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Variety of Strategic Planning Approaches for Knowledge Management

Ettore Bolisani, Enrico Scarso and Adriano Birolo Department of Management and Engineering ‐ University of Padua, Vicenza, Italy [email protected] [email protected] [email protected] Abstract: The paper discusses possible approaches to strategic planning of Knowledge Management (KM). The concept of KM strategy is relatively recent and has been developed based on the assumption that any KM programme requires the definition of long‐term goals, resources, and plans, i.e., a strategic planning. Empirical evidence shows that the conditions for the successful implementation of KM can change from a company to another and in relation to the external context, and this calls for an appropriate approach. Until today, the literature has primarily focused on the definition of different types of KM strategies, and pertinent and useful taxonomies have been defined. Conversely, the process that can lead to the formulation of these strategies has been less studied. The present paper aims to fill this gap by identifying and discussing possible approaches to KM strategic planning that a company can follow. In particular, by drawing inspiration from the classic literature about strategic planning, a taxonomy of the possible approaches to KM strategic planning is developed. This taxonomy is based on two dimensions, namely: a) the nature (rational vs. emergent) of the planning process, and b) the competitive factors (internal vs. external) that drive the strategy formulation. Examples of companies, drawn from recent case‐studies, are then provided, with the purpose to depict the features of each KM strategic planning approach, as well as asses the consistency and usefulness of the formulated taxonomy. The findings provide food for thought to both researchers and managers. In terms of research, it especially reinforces the link between KM and other areas of management, and provides the impulse for new studies of how KM initiatives can emerge in a company. In terms of management, it provides a classification that may help executives to gain awareness of how KM is or can be planned in their companies. A limitation of the paper is the use of secondary data. Being an exploratory investigation, the study can however represent a starting point for in‐depth case‐studies or surveys about how companies plan their KM initiatives. Keywords: knowledge management, knowledge management strategy, strategic planning, classification, case studies

1. Introduction The development of Knowledge Management (KM) has led to the awareness that KM programmes require the explicit formulation of long‐term goals, the definition of relevant resources, and the design of appropriate implementation plans. Consequently, the notion of KM strategy, intended as long‐term planning of organizational, managerial and technical resources that a company can adopt for its KM programmes, has progressively appeared in the KM literature (Holsapple and Jones 2006). Empirical evidence shows that the conditions for the successful implementation of KM can change from a company to another, in relation to the internal organizational and strategic directions, and to the external environment. This calls for approaches that fit the specific case of each company, and may explain why different firms adopt different KM strategies. Furthermore, the recognition of knowledge as a strategic resource (Spender and Grant 1996) involves that the relationship between KM strategy and corporate strategy has to be carefully taken into account. The above mentioned issues have been addressed in the literature, which has however focused primarily on possible definitions of KM strategy (Sveiby 2001; Halawi et al. 2006), on the identification and classification of different types of KM strategies (Earl 2001; Greiner at al. 2007) and on the relationship between KM strategies and corporate strategies (Halawi et al. 2006). Conversely, the process that leads to the formulation of a KM strategy has been less investigated. The paper aims to contribute to fill this gap by identifying and discussing possible approaches to KM strategic planning that a company can follow. In particular, it draws inspiration from the classic literature of strategic planning, and proposes a taxonomy based on two dimensions, namely: a) the nature (rational vs. emergent) of the planning process, and b) the competitive factors (internal vs. external) that drive the strategy formulation. Examples of companies, drawn from recent case‐studies, are also provided, with the purpose to depict the features of each KM strategic planning approach as well as to assess the consistency and usefulness of the taxonomy.

Ettore Bolisani, Enrico Scarso and Adriano Birolo

2. Knowledge strategy and KM strategy

The relationship between knowledge and strategy has been widely stressed in the literature (Kogut and Zander 1992), well before the upsurge of interest in KM. The idea of knowledge as a strategic weapon is not new (Kasten 2007). However, it is the development of the so‐called “knowledge‐based view of the firm” (Grant 1996; Sveiby 2001) and, especially, the growing interest in KM that have made knowledge strategies a key topic of analysis.

