knowledge moment

Week 4

Managing Organizational Knowledge, Learning and Intellectual Capital I

• Developing metrics for knowledge, learning and intellectual capital

Intellectual assets are generally categorized as human capital (like the know-how of knowledge

workers that is “rented” by an organization), structural capital (like the policies, procedures, and

applications that the organization “owns”), and customer or relationship capital (like the value

of customer relationships and loyalty that has been built up over the years).

A variety of fairly sophisticated KM measurement techniques are available now that can help

assess how well an organization is progressing. These involve benchmarking, the balanced

scorecard method, and the house of quality matrix.

Before introducing any metric-based system, we have to be clear regarding what we want the

metrics to answer. Metrics generally helps us to answer several questions, such as −

• Is Knowledge management working as required? And if not, what needs to be fixed?

• Is execution on track, and if not, what needs to be fixed?

• Are people doing what they are assigned to do? Who is doing well, who is not doing

well?

• Are we delivering value? If we aren't, let's stop, or find a better way.

Measuring KM Implementation

The first thing to be done is probably wanting to measure, and how well we are managing to

implement KM.

When we run your assessment at the start of KM implementation, we will develop some baseline

metrics which you can measure the improvement against.

A KM assessment protocol measures various aspects of knowledge flow within an organization,

and allows you to identify blockers and obstacles to knowledge flow. Rerunning the assessment

later allows you to measure progress.

Measuring KM Compliance

Let us assume that an employee named Steve has introduced a knowledge management

framework to the organization, with some clear accountabilities and clear expectations in the

form of KM policies and standards.

At this stage, Steve might want to measure whether people are complying with these expectations,

by using dashboarding and analytical tools to track his project members in an organization.

Similar dashboards will be required in other functions of an organization.

Measuring KM Activity

It is also useful to introduce some activity based metrics to track different elements of your

Knowledge management system.

Measuring Business Outcome

It is generally believed that, knowledge management leads to continuous performance

improvement. As knowledge improves, so does the efficiency and results of an organization.

Therefore, the more we deploy these methods and implement them, the better will be business

performance.

Benchmarking

Benchmarking is the hunt for industry wide best practices that leads to superior performance. It

is a fairly straightforward Knowledge Management metric that represents a good starting point.

Benchmarking basically consists of a study of similar companies to determine how things are

done best in order to adapt these methods for their own use. This approach is best summed up

by the Hindu proverb − “know the best to become the best.”

There are two general types of benchmarking −

• Internal benchmarking − Comparisons against other units within the same company or

a comparison of a single unit over different time periods.

• External benchmarking − Comparison with other companies.

Balanced Scorecard

A Balanced Scorecard method (BSC) is a judgement and management system that enables

enterprises to clarify their vision and strategy and which translates them into action. It offers

feedback on both the internal business processes and external results in order to continuously

improve strategic performance and results.

Balanced Scorecard is a conceptual framework for converting an organization’s vision into a set

of performance indicators distributed among four dimensions −

• Financial Dimension − Involves measures such as operating income, return on capital

employed, and economic value added.

• Customer Dimension − It is associated with such measures as customer satisfaction,

retention, and market share in targeted segments.

• Internal Business Processes − Consists of measures such as cost, throughput, and

quality.

• Learning and Growth − addresses measures such as worker's satisfaction, retention,

and skill sets.

Through BSC, an enterprise can monitor both its current performance (finances, customer

satisfaction, and business process results) and its efforts to improve processes, motivate and

educate employees, and enhance information systems − its ability to learn and improve.

The balanced scorecard method is applicable to both profitable and non-profitable enterprises as

well as to both private and public sector companies. It provides a number of significant

advantages, including the translation of abstract goals into action items that can be continuously

monitored. In addition, the balanced scorecard method provides objective measures of the

current scenario, and helps initiate the changes required to move from the current to the desired

future state of the company.

The House of Quality Method

The house of quality method was discovered to show the links between true quality, quality

characteristics, and process characteristics. It was done using the Fishbone Diagram, with true

quality in the heads and quality and process features in the bones.

