogeneity short lived

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Firm Resources and Sustained Competitive Advantage

• Resource based view of competitive advantage
• Cannot rely on these assumptions
• Examines link between firms internal
  characteristics and performance
• New assumptions
• Firms within industry heterogeneous
• Resources not perfectly mobile across firms

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Defining Key Concepts
Firm Resources
Physical capital
Human capital
Organizational capital
The physical technology used in a firm, a firms
plant and equipment, its geographic location, and
its access to raw materials.
The training, experience, judgment, intelligence,
relationships, and insight of individual managers
and workers in a firm.
A firms formal reporting structure, its formal
and informal planning, controlling, and
coordinating systems, as well as informal
relations among groups within a firm and between
the firm and those in its environment
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Purpose of this paper To specify the conditions
under which such firm resources can be a source
of sustained competitive advantage for a firm
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Defining Key Concepts

• Competitive advantage

• Definitions
• Apply to both existing and potential competitors
• Sustained competitive advantage does not depend
  on calendar time, but on the possibility of
  competitive duplication
• Avoids problem of specifying how long to be
  sustained
• Sustained does not mean forever only until
  duplicated
• Schumpeterian Shocks structural
  revolutions in an industry that can
• redefine which of a firms attributes are
  resources and which are not

Sustained Competitive Advantage
A firm is said to have a competitive advantage
when it is implementing a value creating strategy
not simultaneously being implemented by any
current or potential competitors.
A firm is said to have a sustained competitive
advantage when it is implementing a value
creating strategy not simultaneously being
implemented by any current or potential
competitors and when these other firms are unable
to duplicate the benefits of this strategy
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Competition with Homogeneous and Perfectly Mobile
Resources

• Resources distributed evenly not sustained CA
• First mover advantage
• May be a way to gain SCA
• Not possible because resource homogeneity
• Only possible resources must heterogeneous
• Entry/mobility barriers
• Help existing firm against potential competition
• Only possible resources must heterogeneous and
  perfectly mobile

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Firm Resources and Sustained Competitive Advantage

• To have potential of Sustained Competitive
  Advantage

Resources are valuable when they enable a firm to
conceive of or implement strategies that improve
its efficiency and effectiveness. Attributes
become resources only when they can exploit
opportunities and neutralize threats in a firms
environment.
Valuable
If a valuable firm resource is possessed by many
firms, then each of these firms can exploit this
resource, thereby implementing a common strategy
that gives no one firm a competitive advantage.
This, implicitly, means that the resource is not
rare.
Rare

• Dependent upon
• Unique historical conditions,
• Causal ambiguity
• Social complexity.

Imperfectly Imitable
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There must be no strategically equivalent
valuable resources that are themselves either not
rare or imitable.
Not substitutable
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Applying the Framework
ValueRarenessImperfect Immobility History
Dependent Casual Ambiguity Social
Complexity Substitutability
Firm Resource Heterogeneity Firm Resource
Immobility
SustainedCompetitiveAdvantage
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Strategic Planning and Sustained Competitive
Advantage

• Formal strategic planning
• Wide array of literature available
• Highly imitable
• Not a source of sustained competitive advantage
• Informal and autonomous processes
• Potential evaluated by considering how rare,
  imperfectly imitable and substitutable they are
• If formal is a substitute for informal -gt
  not a source of SCA
• If formal is not a substitute for informal -gt may
  be a source of SCA

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Information Processing Systems and Positive
Reputations

• Depends on type of information processing system
  analyzed
• Machines highly imitable
• Information processing system possible
• Close manager-computer interface
• Highly experienced
• Socially complex, imperfectly imitable gt SCA
• Even if close substitute exists
• Positive reputation
• If only a few firms have it gt rare
• Duplication is complex and depends on historic
  conditions
• Source of SCA

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Social Welfare, Organization Theory and Behavior
and Firm Endowments

• Firms exploiting resources gt effective and
  efficient gt maximize social welfare
• Resource-based model suggests OTB
• Managers limited in their ability to manipulate
  all attributes and characteristics of their firms
• Resources imperfectly imitable gt source of SCA
• Firms cannot purchase SCA on an open market
• Obtained through rare, imperfectly imitable,
  non-substitutable resources

