Knowledge Management - Klaus North

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Klaus North and Gita Kumta
Knowledge Management
Value Creation Through Organizational Learning
2nd ed. 2018
Klaus North
Wiesbaden Business School, Hochschule RheinMain, Wiesbaden, Germany
Gita Kumta
School of Business Management, SVKM’s Narsee Monj. Inst. of
Management Studies, Mumbai, Maharashtra, India
ISSN 2192-4333 e-ISSN 2192-4341

Springer Texts in Business and Economics
ISBN 978-3-319-59977-9 e-ISBN 978-3-319-59978-6
https://doi.org/10.1007/978-3-319-59978-6
Library of Congress Control Number: 2017962625
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The ability to create and maintain the knowledge infrastructure, develop
knowledge workers and enhance their productivity through creation, and
nurturing and exploitation of new knowledge will be the key factors in a
nation becoming a knowledge superpower.
–APJ Abdul Kalam, (Former President of India)
Prologue
On the path towards a knowledge-based society, organisations – firms,
public institutions, non-governmental organisations – increasingly face the
challenge to mobilise knowledge resources for creating value in a
sustainable manner. The transformation towards a digitized economy and
society deeply changes how we manage information and knowledge, how
we connect, collaborate, learn and decide within and across organizations.
While digitalization offers new opportunities for disruptive renewal;
knowledge workers, managers and organizations will have to recreate their
governance, leadership, innovation, knowledge and learning processes and
practices as well as their work organization. New business models and
digitally enabled co-creation emerge, requiring new ways of managing
knowledge.
This book aims at providing an overview of the fields of knowledge-
based management as well as offering guidance for the implementation of
knowledge management.
As the fruit of more than twenty years of research and consultancy
projects carried out by both authors, this is the first textbook to bring
together perspectives and practices on knowledge-based value creation
from all continents.
It is intended not only for academic education but also to provide
guidance to managers, business consultants, trainers, coaches and those
interested in learning about organisations in a knowledge economy. While
the main focus of this book is on businesses, many of the approaches,
methodologies and tools explained are also applicable in public
administration and non-profit organisations.
This book also presents «state-of-the-art» theory and practice. Many
case studies, examples, questions, assignments as well as easy-to-use
knowledge management tools at the end of each chapter make this work a
compendium for learning and for implementing knowledge management
initiatives.
This book begins with an « Introductory summary ».
Chapter 1 deals with the changed environment of competition in
knowledge-based societies and increasingly digitalised economies, and a
self-assessment invites the reader to evaluate their own organisation.
Chapter 2 explains what knowledge means in organisations and clarifies
the relation between information, knowledge and competitiveness.
Chapter 3 addresses the issue of finding the right organisational form to
enable organisational learning, innovation and «boundaryless» knowledge
flows. By using several case studies, different forms of organisations are
described from the viewpoint of knowledge structure and knowledge
transfer.
Chapter 4 underlines the significance of people for the knowledge of an
organisation, and focuses mainly on future working methods in knowledge
firms as well as new perceptions of roles of knowledge workers 4.0.
Chapter 5 concentrates on strategies for managing knowledge and offers
an explanation of the «knowledge market» concept.
Chapter 6 is devoted to knowledge management in such different
contexts as managing knowledge across cultures, countries and regions as
well as in small businesses and the public sector.
Chapter 7 concentrates on how information and communication
technologies associated with the digital transformation can support
knowledge work.
Chapter 8 addresses the issues of intellectual capital reporting and how
to protect and safeguard the knowledge of an organisation.
Chapter 9 provides guidance on implementing knowledge management
initiatives in practice and on fulfilling the KM requirements of ISO
9001:2015 in particular.
This book discusses knowledge management predominantly from an
organisational and business perspective, but for those readers who are
interested on a knowledge worker and leadership perspective based on Peter
Drucker’s thinking, we recommend North and Gueldenberg: Effective
Knowledge Work: Answers to the Management Challenge of the 21st
Century (Emerald Publishing).
Our thanks go to Deepti Parte and Virendra Degvekar for translating,
formatting and editing this book and to Ian Copestake and Christopher
Drodge for proofreading. We also thank Silke Bartsch for designing
appealing graphs and figures. Lastly, we are also grateful to Springer for
their support of the book.
Klaus North
Gita Kumta
Wiesbaden, Germany/Mumbai, India
Spring 2018
Introductory Summary
« L’ entreprise est le lieu où s’organisent les savoirs et les
intelligences individuels en une intelligence collective créatrice
capable d’ entreprendre »Jacques Morin
(The enterprise is the place where individual knowledge and
intelligence converge to form a collective and creative intelligence
capable of undertaking entrepreneurial actions)
We have tried to encapsulate the essence of this book by providing brief