This technique was also known as Quality Function Deployment (QFD), as it links the

customer’s needs with marketing, design, development, engineering, manufacturing, and service

functions. It can be used for service as well as software products.

QFD is the only comprehensive quality system that aims specifically at satisfying the customer.

It concentrates on maximizing customer satisfaction (positive quality), measured by metrics,

such as repeat business and market share.

It focuses on delivering value by seeking out both spoken and unspoken needs, converting these

into design targets, and communicating the targets throughout the organization.

In addition to this, it allows customers to prioritize their requirements, tells us how we are doing

compared to our competitors, and then directs us to optimize those features that will bring the

greatest competitive advantage.

• Knowledge quality

Knowledge management (KM) has assumed a key position in today’s business environment.

Quality management (QM) is a business competence that increases a firm’s efficiency and

capability. KM and QM fundamentally share the same goal improving performance at all levels

of the organization. As firms operate in a highly competitive environment, knowledge and its

quality are critical to surviving and prospering in these circumstances.

A high level of knowledge quality helps firms do work better, develop novel and useful

products or services, reduce costs, and increase sales. It escalates problem-solving capability,

raise process efficiency, and improve performance.

Knowledge quality, however, remains a vaguely defined concept because of its abundance and

variability.

Although knowledge is an important resource, its effective use will depend, to a large extent, on

its quality.

As such, research on knowledge quality should grow in scope and prominence.

• Organizational knowledge creation theories and their application

Nonaka’s (1994) dynamic theory of organizational knowledge creation holds that organizational

knowledge is created through a continuous dialogue between tacit and explicit knowledge via

four patterns of interactions, socialization, combination, internalization and externalization.

Explicit knowledge is codified knowledge transmittable in formal, systematic language whereas

tacit knowledge is personalized knowledge that is hard to formalize and communicate and

deeply rooted in action, commitment and involvement in context (Polanyi 1962).

Socialization represents the interaction between individuals through mechanisms such as

observation, imitation or apprenticeships. Combination involves combining explicit knowledge

through meeting and conversation or using information systems. Internalization converts

explicit knowledge into tacit knowledge whereas externalization converts tacit knowledge into

explicit knowledge.

Organizational knowledge creation takes place when all four modes of knowledge conversion

form a continual cycle triggered by such actions as team interactions, dialogue, metaphors,

coordination, documentation, experimentation, and learning by doing, etc. Organizational

knowledge creation can be viewed as an upward spiral process from the individual level to the

collective group level, and then to the organizational level, sometimes to the interorganizational

level.

Consistent with Nonaka’s dynamic theory of knowledge creation, Cook and Brown (1999)

bridge the epistemology of possession with that of practice and suggest that organizational

knowledge is created through the generic dancing between knowledge and knowing.

Explicit, tacit, individual and group knowledge are distinct forms of knowledge, each doing

work the others cannot. While mere explicit knowledge is insufficient, without explicit

knowledge, tacit knowledge conversion becomes a closed loop. While individuals possess part

of what is known about a given domain, a body of knowledge is possessed by the organization

and is drawn on in its actions, just as knowledge possessed by an individual is drawn on in his

or her actions.

Knowing is the epistemic work done as part of action or practice, and is the interaction with the

social and physical world, using knowledge as a tool. Knowing is dynamic, concrete and

relational. The interplay of knowledge and knowledge can generate new knowledge and new

ways of knowing in organizations.

Focusing on the knowedgeability of action connoting action, doing and practice, rather than

knowledge connoting things, elements, facts, processes and dispositions, Orlikowski (2002)

suggests that organizational knowing is constituted and reconstituted in practice. People engage

in organizational practices, reproduce the knowing generated in those practices and reconstitute

knowledgeability over time and across contexts.

This view of knowing in practice suggests a mutual constitution of knowing and practice that is

depicted by the metaphor of drawing hands, each drawing the other while being drawn,

indicating that knowing is an ongoing social accomplishment that is constituted and

reconstituted in everyday practice.