UNIVERSITY OF SOUTH WALES BUSINESS SCHOOL
MBA - Strategic Systems Thinking (ST4S39-V1)
Chrystalla Markou
Summative Essay “Before we measure something we must ask whether we understand what it is we are trying to measure.” (Gray et al, 2015)
Ola Ouso Student number: R1710D3725770
Submission date: 16 September -18
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1.
Introduction: ......................................................................................................................................... 3
2.
Knowledge Management: .................................................................................................................... 4
2.2.Knowledge Management Definition: .................................................................................................... 5
2.3.Knowledge Management Types: ................................................................................................... 6 3.
Intellectual Capital: ............................................................................................................................ 12 3.1.
Intellectual Capital Definition: ................................................................................................... 12
3.2.
Intellectual Capital components: ............................................................................................... 13
3.3.
Intellectual Capital for value creation: ...................................................................................... 14
4.
Communities of practices: ................................................................................................................. 15
5.
performance Measurement: Measurement: .............................................................................................................. 16
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1. Introduction:
DeGeus in1988 clarified that “Organizational learning”, “knowledge management”, and “intellectual capital” are terms commonly used in today’s business environment by firms convinced that the company of the future will have is its ability to learn faster than its competitors (Mary et al, 2002, p1). On the other hand, Neef in 1997 Said that firm growth today depends upon innovation and innovation depends on knowledge (Mohd. H. S, 2006, p101). This essay is a theoretical paper aims to critically appraise the following statement: “Before we measure something we must ask whether we understand what it is we are trying to measure” (Gray et al, 2015)
By critical review for the literature of the following concepts: Knowledge Management, Intellectual Capital, Communities of practices, and Performance Measurement.
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Analysis 2. Knowledge Management:
Knowledge management has been used prominently since 1990s as a tool to achieve superior performance (Laith. Y et al, 2011, P 12). Nowadays organizations create them sustainable competitive advantage by creative knowledge management. So, let’s go in a journey to know: what is knowledge? knowledge? and what is knowledge knowledge Management? Management? W hat are Knowledge Management types? And what are the knowledge management models? And then we will know how organizations can use knowledge management as a competitive advantage.
2.1.
Knowledge Definition:
The definition of knowledge in Webster’s dictionary (1976) is “the fact or condition of possessing within mental grasp through instruction, study, research, or experience one or more truths, facts, principles, or other objects of perception,” (Hsiangchu. perception,” (Hsiangchu. L et al, 2000, p2). Maglite in 1996 talked about three levels: data, Information, knowledge. Data is raw numbers and facts, while information is a flow of messages or processed data. Knowledge is actionable information that is possessed in the mind. (Mohd. H. S, 2006, p102) Nonaka, 1994 defined the knowledge: knowledge is “a dynamic human process of justifying personal belief toward toward the ‘truth’” ‘truth’” (Alexa Briggs, 2006, p 11)
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(Géraud Servin, 2005, P 3) described Knowledge : “knowledge is “knowledge is derived from information but it is richer and more meaningful than information. It includes familiarity, awareness and understanding gained through experience or study, and results from making comparisons, identifying consequences, and making connections ”.
2.2.
Knowledge Management Definition:
Knowledge management these days become a competitive tool between the firms. Nonaka and Takeuchi (1995) released the term “Knowledge Crew” Crew ” as cited in (Laith. H et al, 2011, p 951), this term refers to the to the crew members responsible for the identification, promotion and creation of knowledge within the organization. Davenport et al in 1998 defined KM as the process of managing the organization’ knowledge by means of systematic and organizational specified process for acquiring, organizing, sustaining, applying, sharing and renewing both tacit and explicit knowledge by employees to enhance the organizational performance and create value. (Mohd. H. S, 2006, p102)
Rastogi (2000) defined knowledge management as “a logical process of harmonizing organizational actions of obtaining, archiving, and disseminating knowledge by individuals and teams in an effort to accomplish key organizational goals and objectives ”. As cited in in (Frank. C et al, 2017, p 17). Horwitch and Armacost (2001) defined the KM as cited in (Abdolmajid. Y et al, 2012, P12) “KM is “KM is the creation, extraction, transformation and storage of the correct knowledge and information in order to design better policy, modify action and deliver results” . 5
Sari. S defined the knowledge Management (2003, p 40) “understanding the role of intangible resources in business, and the use, manage and development of intangible assets”. assets” .