answers to the following ten questions regarding knowledge-based
management.
– Why is «knowledge» and knowledge management a hot topic of
discussion today?
– What is the relevance of knowledge as a competitive factor?
– What does «knowledge» of an organisation actually mean?
– Is it possible to measure knowledge?
– What is knowledge management?
– What are the hurdles in the creation and use of knowledge?
– How to promote knowledge sharing?
– How can an enabling environment that promotes knowledge flows be
developed?
– How can processes and structures be organised to support a «knowledge
market» in a company?
– How should an organisation begin with the introduction of knowledge
management?
1. Why is «knowledge» and «knowledge management» a hot

topic of discussion today?
With globalisation and digitalisation firms, public institutions and non-
governmental organisations realise that sustaining competitive advantage or
reaching goals requires tapping the full creative potential and knowledge of
all members of the organisation. The business environment is transforming
from that which was largely dominated by physical resources to one
dominated by knowledge. Companies are increasingly designing products
and services which are a result of and collaboration within and across
organisations. Quick organisational learning and agile processes are
required to find adequate answers to faster changes in the markets and
higher speed of innovation, resulting in fall in prices, shorter product
lifecycles, personalisation of customer needs, establishment of new
business areas, etc. For this purpose, it is necessary to mobilise all relevant
knowledge resources. Traditional potential for rationalisation and
differentiation have to a large extent been exhausted. However,
«knowledge» as a resource still retains rationalisation potentials (e.g. by
transferring best practices) and differentiation potentials (e.g. by combining
knowledge). The developments in information and communication
technology offer the option of dealing with huge volumes of information at
low cost, allowing people to collaborate with each other even over long
distances, and so facilitate co-creation, decision support and the exchange
of knowledge (see ► Chap. 1 ).
2. What is the relevance of knowledge as a competitive factor?

The specific set of knowledge and competence of organisations supports
their ability to offer unique products and services and enables operational
effectiveness in creating customer value. The intelligent use of knowledge
about customers enables the management of individualised customer
journeys by recognising the customer’s present and future needs. Having
knowledge about competitors and other innovative organisations helps to
learn from them and position itself accordingly. Productivity and quality
increase by process know-how and transfer of « best practices » within and
across the company. A transparent presentation of the « intellectual capital
» makes a company more attractive to investors. Thus, a company can
achieve long-lasting competitive advantages, especially if its knowledge is
difficult to be copied or transferred. This applies to know-how of employee
teams, patents, personal and organisational networks as well as to
organisation structures that promote cooperation and exchange of
information. An organisation’s ability to learn and discard irrelevant
knowledge – i.e. to learn and unlearn – is of great importance in this age of
knowledge-intensive activities (see ► Chap. 2 ).
3. What does «knowledge of an organisation» actually mean?

Knowledge can be classified as explicit and tacit. Explicit knowledge is
formal and structured and can be codified to be shared, while tacit
knowledge is experiential, consisting of lessons learned while executing
tasks/projects and insights gained from continuous problem resolution.
Among other things, knowledge is comprised of patents, processes,
technologies, abilities, skills and experiences of employees, and information
about customers, markets and suppliers. Knowledge is developed in a
specific context and cannot be considered in an isolated form. It is people
specific and its availability or existence is unknown in many cases. For
example, even if a painter precisely explains to us how he has made a
certain painting, we are unable to reproduce the same painting. The result of
this complexity of knowledge is that it cannot be completely stored and
transferred detached from people. Knowledge is not « frozen food » that can
be randomly stored, broken down and transferred. It is like preparing fresh
food and learning from it every time; knowledge is the process of knowing
(see ► Chap. 2 ).
4. Is it possible to measure knowledge?