There is still no absolute consensus on what a “knowledge strategy” is (Denford and Chan 2011; Donate and Canales 2012). Zach’s is one of the most cited definitions (1999): a knowledge strategy is described as the overall approach an organization takes to align its knowledge resources and capabilities to the intellectual requirements of its business strategy. Similarly, according to von Krogh et al. (2001), a knowledge strategy denotes the application of “knowledge processes” to an existing or new knowledge domain, in order to achieve a strategic goal. Bierly and Chakrabarti (1996) assert that a knowledge strategy can be explicitly conceptualised as the set of choices and plans that regard the firm’s knowledge base, which affects its competitive capability.

To sum up, a knowledge strategy can be referred to as the general guidelines that shape an organization’s approach to manipulating its cognitive resources (Kasten 2007), with the ultimate goal to make the best use of these assets for competitive advantage (Holsapple and Jones 2006). Consequently, the formulation of a knowledge strategy should be strictly related to the firm’s corporate strategy (Eisenhardt and Santos 2002).

The notion of KM strategy is often regarded as the attempt to formulate intentional plans for explicitly managing knowledge (Sveiby 2001; Wenger 2004), namely a sort of roadmap of the KM Department in an organization (Halawi et al. 2006). Accordingly, a KM strategy mainly deals with specific organizational, managerial and technical issues that a company adopts for its KM programmes, while a knowledge strategy deals with the way knowledge can support competitive advantage (Denford and Chan 2011). In principle, knowledge strategy and KM strategy are, therefore, different, but various authors do not distinguish between them. Given the close connection that exists between the two notions, in the remainder of the paper we will use the term KM strategy but we will consider the two concepts as overlapping.

The topic of KM strategy has attracted the attention of scholars, as confirmed by recent analyses. For instance, in the journal “Knowledge Management Research & Practice”, the term KM strategy occupies the seventh position among the top 40 self‐reported keywords, and strategic KM represents the second focus of KM research (Ribière and Walter 2013).

KM scholars have tried to identify and define possible different categories of KM strategy (Donate and Canales 2012). Probably, the most popular taxonomy is the one that distinguishes between codification and personalization (Greiner et al. 2007; Kumar and Ganesh 2011): codification focuses on capturing, codifying, storing and using explicit knowledge in a form that is compatible with a company’s organizational objectives; personalization has the goal to improve knowledge flows through networking and interactions. Another popular taxonomy distinguishes KM strategies based on the sources (external vs. internal) of a company’s key knowledge (Kim et al. 2003).

Instead, with few exceptions (Kim et al. 2003; Holsapple and Jones 2006), KM scholars, probably because more concerned with the operational issues, have devoted little attention to the process of KM strategy planning. In particular, the connection with “classic” strategic planning approaches, as are developed in the management literature, has been less explored, even if they can provide useful inspiration to understand how a KM strategy develops.

3. KM strategic planning: a proposed taxonomy

Planning a KM strategy implies to define aspects e.g. (Kim et al. 2003): long‐term goals of KM programmes (i.e., how knowledge should be accessed, processed and exploited, what value can be extracted from knowledge, etc.); kinds of relevant knowledge; methods and tools that can be appropriate for this (including organizational arrangements and technical applications); resources that can or must be invested in KM programmes (in terms of funds and people); and the connection of KM with the overall corporate strategy and with the organizational structure (fig. 1).

Ettore Bolisani, Enrico Scarso and Adriano Birolo

In the management literature, strategic planning has a long history, and has evolved over time. As a concept, strategic planning was introduced by authors such as Ansoff (1965). The idea was that companies can and should set their long term goals rationally and deliberately: based on that, resources and plans to pursue these goals are defined. In the following decades, the increasing turbulence of markets and technologies has challenged the possibility to plan strategic planning rationally. Some studies have proposed to consider the effects of uncertainty and dynamic changes on managerial decisions: uncertainty implies that companies never have all the information that would be required to rationally set plans in advance; dynamic changes imply that new scenarios may emerge over time. The notion of emergent strategy was consequently developed, by authors like e.g. Mintzberg (1987): companies must be able to modify their strategies as a consequence of learning processes and in accordance with changes in the environment. This means that a strategy plan, rather than being defined in advance, can be defined progressively, “at the right time”.