2.3.
Knowledge Management Types:
Knowledge in organizations is often classified into two types: explicit and tacit.
2.3.1. Explicit knowledge: is the knowledge that can be captured and written down in
documents or databases (Géraud Servin, 2005, P 3). Nonaka & Konno 1998 defined the explicit knowledge: Explicit knowledge can be expressed in words and numbers and shared in the form of data, scientific formula, specifications, manuals, and the like. (Niklas E. Danell, 2008, p6). 2.3.2. Tacit knowledge: Polanyi, 1967 defined the tacit knowledge is knowledge of
which the bearer is unaware; it only exists in the bearers head (T. de Wilde, 2009, p11). Also, (Géraud Servin, 2005, P 3) defined the tacit knowledge, it is the knowledge that people carry in their heads. It is more of an “unspoken understanding” about something, knowledge that is more difficult to write d own in a document or a database.
Therefore, tacit knowledge may best be transferred through interpersonal means and non-structured processes. In contrast, explicit knowledge is a tangible concept which can
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be documented and distributed to others such as guidelines, reports, procedures, strategies and databases. (Nasser. E, 2012, p14).
2.4.
Knowledge Management Models:
The questions now: how knowledge successfully and coherently can become a value? what are the appropriate processes for managing knowledge resources? Grayson and O'Dell, 1998 said that Knowledge management will help organizations become more competitive by using new knowledge to reduce costs, increase speed, and meet customer needs (Ahmed. O, 2004, p 38). Bhatt (2001) believes that knowledge management Cycle includes acquiring, registering, creating, and applying knowledge in the organization. (Solouki et al, 2014, p 163)
Likewise, Nonaka and Takeuchi (1995) released the concept that the human knowledge is created by the social interaction between tacit knowledge and explicit knowledge as cited in (Ilkka Virtanen, 2014, p35), and they call it ’knowledge conversion’. Knowledge conversion consists of four processes or modes that together form so-calle d SECI-model: the term SECI modes are: -
socialization that socialization means social interaction that enables tacit to tacit
knowledge transfer through shared experiences. -
Externalization (tacit knowledge is made transferable to others) explicit knowledge
is collected from inside or outside the organization and then combined, -
Combination (conversion from explicit to explicit knowledge). edited or processed
into new refined knowledge.
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-
Internalization and it is essentially about learning by doing; explicit knowledge
becomes part of an individual's knowledge base and will be asset for the organization. Thus, in SECI model the process should be seen as a continuous, dynamic spiral of knowledge. Also, Osmarina. Osmarina. G et al, (2017, (2017, p 185) 185) explained explained that organiza organizations tions use use this model for the creation of organizational Knowledge, and add as well that the creation and conversion of organizational knowledge is a continuous and dynamic interaction between the conversion of tacit knowledge to explicit knowledge through the four knowledge conversion models SECI. Ahmed. O in 2004 examined "SCPTS" "SCPTS" (Strategy (Strategy - Culture - People - Technology Technology Structure) three-layer KM model in engineering organizations , this model consists of three layers. The below figure illustrate the model layers’ process.
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Ahmed. O, 2004, p 167. SCPT S three layers KM model
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Elham. R et al in 2013 produced a model for knowledge management process based on depth analysis of the pervious literatures, this model illustrated in the below figure: Knowled led e Man Mana emen ment
s e e y o l p m E e l b a n E
g n i t t e g d n a g k n c i r u a s b a d e e e M f
e g d e l w o n K f o e g a s U
n o i t a e r C e g d e l w o n K
e g a r o t S e g d e l w o n K
g n i r a h S e g d e l w o n K
n o i t i s i u q c A e g d e l w o n K
e s o p r u g P n e i g n d i e m l r w e t o e n D K
Elham. R et al, (2013, P96) The proposed knowledge management model.