«What cannot be measured cannot be managed» is a frequent saying in
management. Therefore, some organisations structure their « Intellectual
Capital » and have started to experiment with Intellectual Capital Reporting
and to develop indicators that refer to customers, employees, processes,
innovations and finance capitals. The « Balanced Scorecard » of Kaplan
and Norton also helps in evaluating knowledge and learning associated with
objectives and processes. However, at present, there is no comprehensive
methodology for measuring organisational knowledge (see ► Chap. 8 ).
5. What is knowledge management?

Knowledge management enables individuals, teams and entire organisations
to collectively and systematically create, share and apply knowledge to
achieve their strategic and operational objectives. Knowledge management
contributes to increasing the efficiency and effectiveness of operations on
the one hand and to innovate and change the quality of competition on the
other. The aim of knowledge-oriented management is to generate
knowledge from information and convert this knowledge into a sustainable
competitive advantage that can be measured as success in the business. In
view of this, knowledge management is comprised of the following tasks
and purposes:
– Acquiring knowledge : Ensuring that the information and knowledge
necessary for business development and business processes is available.
– Creating knowledge : Ensuring that the knowledge is developed in the
most suitable place inside or outside the company and that it leads to
innovation.
– Sharing and using knowledge : Ensuring dissemination, learning and
optimum use of knowledge.
– Learning : Ensuring that the organisation and each of its employees is
able to learn and to reflect as well as apply what is learned.
– Protecting knowledge : Knowledge is an asset and its value needs to be
protected by keeping it updated through contributions from people.
The challenge is to evolve the right approach for managing knowledge.
It depends on the culture of the organisation and is a combination of
«people systems» and «information systems». The approach of « knowledge
ecology » emphasises that companies should achieve the right growth
conditions for « knowledge plants » (see ► Chap. 5 ).
6. What are the hurdles in the creation and use of knowledge?

Hurdles in the creation and use of knowledge in many companies can be
summarised using the following points:
– Organisation structure (e.g. line of business, establishments, and profit
centre) and values practiced in the organisation create obstacles to
knowledge flows. Knowledge is power and is therefore kept under
wraps. The « not invented here » syndrome prevents transfer of
knowledge.
– Reward and appraisal systems offer too little incentive to collaborate,
learn and transfer knowledge.
– There are a lack of efficient processes for creating and transferring
knowledge . Information systems are not user friendly.
– Knowledge is often confused with information and is therefore treated as
a product such as « frozen food » (see ► Chap. 3 ).
7. How to promote knowledge sharing?

Managing a company from the knowledge point of view means aligning
behaviour and cooperation directed towards shared goals and values of the
organisation as a whole. This should be done in such a way that the short-
term success of units and the long-term development of competence of the
organisation as a whole can be ensured.
The following three conditions must be fulfilled in order to create and
transfer knowledge effectively:
– Enabling conditions : Corporate values, guiding principles, mission,
vision and the reward systems must interconnect with the success of the
business units and the contribution to the development of the whole
organisation.
– Rules of the game : A knowledge market should be established in the
company with supply and demand. Those in need of a solution can seek
knowledge and those who have insights can provide knowledge.
– Processes/structures : Efficient processes, structures and media should be
developed for creating and transferring knowledge (see ► Chaps. 3
and 4 ).
8. How to create a «knowledge ecology» that promotes

knowledge flows and learning across the organisation?
A knowledge-promoting environment – also known as a knowledge
ecology – contains a value system that is characterised by terms like trust,
cooperation and openness to continuous change.
Today, the goals and incentive systems in many of the companies are
based on business units or profit centres. Individual performance is
honoured more than teamwork. However, under knowledge management,
companies begin to consider measurable contributions to the creation and
transfer of knowledge in their appraisal systems. While rewarding
knowledge workers, the success of the entire organisation is heavily
weighted (e.g. using equity options) in order to encourage transfer of
knowledge and teamwork across firms.
By introducing a « Balanced Scorecard », the traditional financial
indicators can be complemented by competence-based criteria (based on
customer, employees, processes, innovations, etc.). Companies are
increasingly appointing « knowledge managers » at senior management
level. However, these efforts will be successful only if senior management
is committed to knowledge management (see ► Chaps. 4 and 9 ).
9. How can we organise processes and structures to support a

