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Shilpa Govada Rachana Pejaver Shirish Kandekar John Wahlman Slide 2 Firm Resources and Sustained Competitive Advantage Jay Barney The Eleven Deadliest Sins of Knowledge Management Liam Fahey & Laurence Prusak Whats Your Strategy for Managing Knowledge Morten T. Hansen, Nitin Nohria, & Thomas Tierney 11/28/2015 2 MIS 580 - Knowledge Management Slide 3 Jay Barney Journal of Management VOL 17, NO. 1 1991 Slide 4 Sustained competitive advantage has become a major area of research in strategic management. Four empirical resources to generate competitive advantage value, rareness, imitability & sustainability Application of the resource based model by analyzing the potential of firm resources for generating sustained competitive advantage Examining the implication of this firm resource model of competitive advantage for other business disciplines. 11/28/2015 4 MIS 580 - Knowledge Management Slide 5 Strengths Weaknesses Strengths Weaknesses Opportunities Threats Opportunities Threats Internal Analysis External Analysis RESOURCE BASED ENVIRONMENTAL MODELS MODEL OF COMPETITIVE ADVANTAGE 11/28/2015 5 MIS 580 - Knowledge Management Implement strategies that exploit internal strengths Respond to environmental opportunities Neutralize external threats Avoid internal weaknesses Slide 6 Firm Resources: include all assets, capabilities, organizational processes, firm attributes, information, knowledge etc. that enable the firm to conceive of and implement strategies that improve its efficiency and effectiveness. There are 3 types of firm resources: 1. Physical Capital Resources 2. Human Capital Resources 3. Organizational Capital Resources 11/28/2015 6 MIS 580 - Knowledge Management Slide 7 Firm Resources Physical Capital Human Capital Organizational Capital Physical technology used in a firm Firms plant & equipment Geographic location Access to raw materials Training Experience Judgment Intelligence Relationships Insight Formal reporting structure Formal and informal planning Controlling and Coordinating systems Informal relationships among groups (internal and external to firm) 11/28/2015 7 MIS 580 - Knowledge Management Slide 8 Competitive Advantage: Implementing a value creating strategy not simultaneously being implemented by any current or potential competitors. Sustained Competitive Advantage: When a firm 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. 11/28/2015 8 MIS 580 - Knowledge Management Slide 9 1. Firms within an industry are identical in terms of the strategic relevant resources they control and the strategies they pursue. 2. These models assume that should resource heterogeneity develop in an industry or group through new entry, that this heterogeneity will be short lived because the resources that the firms use to implement these strategies are highly mobile. 11/28/2015 9 MIS 580 - Knowledge Management Slide 10 The first firm in an industry to implement a strategy can obtain a sustained competitive advantage over other firms. Eg. Gain access to distribution channels, develop goodwill with customers, develop a positive reputation However, homogeneous and highly mobile resources would not generate the first-mover. 11/28/2015 10 MIS 580 - Knowledge Management Slide 11 Strong entry or mobility barriers would enable the firms to obtain a sustained competitive advantage vis--vis firms that are not in their group. However, barriers to entry and mobility only exist when resources are heterogeneous and immobile. 11/28/2015 11 MIS 580 - Knowledge Management Slide 12 1. Firms within an industry or group may be heterogeneous with respect to the strategic resources they control. 2. These resources may not be perfectly mobile across firms, and thus heterogeneity can be long lasting. 11/28/2015 MIS 580 - Knowledge Management 12 Slide 13 Valuable Resource must exploit opportunities and/or neutralize threats Rare Resource should not be freely available among a firms current and potential competition Imperfectly imitable Resource should not be able to be imitated easily Not substitutable There must be no strategically equivalent valuable resources that are themselves either not rare or imitable. 11/28/2015 13 MIS 580 - Knowledge Management Slide 14 Unique historical conditions: Firms ability to acquire and exploit some resources depends on its unique position in time and space and other idiosyncratic attributes Causal ambiguity: The link between the resources controlled by a firm and a firms sustained competitive advantage isnt understood or understood imperfectly by the competitors Social complexity Resources may be socially complex- beyond the ability of firms to systematically manage and influence Eg. Interpersonal relations among managers, firms reputation among suppliers and customers etc. 11/28/2015 14 MIS 580 - Knowledge Management Slide 15 Firm Resource Heterogeneity Firm Resource Immobility Value Rareness Imperfect Imitability --History Dependent --Causal Ambiguity --Social Complexity Substitutability Sustained Competitive Advantage 11/28/2015 MIS 580 - Knowledge Management 15 Slide 16 Strategic Applications Formal Planning: Highly imitable, not a good source of sustained competitive advantage Informal Planning: Potential evaluated by considering how rare, imperfectly imitable and substitutable processes are Information Processing Machines can be highly imitable Source of SCA depending on type of IS and if the IS is deeply embedded in a firms formal and informal management decision