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The Eleven Deadliest Sins of KM

• Without detecting and correcting errors in what
  we know and how we learn an organization
  deteriorates and can result in bad decisions.
• Purpose of article draw attention to a set of
  pervasive knowledge management errors
• Based on the authors observing or partaking in
  over 100 knowledge projects over the past five
  years

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The Eleven Deadliest Sins of KM
1 Not developing a working definition of
knowledge 2 Emphasizing knowledge stock to the
detriment of knowledge flow 3 Viewing knowledge
as existing predominantly outside the heads of
individuals 4 Not understanding that a
fundamental intermediate purpose of managing
knowledge is to create shared context 5 Paying
little attention to the role and importance of
tacit knowledge 6 Disentangling knowledge from
its uses 7 Downplaying thinking and reasoning 8
Focusing on the past and the present and not the
future 9 Failing to recognize the importance of
experimentation 10 Substituting technological
contact for human interface 11 Seeking to
develop direct measures of knowledge
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What Can Be Done?

• Three actions to avoid the errors
• I. Continuously reflect on knowledge as
  organizational phenomenon
• Develop shared understanding at local levels
• Allow individuals frequent opportunities to
  discuss and debate what knowledge is
• Help individuals identify current and desired
  knowledge roles
• Ask individuals to identify knowledge
  implications for group behaviors and processes

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What Can Be Done?
II. Managers must be obsessive about noting and
correcting errors in their stock of
knowledge III. Managers must be vigilant about
detecting errors in their the generating, moving,
and leveraging of knowledge throughout the
firm. Conclusion An organization must engage
in critical, sustained, and honest
self-reflection about the errors noted in this
article. By doing this, it can avoid the pitfalls
that are evident in the approaches of many
organizations attempts to work with knowledge.
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Whats your strategy for Managing Knowledge?

• 1990s foundation of industrialized economy
  shifted from natural resources to intellectual
  assets
• Rise of networked computers
• Codify, store and share certain kinds of
  knowledge
• Executives lacked successful models
• Study knowledge management in different
  industries
• Management Consulting
• Health Care Industry
• High Tech Industry

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Management Consulting Firms
Knowledge is the core asset of consultancies Firs
t to pay attention to and invest in
KM Aggressively explore use of IT to capture and
disseminate knowledge Experience relevant to
companies that depend on smart people and flow of
ideas However, consultants do not take uniform
approaches to managing knowledge
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Whats Your Strategy for Managing Knowledge?
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Knowledge Management Strategies

• Codification
• The strategy centers on the computer
• Knowledge carefully codified and stored in
  databases
• Accessed and used easily by anyone in the company
• Personalization
• Knowledge closely tied to person who developed it
• Shared mainly through person-to-person contacts
• Purpose of computers help communicate knowledge
• Choice of strategy
• The way the company serves its clients
• Economies of the business
• The people it hires

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Whats Your Strategy for Managing Knowledge?
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Codification or Personalization?

• Anderson Consulting and Ernst Young
• Codification strategy
• People-to-Documents approach
• Extracted from the person who developed it
• Made independent of that person, reused
• Bain, Boston Consulting Group and McKinsey
• Personalization strategy
• Dialogue between individuals
• Brainstorming sessions and one-on-one
  conversations
• Deeper insights going back and forth on problems
  to be solved

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Whats Your Strategy for Managing Knowledge?
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Codification or Personalization?

• Ernst Young
• 250 people at the Center for Business Knowledge
• The method
• Randall Love and the industrial manufacturer bid
• The process
• The result
• Bain
• Marcia Blenko and the British financial
  institution
• The process
• The result
• Invests heavily in building networks of people

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Whats Your Strategy for Managing Knowledge?
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Health Care Industry

• Access Health
• Clinical decision architecture
• Reuse structure leads to low prices
• Captured 50 of call-center market. Growing at
  40 a year
• Memorial Sloan-Kettering Cancer Center
• Highly developed personalized model
• Higher prices
• Consistently ranked as top cancer research and
  treatment institution in the country

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Whats Your Strategy for Managing Knowledge?
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Different Strategies, Different Drivers

• Knowledge management strategy reflect competitive
  strategy
• Creating customer value for customers

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Whats Your Strategy for Managing Knowledge?
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Choosing the Right Strategy

• Why customers buy a companys products/services
  rather than those of its competitors
• What value do customers expect from the company?
• How does knowledge that resides in the company
  add value for customers?
• Assuming the answers to these questions are
  clear, ask the following questions
• Standardized or customized products?
• Mature or innovative products?
• People rely on explicit or tacit knowledge to
  solve problems?