KM STRATEGY

KM long‐ term goals

Relevant types of knowledge

KM methods and tools

Resources

Connection with company’s strategy and organization

Figure 1: Elements of KM strategic planning

Other contributions have attempted to clarify the elements on which a strategic plan can or should be based on. Here, there are two main points of view. The first one is that strategic formulation should be based on an analysis of a company’s external environment (i.e., industry structure, market opportunities, competitive pressures, etc.) and its possible positioning in this environment. Approaches such as the SWOT analysis and Porter’s model of “five competitive forces” (Porter 1980; 2008) are traditional ingredients of this perspective. More recently, the so‐called resource‐based theory (Barney 2001; Grant 1991) suggests that any effort to define the strategy of a company must consider its actual or potential resources that define the “space of opportunities”. In other words, the goal of strategic planning is, essentially, to exploit and reinforce a company’s internal resources. In this paper, the attempt is to link with the studies of strategic planning with those of KM strategy. Therefore, by grounding on the literature mentioned before, the aim is to identify and classify possible approaches to KM strategic planning by considering two dimensions. The first dimension takes into account the nature of the approach to KM strategic planning, and distinguishes between (Bolisani et al. 2014):

a rational approach that grounds on a consideration of the possible long term goals of KM and consequently plans resources and activities to pursue these goals (i.e., KM practices are the implementation of plans that have been set in advance);

an emergent approach that bases on the assessment of the results that the company progressively achieves from its KM practices and learning processes, and employs them to continuously define the practicable goals (i.e., plans are the ex‐post rationalisation of already existing KM practices).

The second dimension regards the factors that guide the formulation of the KM strategy, and distinguishes between (Zack 2005):

an approach based on the external competitive environment, that defines a company’s KM strategy in relation to the competitive forces (i.e., suppliers, clients, competitors, etc.) that constrain the action of the firm;

Ettore Bolisani, Enrico Scarso and Adriano Birolo

a resource‐based approach, that defines a KM strategy taking into account the internal resources that a company possesses (i.e., technologies, kinds of knowledge, financial resources) to implement that strategy.

The combination of these dimensions produces four different KM strategic planning approaches (fig. 2) as follows:

rational planning based on a preliminary analysis of the competitive environment: companies plan their KM programmes in advance, mainly based on the long‐term goals of knowledge development and exploitation for facing significant business problems or competitive pressures;

rational planning based on a preliminary assessment of the internal KM resources and how to develop and exploit them with appropriate programmes and methods;

emergent planning based on solicitations of competitive environment: KM plans derive from an ongoing attempt of companies to face emerging competitive pressures;

emergent planning based on exploitation of internal resources: KM plans represent the “ex‐post” systematization of methods, practices and tools that a company has adopted to develop and exploit internal KM resources.

Nature of KM planning

Rational

Emergent

Driving factors

Competitive environment

Internal resources

Rational planning based on competitive environment

Emergent planning based on competitive environment

Rational planning based on internal resources

Emergent planning based on internal resources

Figure 2: Taxonomy of KM strategic planning approaches

4. Empirical evidence

4.1 Purpose and data collection What follows illustrates a preliminary analysis of the consistency and usefulness of the proposed taxonomy. Examples of real‐life situations of companies are shortly reported and described, with the purpose to show how these companies followed different paths in formulating their KM strategies.