making process Positive Reputations Usually depends upon specific, difficult to duplicate historical settings Good source of sustained competitive advantage 11/28/2015 16 MIS 580 - Knowledge Management Slide 17 Resource-Based View of Knowledge Management for Competitive Advantage 1 Leila A. Halawi, Jay E. Aronson and Richard V. McCarthy Nova Southeastern University, Fort Lauderdale, USA Terry College of Business, The University of Georgia, Athens, USA Lender School of Business, Quinnipiac University, Hamden, USA Success in todays global, interconnected economy springs from the fast and efficient exchange of information. Sustainable competitive advantage is no longer rooted in physical assets and financial capital, but in effective channeling of intellectual capital 11/28/2015 17 MIS 580 - Knowledge Management 1. Electronic Journal of Knowledge Management; 2005, Vol. 3 Issue 2, p75-86 Slide 18 Knowledge and its application are the means by which creativity can be promoted, innovation facilitated and competencies pulled KM drivers include competition, customer focus, the challenge of a mobile workforce, equity in the workplace, and the global imperative KM is a conscious strategy of getting right knowledge to the right people at the right time & helping people share and put information into action KM has been applied to a broad spectrum of activities designed to manage exchange and create or enhance intellectual assets within an organization 11/28/2015 MIS 580 - Knowledge Management 18 Slide 19 Identifying the strategic business drivers Establishing the knowledge core and interrelationships Applying just-enough-discipline (JED)Monitoring and rebalancing 11/28/2015 MIS 580 - Knowledge Management 19 Slide 20 11/28/2015 20 MIS 580 - Knowledge Management Current video game industry vs. other video game industry The Nintendo creates difference by developing low cost hardware and software, new, intuitive game play input and original game genres for sustaining competitive advantage Nintendo achieves strategic positioning by two key factors: Strong Community Immersive games 2.The Nintendo Strategy, http://www.n-sider.com/articleview.php?articleid=495 Slide 21 Do you consider knowledge as the most important valuable resource for firms to create sustained competitive advantage in todays information centric world? With new upcoming technologies and the internet for ease of availability of information, do you think that there exists a threat for resource imitability? 11/28/2015 21 MIS 580 - Knowledge Management Slide 22 Liam Fahey Laurence Prusak California Management Review VOL 40, NO. 3 SPRING 1998 Slide 23 The Eleven Sins 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 What can be done? 11/28/2015 23 MIS 580 - Knowledge Management Slide 24 Knowledge is different from data or information Yet managers seem reluctant to distinguish between the three There is little education or training to prepare managers for the concept of knowledge This is a critical error and contributes directly to all errors that follow Reluctance to use the knowledge word due to anti-knowledge culture; compelled to do knowledge work by stealth 11/28/2015 24 MIS 580 - Knowledge Management Slide 25 Knowledge is a flow, not a stock item It is in constant flux and change Individuals create it and it is largely self- generating It is inseparable from the individuals who develop, transmit, and leverage it This view results from: 1. Education system: learn facts and regurgitate them 2. Information Technology: capture > store > retrieve > transmit 11/28/2015 25 MIS 580 - Knowledge Management Slide 26 Knowledge is what a knower knows; there is no knowledge without someone knowing it originates between the ears of individuals can be represented in and embedded in organizational processes, routines, and networks cannot truly originate outside the heads of individuals Emphasis on knowledge as stock shifts the focus of knowledge work away from individuals 11/28/2015 26 MIS 580 - Knowledge Management Slide 27 A fundamental purpose of managing knowledge is to build a shared context Shared context means a shared understanding of an organizations external and internal worlds and how they are connected Knowledge is a direct outcome of experiences, reflection, and dialogue three activities that use up the most precious managerial asset time 11/28/2015 27 MIS 580 - Knowledge Management Slide 28 Tacit knowledge plays a central role in shaping and influencing explicit knowledge Tacit knowledge is the means by which explicit knowledge is captured, assimilated, created, and disseminated Organizations are reluctant to grapple with managing tacit knowledge; fear it is inaccessible and impossible to influence Example: refusal to believe explicit knowledge that conflicts with long-held tacit beliefs 11/28/2015 28 MIS 580 - Knowledge Management Slide 29 Knowledge is about imbuing data and information with decision and action relevant meaning Knowledge is inseparable from thinking and acting False assumptions in approaching KM: Access to information is equivalent to insight, value, or utility The value of data is anything but obvious Tendency to segregate knowledge users from those generating knowledge Knowledge efforts of many organizations are misdirected Commit extensive resources to refining and perfecting data and information at the expense of deriving decision and action implications 11/28/2015 29 MIS 580 - Knowledge Management Slide 30 Getting to different states of knowledge development