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Whats Your Strategy for Managing Knowledge?
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Do Not Straddle

• Companies that use knowledge effectively 80-20
  split
• 80 of knowledge sharing follows one strategy
  while 20 follows the other
• Downfall of CSC Index in the early 1990s
• Problem mixing inventors with implementers
• Result CSC Index unable to keep up with
  competition like Anderson Consulting and Ernst
  Young
• Lesson important to avoid straddling, but unwise
  to focus on one exclusive strategy

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Whats Your Strategy for Managing Knowledge?
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Do Not Isolate Knowledge Management

• Companies that isolate KM risk losing its
  benefits
• Do not isolate in departments like HR or IT
• Benefits higher if coordinated with HR, IT and
  competitive strategy
• Responsibility of top management
• actively a knowledge management approach that
  supports a clear competitive strategy
• Strong leadership benefit of customers and
  company

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Whats Your Strategy for Managing Knowledge?
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Cross Cutting Themes

• Management of essential resources
• Importance of proper Knowledge Management
• What errors to avoid
• Which strategies to choose
• Which resources to exploit

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Critique

• Firm Resources and Sustained Competitive
  Advantage
• Insightful, even if outdated (1991)
• Represents interesting, and logical, arguments
• Repetitive
• The Eleven Deadliest Sins of Knowledge Management
• Easy to read, great layout
• Interesting information, but repetitive
• Whats Your Strategy for Managing Knowledge?

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Additional Resources

• Codification, Personalization, Integration
• A strategy for selecting and applying KM tools
• http//www.kmworld.com/publications/magazine/index
  .cfm?actionreadarticleArticle_ID1224Publicatio
  n_ID67
• Insight on Morten Hansen
• http//www.insead.edu/facultyresearch/faculty/prof
  iles/mhansen/
• http//66.102.7.104/search?qcachenMdcVJX1KA4Jww
  w.london.edu/assets/documents/PDF/MHansen_CV_Febru
  ary2003.pdfmortent.hansenhlen

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Additional Resources

• Resource Based View of the Firm
• More Jay Barney
• Forms of resources patents, properties,
  proprietary technologies or relationships
• Dynamic capability perspective
• Asymmetries skills, processes or assets a firms
  competitors do not and cannot copy at a cost that
  affords economic rents.
• Rare, inimitable and non-substitutable
• Often act as liabilities not connected to any
  engine of creation
• Turn asymmetries into sustainable capabilities
• http//www.valuebasedmanagement.net/methods_barney
  _resource_based_view_firm.html
• Sharon A. Alvarez and Jay B. Barney, management
  and human resources, "Entrepreneurial Advantage
  The Resource Based View," a chapter in
  Entrepreneurship as Strategy, G.D. Meyer and K.
  Heppard, eds., Thousand Oaks Sage Publications,
  2000.

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Additional Resources

• Insight into Laurence Prusak
• Storytelling in Organizations Why Storytelling
  Is Transforming 21st Century Organizations and
  ManagementJohn Seely Brown, Laurence Prusak,
  Stephen Denning, Katalina Groh May 2005
• In Good Company How Social Capital Makes
  Organizations Work Don Cohen, Laurence Prusak
  February 2001
• Putting Ideas to Work From Knowledge to Action
  October 8, 2004
• University of Pennsylvania
• KM Asia 2005 October 27, 2004
• Suntec Singapore
• http//www.gurteen.com/gurteen/gurteen.nsf/id/larr
  y-prusak

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Additional Resources

• Insight into Liam Fahey
• Competitors Outwitting, Outmaneuvering and
  Outperforming (1999)
• The Portable MBA in Strategy (2nd ed., 2001)
• http//www.managementonly.com/author.php/133/Liam_
  Fahey