The data presented here were mainly collected by means of secondary sources, i.e. existing reports and detailed analyses of case‐studies. The literature emphasises that the resort to secondary sources can be fruitful (Barbour and Eley 2007) for doing extensive comparative research, for exploring specific aspects that were not explicitly analysed in the original cases, or for doing preliminary evaluations. Therefore, considering that there are several case‐studies of KM in the literature, and given that the purpose was just to provide empirical evidence to preliminary evaluate the potential usefulness of the proposed taxonomy, extant literature instead of fresh investigations was used. The evidence presented here is drawn from case‐studies already available in the literature, either directly conducted by the authors, or authored by other researchers. The selection of cases was based on some criteria. First, only the companies of which it was possible to have access to sufficient information on their KM programmes and planning approaches were considered. Secondly, companies with different KM programmes and planning approaches were taken into account, so that the cases could fill distinct cells of Figure 1.

Ettore Bolisani, Enrico Scarso and Adriano Birolo

4.2 Cases

4.2.1 ENI (Scarso et al. 2009)

Eni is a big oil multinational with business units and operational locations scattered in 70 different countries, and more than 77,000 employees of various nationalities; sales exceed 125 billion € (2013). A growing competition denotes the oil sector. Exploration and production are becoming an increasingly risky activity. Reservoirs are more and more difficult to find and exploit. Huge investments and sophisticated technologies are then needed. The oil business is very complex and implies many activities and professional skills (geology, chemistry, construction, electronics, mechanics, but also economic‐managerial capabilities and legal‐ political competencies for negotiations and contracting). Furthermore, oil companies must combine routine processes (for instance, day‐by‐day oil extraction) that require efficiency and standardization, with project‐based activities (e.g., discovery of new reservoirs) that involve solutions to specific and partly new problems. In this environment, any wrong decision taken by professionals working at some exploration site and oil well may cause huge losses to the firm and can weaken its position. Consequently, about 10 years ago, Eni formulated its KM strategy in terms of the creation of an environment that facilitates knowledge exchanges between professionals at local production sites, and more experienced people that can be anywhere around the world. The idea was to make young professionals learn faster by eliminating spatial and time constraints. Eni’s KM system was built based on this KM strategy. It consists of a system of communities of practice, specialising in different areas (e.g., geology, chemistry, facility management, etc.). Each community is formed by experienced senior professionals who are connected by means of an internal e‐mailing system. The community is activated on demand, when a professional needs some help on the ground. The experts propose a possible solution based on their experience, and can therefore transfer their knowledge to the younger colleagues by means of the system. This makes responsiveness of the entire company faster, and reduces the risks of losses or mistakes thanks to a better circulation of knowledge across the company.

4.2.2 EY (Padova and Scarso 2011; Scarso et al. 2010)

EY (formerly Ernst & Young) is a global consulting company, leader in assurance, tax, transaction and advisory services, based entirely on the knowledge of its 172,000 professionals who are dispersed all over the world. In a company of this scale, the activity of KM is critical and challenging, since there is the need to operate in a variety of sectors and with diverse business units, each one characterised by a specific knowledge base. Particularly, reusing knowledge is crucial to deliver more value to clients faster. Knowledge is a resource that must not be confined to a particular area but has to be shared among all the hundreds of offices and professionals worldwide. It is necessary not only to share explicit knowledge, but also to capture and retain valuable tacit knowledge that resides in the minds of employees. In other words, there is the need to map, connect and enhance all the different knowledge resources (i.e., distinct offices, professionals, databases) that are scattered worldwide. The KM strategy of EY has been formulated with the explicit goal to enhance the company’s capacity to create and share knowledge resources globally, and to improve the learning capability of service offices or individual professionals. In particular, EY has designed a KM plan consisting of the definition of a common “knowledge platform” with the aim to define shared taxonomies for the entire company (i.e., only one way to call things), a “one stop shop” system to search and find appropriate pieces of knowledge for each single professional or office, and a centralised maintenance process, which saves time and money at the local level. In 2007, EY launched the Future State of Knowledge initiative, with the aim to implement this new knowledge vision for the organisation. The goal was to design and implement a single global knowledge function across the globe. The actual project started in early 2009 with the objective of launching a first release of the new platform at the end of July 2009.