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Dragoş. S et al, 2009, P 359, talked about” Choo” knowledge management model , this model centers on how informational elements are selected and introduced in company actions. This actions results from the concentration and absorption of information coming from the external environment in every cycle, illustrated in the below figure.
Dragoş. S et al, 2009, P 359,” Choo” knowledge management model
For Nonaka & Takeuchi (1995), successful organizations are those that: create new knowledge, extensively disseminate them throughout the organization, and rapidly, incorporate them into new products, services and technologies; in addition to improving working conditions for the people who are part of them. (Osmarina. G et al, 2017, p 184) Furthermore, Drucker is considering knowledge as being capitalized hence the term intellectual capital, this type of capital is seen as consisting of intangible assets and can
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include employee skills, information, patents, copyright, brands, R&D, licensing opportunities, innovative use of assets such as data bases. (Ahmed. O, 2004, p 31). Now it is important to know about intellectual capital because it is an integral part of knowledge management. Thus, we can understand more about intangible assets, and how organizations use IA as a competitive advantage.
3. Intellectual Capital: In knowledge-based economy, intellectual capital is used in order to create and increase enterprise value and the success of an organization depends on its ability to manage this scarce resource (Aidin. O, 2013, p13)
3.1.
Intellectual Capital Definition:
The term “Intellectual Capital” (IC) was first published by John Kenneth Galbraith in 1969 (William S Chang et al, 2011, p4). Prusak 1998 defined the IC as intellectual resources that have been “formalized, captured and leveraged” to create assets of higher value (Gopika.
K et al,2004, p 389 ).
Likewise, Ali. A et al, 2000 said that IC is the sum and synergy of a company’s knowledge, experience, relationships, processes, discoveries, innovations, market presence and community influence. Whereas, Stewart, 1997 defined the IC by its value as cited in (Kwee. K. C, 2008, p612) “intellectual capital as the difference between the firm’s market value and its book value
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of entity” entity”. Also he adds another definition illustrate more about the role of IC in organization value creation when he said about the relationship between IC and IT “the management of information technology that can be put to use to create wealth.” Sofian et al. in 2008 delineate intellectual capital as “the possession of knowledge and experience, professional knowledge and skill, goal relationships, and technological capacities, which when applied can give organizations competitive advantage ” ( Nixon. Nixon. K
et al, 2011, p154 )
3.2.
Intellectual Capital components:
Stewart in 1995 said that IC can be classified as human capital, organizational capital / structural capital which refer to all nonhuman stocks of codified knowledge in an organization as illustrated in (Aristides. I,2011, p252), and customer capital (Gopika. K et al,2004, p 390). “Customer capital can be defined as the value of relations with the individuals and institutions that the business sells something to. Customer capital states the value of organization’s relation relati on with customers, suppliers and the rest of the society and expresses the loyalty of people mentioned to the organization. ” (Funda. (Funda. B. K et al, 2010, p159)
Similarity, William S Chang et al, 2011, p5 highlighted from his literature review that IC consist of three components: 1. Human Capital (HC) comprises the competence, skills, experience, and intellectual abilities of the individual employees.
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2.
Structural Capital (SC) includes processes, systems, structures, brands, intellectual property, and other intangibles that are owned by the firm.
3.
Social Capital (SC) which resides either at the individual or the organizational level.
While, Pashar and Sliachar proposed that the five components of national intellectual capital were human capital, market capital, process capital, renewal capital, and financial capital. (Mikael. A, 2011, p19)
3.3.