requires some form of reasoning Explicating thinking and reasoning processes is especially critical in the case of explicit knowledge Many organizations pay little attention to modes of reasoning Dominance of tacit knowledge is principal reason; managers beliefs overwhelm conflicting data Need to challenge prevailing modes of thinking and reasoning to prevent knowledge from solidifying 11/28/2015 30 MIS 580 - Knowledge Management Slide 31 To inform and influence decision making, knowledge must focus on the future Knowledge creates a shared context for addressing the future Yet most organizations use knowledge predominately for understanding the past Discussing the future is rarely the driving focus of knowledge work Causes include the comfort and ease of collecting data about the past and present as opposed to the future 11/28/2015 31 MIS 580 - Knowledge Management Slide 32 Experiments are a crucial source of the data and information necessary for the invigoration of knowledge and the creation of new knowledge New approaches to analysis, initiating pilot projects, doing things on trial-and-error The use of technology tends to result in standardized approaches Distinctly new knowledge stems from experimenting 11/28/2015 32 MIS 580 - Knowledge Management Slide 33 Widespread tendency to validate significant IT investment by reference to contribution to developing and leveraging knowledge Pivotal error: technological contact is equated to face-to-face dialogue IT can never substitute for the rich interactivity, communication, and learning that is inherent in dialogue Knowledge is primarily a function and consequence of the meeting and interaction of the minds 11/28/2015 33 MIS 580 - Knowledge Management Slide 34 Many organizations seek to measure knowledge directly rather than its outcomes, activities, and consequences Emphasize the scope, depth, number, and quality of databases; the number of hits on intranets Proxies for outcomes include patents, new products developed and introduced, customer retention, and process innovation Stock is given prominence while flow, because it is so difficult to measure, receives minimal attention 11/28/2015 34 MIS 580 - Knowledge Management Slide 35 Three actions to avoid errors 1. Continuously reflect on knowledge as an organizational phenomenon Develop shared understanding at local levels Allow individuals frequent opportunities to discuss and debate what knowledge is Help individuals identify their current and desired knowledge roles Ask individuals to identify knowledge implications for group behavior and processes 11/28/2015 35 MIS 580 - Knowledge Management Slide 36 2. Managers must be obsessive about noting and correcting errors in their stock of knowledge Must go beyond verification of so-called facts Expose knowledge content and subject it to scruitiny in every way 3. Managers must be vigilant about detecting and correcting errors in the processes of knowing the generating, moving, and leveraging of knowledge throughout the firm 11/28/2015 36 MIS 580 - Knowledge Management Slide 37 This playing field is flattened by the unfettered transfer of information Prusak: Friedman and others make a fundamental error when they argue that brute connectivity will level the playing field Their mistake is that theyre confusing information with knowledge 3. Harvard Business Review; April2006, Vol. 84 Issue 4, p18-20, 3p, 1c Several technological and political forces have converged, and that has produced a global, Web-enabled playing field that allows for multiple forms of collaboration without regard to geography or distance or, soon, even language. -- Thomas Friedman, author of The World is Flat Several technological and political forces have converged, and that has produced a global, Web-enabled playing field that allows for multiple forms of collaboration without regard to geography or distance or, soon, even language. -- Thomas Friedman, author of The World is Flat 11/28/2015 37 MIS 580 - Knowledge Management Slide 38 No amount of IT can speed the acquisition of knowledge IT infrastructure is good at moving information, but not knowledge, from one place to another It takes just as long today to learn French, calculus or chemistry as it did 200 years ago Knowledge is time-consuming and expensive to develop, retain and transfer Most people in the world remain out of the knowledge loop and off the information grid Giving everyone access to email and Google will never in itself flatten the earth 11/28/2015 38 MIS 580 - Knowledge Management Slide 39 Do you agree or disagree with Prusaks argument that No amount of IT can speed the acquisition of knowledge? Do you agree or disagree with any of Fahey and Prusaks Eleven Deadliest Sins of Knowledge Management? How do we know if knowledge management efforts produce satisfactory results? 