knowledge market in an organisation?
Establishing a knowledge market facilitates knowledge supply and demand,
brings knowledge sellers and knowledge buyers in contact, facilitates
exchange of knowledge and determines the exchange conditions.
What does this actually mean? Firstly, it is necessary to achieve
transparency in terms of «who knows what in the organisation». Once the
knowledge supply is presented transparently, the sellers and the buyers
should be brought into contact with each other. Formal and informal
networks (e.g. communities of practice) are increasingly gaining
importance for this purpose. Contact fairs, approaches via the internet,
debates, exchange of experiences, mentoring, etc., are other options to bring
knowledge sellers and knowledge buyers in contact with each other.
The common interest of the seller and the buyer is crucial for the
success of the subsequent exchange of knowledge or the collective
development of knowledge. Exchange and development of knowledge can
take place through competence networks, cooperative projects, personnel
rotation and exchange of manuals as well as process and customer
information (see ► Chaps. 5 and 9 ).
10. How should a company introduce knowledge management?

Experience has shown that a combined change process from top to bottom
(top down) and from bottom to top (bottom up) supported by appropriate
information technology is promising. It is possible to adopt different ways
of introducing knowledge management.
The following arrangements should be made:
– Knowledge, learning and innovation are integral parts of the overall
organisational strategy. The leaders of the organisation should be fully
committed to actively managing knowledge resources: «Knowledge
creation and transfer is very important for ensuring prolonged
competitiveness of our company. The performance of the management
and the employees is measured based on this».
– Management and reward systems should be reformed so that learning and
competence development oriented at the overall goals of the organisation
are honoured. Collaboration is a defining principle across the
organisation. Managers and leaders recognise and reinforce the link
between knowledge, learning and performance.
– Relevant knowledge is made available and enriched in processes, work
flow and projects. Competence networks and « Communities of Practice
» transfer knowledge within and outside the company (e.g. to suppliers).
– The information and communication systems ensure that information is
easy to access and retrieve. Selected information is sent to potential users
in a systematic and coherent manner.
Firms should avoid to create a knowledge management structure that is
parallel to the «real business», but rather make sure that KM is integrated
into all business functions.
This introduction strategy of k nowledge management leads to short-
term successes that pave the path for a long-term strategy of knowledge
management. The « Twelve-point programme » at the end of this book will
assist its implementation (see ► Chap. 9 ).
Contents
1 Towards a Digitally Enabled Knowledge Society
1.1 Knowledge: A Resource for Creating Wealth
1.1.1 Knowledge Societies and Economies
1.1.2 International Division of Labour Based on Intangible
Assets
1.1.3 Accelerated Competition: Improving Faster and Becoming