Intellectual Capital for value creation:
IC of a firm emanates from the conjoint interaction of its Social Capital, Human Capital, and Knowledge Management. It denotes a firm’s holistic prowess and potential for creating value. (P.N. Rastogi, 2002, p232) The essence of intellectual capital is the value creation that can be understood as a complex of intangible property, knowledge, skills, processes, applied experience and technologies used in organizations to ensure a competitive advantage on the market. (Ján Papula et al, 2011, p502) On the other hand, (Sirle. B, 2009, P32) clarified that for the firm it is not enough to have intellectual capital which is inimitable and non-substitutable by competitors but is not valuable in the market. Firms are forced to keep up with changes in the market – globalization, new technologies and customer demands. Mariya et al ,2012, p3 provided us with intellectual capital transformation scheme, they consider that to reveal intellectual capital outcomes from the investment point of view the value-based the approach should be applied. 14
Mariya et al ,2012, p3: Intellectual capital transformation transformation scheme
4. Communities of practices:
The term “communities of practice” has become popular in organizational studies, particularly in the topics of knowledge management and organizational learning. Etienne Wenger said that communities of practice are formed by people who engage in a process of collective learning learni ng in a shared domain of human endeavor. Also, E. L. Lesser defended the CoP by “ a group whose members regularly engage in sharing and learning, based on their common interests ” (E. L. Lesser et al, 2001, p831). Wenger (1998) defined the th e CoP as a group that coheres through “mutual engagement” on an “indigenous” (or appropriated) enterprise, and creating a common repertoire. (Andrew Cox, 2005, p 536). Marc L. Resnick et al defended the CoP as “networks of groups of people within a common professional domain, often supported through a company Intranet, to facilitate fluid communication and collaboration of geographically dispersed professionals. (Marc L. Resnick et al,2007, p1714).
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William M. Snyder in 2004 described that CoPs operate as “social learning systems” where practitioners connect to solve problems, share ideas, set standards, build tools, and develop relationships with peers and stakeholders. (William M. Snyder, 2004, p17) Enrique Murillo see that theorists now see CoPs as an essential component of the knowledge-based view of the firm, for their part, managers increasingly view CoPs as privileged sites of knowledge-sharing and innovation. (Enrique Murillo, 2011, p2)
In fact, Marc L. Resnick et al admired that Communities of Practice work best when they are allowed to develop naturally as autonomous, self-governing entities that are not managed through a company’s chain of command . (Marc L. Resnick et al,2007, p1715). William M. Snyder in 2004, p17 defined communities of practice as a tool for crossorganizational collaboration. The best way for an executive to assess the value of a community of practice is by listening to members’ stories, which can clarify the complex relationships among activities, knowledge, and performance. (Wenger et al, 2000)
5. performance Measurement:
Let’s start by peter Drucker famous principle: "If you can't measure it, you can't manage it.". This quota summarizes the importance of performance measurement in evaluation phase that aim to improve the performance continuously to reach the organization goals in effectiveness and efficiency way. Now what is PM? And what is KPI?
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Most companies are trying to improve impro ve their performance in any way possible. The winning card will be hold by those who are trying to innovate, to obtain and sustain performance. (Cristian. I et al, 2013, p397 ). Argyris and Schön 1978 explained the performance measurement role by: PM role is extended from a single loop to a double loop learning dimension, performance measurement measu rement is seen as fostering organizational learning, owing to its capacity to acquire, distribute, interpret and store knowledge. (Jean. F. H, 2002, p18). Neely, 1995 defined the performance measurement as the process of quantifying the efficiency and effectiveness in action, considering the measurement as the process of quantification and the action that leads to performance. (Aquilino Felizardo, 2017, p6)
Now the Key Performance Indicators are financial and non- financial measures that organizations use to reveal how successful they were in accomplishing long lasting goals. (Dragana. V et al, 2011, p63). Otherwise, Dornier et al. (2000) see performance indicators as a guide for making investments, defining goals and also benchmarking vs. the actual status, in addition to a facilitating instrument for predicting and reducing uncertainties, identifying high priority actions, helping in engaging and managing staff and being a dynamic tool reflecting the organization's behavior. (Cavenaghi, Vagner, 2009, p5) Performance Measurement Indicators are measurable characteristics of products, services, processes and operations that the company uses to track and improve the performance. These indicators should be selected to present the best performance factors (Grigore. A et al, 2002, p953).
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Organizations can be measured according to different perspectives, like financial, customer, internal business processes and others, and based on these perspective it can design a performance indicator.
2. Conclusion: This essay summary the importance of Knowledge Management, Intellectual Capital, Communities of practices, and Performance Measurement in the organizations these days. And how organizations can use these tools to achieve a competitive advantage and sustain in the difficult and competitive work environment.
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