Ettore Bolisani, Enrico Scarso and Adriano Birolo

4.2.3 Eurotech (DeToni and Fornasier 2012)

Eurotech is a holding of 9 small companies located in Italy and USA, with about 400 employees and 100 million € annual turnover. The company produces small PC devices for special purposes. To face competition, Eurotech must keep the pace of leading edge technologies for electronic miniaturization. This requires a continuous improvement and maintenance of the knowledge base which, however, was not achieved by means of deliberate KM plans but, rather, of other actions targeted to different aims. First, since 2001, the acquisition of some innovative small companies has led to an expansion of the knowledge owned by the company, with a need for integration and re‐combination of different languages, approaches, perspectives. Second, a systematic connection with Universities and public research centres was promoted, to outsource part of the research activities.

All this has progressively led to the awareness that a more systematic approach to KM could have been useful. In fact, on the one side Eurotech has to favour the circulation of knowledge in the entire organization, so that each distinct part can easily react to the challenges of the competitive environment, on the other it has to protect the distinctive competences that have enabled a leading market position. In light of this, a re‐definition of KM plans was made to manage the different kinds of knowledge in the company.

The new elements of knowledge acquired from outside are codified (whenever possible) in a standard format, so that they can be accessed to all the distinct parts of the organization by using repositories such as MS Sharepoint. Instead, the core distinctive elements of knowledge of the company remain tacit and embedded in the minds of expert employees: these expert people are temporarily assigned “on demand” to some specific part of the organization. At the same time, to facilitate the continuous improvement of technical capabilities without affecting operational processes and market‐led projects, from 2005 research activities have been separated from the Product Development processes. A central research laboratory develops the “technological frontiers”, while product development, which is mostly pulled by the market, is conducted separately at each single company of the holding. This enables the company to continuously improve “currently used” products while keeping an eye on new technologies that can change the conditions of competition.

4.2.4 Infonet Solutions (Bolisani et al. 2014)

Infonet Solutions is a small ICT company located in Northern Italy with 30 employees and 5 external collaborators; the annual turnover is about 5 million Euros. Infonet provides custom‐made IT platforms to clients, and is a project‐led company: a project for a client consists of various steps (first contact, needs analysis, negotiation, technical implementation, delivery, and customer support). These different steps involve distinct departments of the organisation (i.e., sales force, technical staff, and customer service) that represent knowledge resources that are distinct but must be connected and shared to be exploited effectively. For example, to provide effective assistance to a customer, the support department must rapidly retrieve all the knowledge about the installed system (e.g., maps, codes, network configurations, functioning parameters); but this knowledge was produced by others (i.e. the technical staff) at another time and by using different approaches. Similarly, when the sales force has to formulate a new commercial proposal, they may be benefited from retrieving the technical elements of past installations.

Initially, when the company was founded, this problem already existed but was easily resolved because there were few employees, few customers, and few projects: direct face‐to‐face contact and knowledge exchange were enough. With the growth of the company, the management started to introduce some mechanisms and tools to store and retrieve project documentations. However, this was made without a systematic reflection on KM needs of the company and on possible solutions to these. In fact, the company initially used simple paper‐based documentation, that proved to be ineffective; later, a shared folder was used, which was more efficient but inflexible. Recently, an internal wiki system has been implemented, that contains all the relevant information about any installation of a new system for a customer. The adoption of the system was, however, not the consequence of a planned strategy but is a solution that has emerged progressively. As well underlined by one of its creators, the approach followed in the development of the system “was contingent and closely tied to the tools available”. It is only now that the wiki system has proven to be useful and used, and its further development is now part of the deliberate KM plans of the company.

Ettore Bolisani, Enrico Scarso and Adriano Birolo

5. Analysis The brief summary of the cases examined is sufficient to highlight that different companies can adopt distinct approaches to formulating their KM plans. Figure 3 depicts the collocation of companies in the taxonomy previously proposed.