Different
1.1.4 What Is Knowledge Management?
1.2 How Organisations Learn
1.3 The Knowledge Firm: A Quick Assessment
1.4 Key Insights of Chapter 1
1.5 Questions
1.6 Assignments
1.7 KM-Tool: Knowledge Café
References
2 Knowledge in Organisations
2.1 Knowledge Based Value Creation
2.1.1 The «Knowledge Ladder»: Information, Knowledge and
Competence
2.1.2 Fields of Action of Knowledge Management
2.1.3 KM Maturity Asessment
2.2 Dimensions of Knowledge
2.2.1 Nature of Knowledge
2.2.2 Availability and Conversion of Knowledge: SEICI-Model
2.2.3 The Value Dimension of Knowledge
2.3 Knowledge as Competitive Factor
2.3.1 Knowledge-Based Theory of the Firm
2.3.2 Knowledge as Strategic Competitive Factor
2.3.3 Impact of Knowledge Management Practices on
Performance
2.5 Questions
2.6 Assignments
2.7 KM-Tool: Idea Competition
References
3 Organisational Forms to Leverage Knowledge
3.1 Balancing Antagonisms
3.1.1 Stability Versus Renewal
3.1.2 Competition Versus Cooperation
3.2 Platforms for Knowledge Creation
3.2.1 The Hypertext Organisation
3.2.2 The Platform Organisation
3.3 From «Infinitely Flat» to «Star Burst»
3.3.1 The Infinitely Flat Organisation: Effective Replication of
Routines
3.3.2 The Inverted Organisation: Support to Individual
Expertise
3.3.3 The Starburst Organisation: The New Business Creator
3.3.4 The Spider Organisation: Creating Value by Networks
3.4 Overcoming Deficiencies of the Multidivisional Organisation
3.4.1 Independence Versus Integration
3.4.2 The Entrepreneurial Corporation
3.5 Knowledge Alliances
3.6 Groups as Knowledge-Promoting Forms of Organisations
3.8 Questions
3.9 Assignments
3.10 KM-Tool: After Action Review (AAR)
References
4 Knowledge Work(ers) in the Digital Age
4.1 The Future of Knowledge Work
4.1.1 A New Social Contract
4.1.2 Types of Knowledge Work
4.1.3 Knowledge Work(ers) 4.0
4.2 Drivers and Obstacles of Effective Knowledge Work
4.3 The Actors of the Knowledge Firm
4.3.1 Five Groups of Employees
4.3.2 Redefining Middle Management in a Digital World
4.3.3 Upper Management: Visionary Context Designers
4.3.4 Professionals: The Knowledge Practitioners
4.3.5 Information Brokers and Infrastructure Managers
4.3.6 Support Employees
4.4 Motivating Knowledge Workers
4.4.1 Extrinsic Versus Intrinsic Motivation
4.4.2 Motivating Knowledge Workers
4.5 Competencies for the «Intelligent Firm»
4.5.1 Managing Talent and Competencies
4.5.2 How Does Your Organization Deal with Competences?
4.5.3 Developing Competence
4.6 Communities of Practice: A Learning Approach
4.6.1 Understanding Communities
4.6.2 Ideal Type of Communities of Practice
4.6.3 Dimensions of Communities of Practice
4.8 Questions
4.9 Assignments
4.10 KM-Tool: The Skill or Competence Matrix
References
5 Strategies for Managing Knowledge
5.1 The Need for a Knowledge-Oriented Strategy
5.1.1 Guiding Principles for a Successful Knowledge
Management Strategy
5.1.2 Knowledge Management as Response to Tactical and
Strategic Changes
5.2 Developing a Knowledge Management Strategy: Five Questions
5.3 Focused Strategies: Innovation, Process and Project
Perspectives
5.3.1 Innovation-Oriented KM Strategy
5.3.2 Process-Oriented KM Strategy
5.3.3 Project-Oriented KM Strategy
5.4 Organisations as Knowledge Markets
5.4.1 The Knowledge Market Concept
5.4.2 Creating a Knowledge Market
5.4.3 Roles of Knowledge Managers and Coaches