11/28/2015 39 MIS 580 - Knowledge Management Slide 40 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 11/28/2015 40 MIS 580 - Knowledge Management Slide 41 Morten T Hansen Nitin Nohria Thomas Tierney Harvard Business Review March-April 1999 Slide 42 Knowledge is carefully codified and stored in databases, where it can be accessed and used easily by anybody in the company Codification Knowledge is closely tied to the person who developed it and is shared mainly through direct person-to person contacts. Personalization 11/28/2015 42 MIS 580 - Knowledge Management Slide 43 11/28/2015 43 MIS 580 - Knowledge Management Slide 44 Dealing with similar problems over and over again. Customers gain because consultants can build a reliable, high-quality info system faster for lower price Codification Tackle problems that dont have clear solution on the outset. Create a highly customized solution to a unique problem. Charge high fees for their service. Personalization 1. Create Value for Customer 11/28/2015 44 MIS 580 - Knowledge Management Slide 45 Rely on the economics of reuse. Reuse of knowledge saves work, reduces communication costs. Allows a company to take on more projects. Codification Rely on logic of expert economics. Offer clients advice rich in tacit knowledge Time consuming, expensive and slow. Charge higher price for service. Personalization 2. Turning a profit: 11/28/2015 45 MIS 580 - Knowledge Management Slide 46 Hire implementers Train using knowledge management repositories. Recruit in large numbers Work through different scenarios during training. Codification Hire inventors Recruit very few, very carefully. Mentor to use analytical and creative skills on unique business problems. Personalization 3. Managing People: 11/28/2015 46 MIS 580 - Knowledge Management Slide 47 Codification Nurse uses clinical decision architecture to assess callers symptoms. Knowledge repository contains algorithms of more than 500 illness and symptoms. Initial investment was high Algorithms used about 8,000 times every year Charges low price per call. Has captured 50% of call- center market Growing 40% each year Personalization Provide the best, most customized advice and treatment to cancer patients Variety of experts consult and collaborate to treat each patient. Intensive face-to-face communication to ensure knowledge transfer between researchers and clinicians. Pays high salary to its employees. Consistently ranked as the top cancer research and treatment center in the country Access Health Memorial Sloan-Kettering Cancer Center 11/28/2015 47 MIS 580 - Knowledge Management Slide 48 Codification Assembles inexpensive PCs and sells directly to customer System drives the operation Invested heavily in electronic repository Does not deliver highly customized orders. In 1997 - shipped 11 million PCs Sales - $12.3 billion Has grown 83% annually over the past 5 years. Personalization Develops innovative products Technical knowledge is transferred to product development teams in a timely way through person-person exchanges. Engineers routinely visit different divisions and share ideas about possible new products. Extremely successful in its field. Dell Hewlett Packard 11/28/2015 48 MIS 580 - Knowledge Management Slide 49 Codification Invested heavily in codification process 250 people at the Center for Business Knowledge manage the electronic repository and help consultants find and use information Personalization Focus on dialogue between individuals, brain storming sessions and one-on- one conversations. Use information technology mainly to connect people. Anderson Consulting / Ernst & Young Bain, Boston Consulting Group/ McKinsey 11/28/2015 49 MIS 580 - Knowledge Management Slide 50 Successful companies pursue one strategy and use the second strategy to support the first. 80-20 split 80% of knowledge sharing follows one strategy, 20% the other. Companies run into serious trouble when they fail to stick to one approach. KM strategy must be aligned with business strategy. 11/28/2015 50 MIS 580 - Knowledge Management Slide 51 Ask the following questions: 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 answers to these questions are clear, the following questions need to be addressed Standardized or customized products? Mature or innovative products? Do employees rely on explicit or tacit knowledge to solve problems? 11/28/2015 MIS 580 - Knowledge Management 51 Slide 52 Never isolate Knowledge Management may risk losing its benefits. Only strong leadership can provide the direction a company needs to choose, implement, and overcome resistance to a new knowledge management strategy. 11/28/2015 52 MIS 580 - Knowledge Management Slide 53 DIFFERENT KNOWLEDGE, DIFFERENT BENEFITS: TOWARD A PRODUCTIVITY PERSPECTIVE ON KNOWLEDGE SHARING IN ORGANIZATIONS 4 MORTEN T. HANSEN MARTINE R. HAAS Harvard University 11/28/2015 53 MIS 580 - Knowledge Management 4. Strategic Management Journal; Nov2007, Vol. 28 Issue 11, p1133-1153, 21p Slide 54 Using electronic documents of high quality and relevance saves time but does not enhance the quality of the work. H1 Search and transfer efforts involving electronic documents take time but do not affect the quality of work. H2 Enlisting help from experts increases quality of work but does not save time. H3 Search efforts for people with relevant experience and lack of effort by these people decrease the quality of work. H4 Enlisting help from experts conveys a signal of competence to clients. H5 Help from experts who are unresponsive or display a lack of effort reduces the signal of competence to clients. H6 11/28/2015 54 MIS 580 - Knowledge Management Slide 55 Different types of knowledge have different impacts on a task units performance. Electronic documents improved the time efficiency of the teams. Personal advice improved the quality of work and signaled their competence to clients. Usefulness of distinguishing between content and process variables. 11/28/2015 55 MIS 580 - Knowledge Management Slide 56 What do you think is the best strategy to adopt? Which do you think is easier to incorporate into the organization Personalization or Codification? 11/28/2015 56 MIS 580 - Knowledge Management