Nature of KM planning

Rational Emergent

Driving factors

Competitive environment

Internal resources

ENI

Eurotech

Infonet

Figure 3: Classification of cases based on their approach to KM strategic planning

The first two companies show some similarities in the way KM is planned: in both cases, first there was a consideration and assessment of needs, problems, competitive position, knowledge resources, etc., and later KM planning followed. In other words, these companies had a rational approach to KM. At Eni, the KM strategy was formally defined after an analysis and modelling of the competitive pressures that the company had to face in the economic climate: the main KM project was designed and planned based on the results of this analysis. Consequently, the approach followed by the company can be considered to be “rational KM planning based on competitive environment”. Similarly, EY planned its KM program based on a careful assessment of organizational needs; however, rather than external competitive pressures, the starting point was the assessment of internal knowledge resources and how these can be mobilized and improved. Therefore, this is an approach of “rational planning based on internal resources”. The other two companies, maybe because they are smaller and younger, followed a different path: KM planning was not the result of a rational assessment of internal or external conditions, but rather is the “ex‐ post” systematization of a series of actions that the companies have undertaken for different purposes. Due to its fast growth mainly consisting of acquisitions, Eurotech reformulated its internal processes and structures for improving responsiveness to the competitive pressures in a highly dynamic industry. This led to a series of initiatives that aligned the internal production and exploitation of knowledge to the strategic needs of the company. In short, Eurotech’s KM programs have later emerged as an attempt to give form to all these activities that had already been started for other reasons and without a KM strategy. Consequently, Eurotech can be seen as a case of “emergent KM planning based on competitive environment” Similarly, Infonet didn’t deliberately formulate a KM strategy or started KM plans: its KM practices are the consequence of specific operational problems of service delivery that the company had progressively encountered during its growth. It is only after a time that the company has become aware that these can be seen as KM. The purpose of the company is now to give order to internal knowledge resources, therefore this approach can be considered to be “emergent KM planning based on internal resources”.

6. Discussion and conclusion The paper proposes a view of KM strategic planning by identifying different approaches that companies can follow. Indeed, a brief analysis of the existing empirical evidence shows that companies’ actions can differ: some companies have first an analysis of internal needs or external pressures and later a formulation of possible KM strategies, which finally results in KM operative plans. Instead, for other companies, actions and projects that may also be started for other reasons only later are recognized to be KM initiatives: therefore, the formalization of KM plans is the attempt to give a form and a consistent interpretation to a set of activities already started. This different behaviour can be explained by considering the different structure and strategic approach of companies: for example, the case studies show that the larger companies with a longer history may be more

Ettore Bolisani, Enrico Scarso and Adriano Birolo

used to formulating plans rationally, while young fast growing firms may not be accustomed to do that, so they may follow an “emergent approach”.

In addition, the impulse to a KM initiative (either rational or emergent) can be different: in some cases, it can come from changes in the competitive environment which lead a company to reflect on the ways to face these pressures: KM strategies and actions, therefore, represent a reaction to the challenges of the external competitive environment. In other cases, the impulse to KM can come from the awareness that internal knowledge resources need reorganizing and improving in terms of activities and processes of KM.

6.1 Implications for research This study can provide food for thought for strategic thinking applied to KM. Also, it represents an effort to apply well known notions and models already developed in the management literature. This can reinforce the link between KM and other areas of management. In addition, it can provide the impulse for a new research line: specifically, it suggests that more attention should be devoted to investigating the factors that enable the emergence of KM initiatives within a company.

6.2 Implications for management The awareness that companies can follow different approaches to KM planning is important for executives that consider KM as a primary activity for their companies. In particular, in the case of an emergent KM strategy, managers should be able to recognize it, and, as far as possible, to align it with the company’s overall strategic goals.

6.3 Limitations of the study and future agenda The analysis based on secondary data is a good starting point to preliminary assess the potential usefulness of the proposed taxonomy. However, there is now the need to formulate a new research agenda with fresh case studies or surveys that can provide more targeted empirical results. In particular, there is the need to understand if different approaches to KM strategic planning can lead to different categories or KM projects, and whether they can result in successful or unsuccessful KM programmes.

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