5.4.4 Defining Principles of the Knowledge Market
5.4.5 Knowledge Culture: An Enabling Framework
5.5 Spaces for Interaction: The Physical Layout
5.7 Questions
5.8 Assignments
5.9 KM-Tool: Knowledge Market
References
6 Context Specific Knowledge Management Strategies
6.1 Knowledge Management in International Contexts
6.1.1 Challenges of Knowing Across Cultures
6.1.2 The Projection Approach
6.1.3 The Integration Approach
6.1.4 The Orchestration Approach
6.1.5 Knowledge-Oriented Project Planning
6.1.6 Bridging the «Knowing-Doing» Gap in International
Service Organisations: Three Cases
6.2 Knowledge Management in SMEs
6.2.1 Coping with Turbulent Environments
6.2.2 Need for Harnessing Organisational Learning in SMEs
6.2.3 Knowledge Management Strategies of SMEs
6.2.4 Framework for Effective Implementation of KM in SMEs
6.3 Knowledge Management in the Public Sector
6.3.1 New Public Management
6.3.2 KM Challenges in the Public Sector
6.3.3 KM Practices in the Public Sector
6.4 Managing Knowledge at a Country or Regional Level
6.4.1 Tangible Versus Intangible Assets
6.4.2 Attracting Talents to Regions
6.4.3 Knowledge Management for Rural Development
6.6 Questions
6.7 Assignments
6.8 KM-Tool: Storytelling
References
7 Information and Communication Technologies Supporting the Digital
Transformation of Knowledge Work
7.1 Changing Needs
7.2 Challenges for Designing ICT Systems
7.3 High Performance Workplace
7.4 ICT Applications for Knowledge Workers: An Overview
7.4.1 Individual Efficiency
7.4.2 Teamwork
7.4.3 Information Supply
7.4.4 Active Information Search
7.4.5 Cooperative Knowledge Use
7.4.6 Management Systems for Planning and Control
7.5 Success Factors for ICT Implementation
7.7 Questions
7.8 Assignments
7.9 KM-Tool: Knowledge Taxonomy and Knowledge Map
References
8 Measuring and Safeguarding Intellectual Capital
8.1 Finding Measures for Intangible Assets
8.2 Intellectual Capital Reporting
8.2.1 Deductive Summarising Approaches
8.2.2 Inductive Analytical Approaches
8.2.3 The Multi-stage Indicator Model
8.2.4 Evaluation of IC Reporting Approaches
8.3 Protecting Knowledge
8.3.1 Loss of Knowledge: The Organisation Forgets
8.3.2 Ways of Safeguarding Knowledge
8.5 Questions
8.6 Assignments
8.7 KM-Tool: Knowledge Inventory
References
9 How to Put Knowledge Management into Practice
9.1 Shaping the Knowledge Organisation of the Future
9.2 KM Implementation Frameworks
9.2.1 Business Excellence Models as an Overarching Framework
9.2.2 ISO 9001:2015 as an Implementation Framework
9.2.3 Step Approach Frameworks to KM
9.2.4 A KM Implementation Framework Based on the
«Knowledge Ladder»
9.3 Implementing KM: A Change Project
9.3.1 Structuring a Change Project
9.3.2 Kotter’s Eight Steps of Change
9.3.3 Implementation Paths of Knowledge Management
9.4 Implementing KM at Individual Level: Key Competencies for
Knowledge Workers
9.5 The 12-Point Programme for Knowledge-Oriented Management
of a Company
9.7 Questions
9.8 Assignments
9.9 KM-Tool: Work-Out (General Electric)
References
Multilingual Glossary
Knowledge Management Resources
Index
List of Figures
Figure 1.1 Three driving forces increasing the importance of «knowledge»
as a factor of competition 3
Figure 1.2 Phases of knowledge production and dissemination 4
Figure 1.3 The value of a company is being increasingly determined based

on its intangible assets 6
Figure 1.4 What hampers the creation and transfer of knowledge? 11
Figure 1.5 Basic questions for the knowledge management of an

organisation 12
Figure 1.6 The knowledge intensity matrix 20
Figure 2.1 The knowledge ladder 35
Figure 2.2 Degree of maturity of knowledge-based management of a

company 39
Figure 2.3 Differences between capital and knowledge 45
Figure 2.4 Four ways to create and transform knowledge 47

Figure 2.5 The spiral of creation and transfer of organisational knowledge
49
Figure 2.6 Organisational knowledge base is part of intangible assets 52
Figure 2.7 Skandia’s structuring of organisational capital 54
Figure 2.8 Performance improvement attributed to KM initiatives (240

impact statements by 48 German firms) 61
Figure 3.1 Balancing stability and renewal 70
Figure 3.2 Balancing competition and cooperation 75
Figure 3.3 Payoff matrix of a two-person knowledge-sharing dilemma 76
Figure 3.4 Criteria to decide whether to share or not to share knowledge 77
Figure 3.5 The hypertext organisation 81
Figure 3.6 The inverted organisation 87
Figure 3.7 The starburst organisation 89
Figure 3.8 The spider organisation 91

Figure 3.9 Evaluation of forms of organisation as per stability of the
company environment and information costs 93
Figure 3.10 The processes and roles in an entrepreneurial corporation 94
Figure 4.1 Possible structuring of work 115
Figure 4.2 Actors in a knowledge-oriented company 121
Figure 4.3 Functions and roles of middle management 124
Figure 4.4 Functions and roles of upper management 126
Figure 4.5 Life-cycle model of the market value of specialised

competence 127
Figure 4.6 Functions and roles of professionals 130
Figure 4.7 Branch competence and inter-branch competence 141
Figure 4.8 Dimensions of communities of practice: the MIEO model 148
Figure 4.9 The competence matrix: who can do what and how well? 153
Figure 5.1 Strategic K gap analysis 160
Figure 5.2 The KM process framework by Buckowitz and Williams 162
Figure 5.3 Strategic objectives according to Traecy and Wiersema 164
Figure 5.4 Strategic knowledge analysis 166
Figure 5.5 Assessment of knowledge management situation 167
Figure 5.6 Information and knowledge analyses of business processes 173
Figure 5.7 How best practices emerge 174
Figure 5.8 Knowledge organisation in project cycles 178
Figure 5.9 Governance concept of knowledge markets as «internal social

market economy» 180
Figure 5.10 The knowledge market concept 180
Figure 5.11 Extract from the short analysis of knowledge-oriented

company 182
Figure 5.12 Actors of knowledge market 183
Figure 5.13 Coaches = catalysts of knowledge management 184
Figure 5.14 Extract from the short analysis of knowledge-oriented

company 190
Figure 5.15 The framework conditions at General Electric encourage

creation and transfer of knowledge 192
Figure 5.16 Types of offices 194
Figure 6.1 Projection: push-out knowledge to subsidiaries 205
Figure 6.2 Different organisational models of international research and

development 206
Figure 6.3 Orchestration fuses multiple capabilities 207
Figure 6.4 Knowledge management strategy at WHO 211
Figure 6.5 Knowledge management framework 220
Figure 6.6 Knowledge repository 223

Figure 6.7 Skandia framework for National Intellectual Capital 232
Figure 6.8 What makes a region attractive for knowledge workers 233
Figure 7.1 Social media – features, content, means, people and purpose
248
Figure 8.1 Process model of ARCS 277
Figure 8.2 Indicators of «intangible assets monitor» 281
Figure 8.3 The «intellectual capital navigator» 282
Figure 8.4 The «intellectual capital index» 283
Figure 8.5 Structure of Balanced Scorecard 284
Figure 8.6 The intellectual capital statement model developed by the

Intellectual Capital Statement Project Group (AK-WB) 285
Figure 8.7 Implementation of Danish guideline for IT skill resources

department of a bank (an extract) 287
Figure 8.8 Process of measuring and transforming knowledge 288

Figure 8.9 How do organisations forget? 292
Figure 9.1 The knowledge management cycle 308
Figure 9.2 KM implementation framework based on the «knowledge

ladder» 312
Figure 9.3 Nihilent’s MC 3 framework 316
Figure 9.4 Five phase implementation model of project management 319
Figure 9.5 Implementation paths of knowledge management 322

List of Case Studies
Production Impresarios: Orchestrating International Manufacturing
Networks 7
K&P Engineering: Learning Fast 9
The Rise of the Knowledge Market 16
Mumbai’s Dabbawalas – «A Model of Managerial and Organizational

Simplicity» 22
Transfer of Best Practice (Electronic Manufacturing Services) 34
Thought Experiment: Is Knowledge «Justified True Belief»? 36
Evolvement of Knowledge Management at Eureka Forbes Ltd 43
Integration of Knowledge: Taking Over a Foreign Company 45
The Best Bread in Osaka 50
The Value of Knowledge 54
Oticon – The Spaghetti Organisation 72

Creating Organisational Linkages – The Eureka Forbes Senate 74
Mini Case: Mindtree I 78
Allianz Group Business Services (AGBS) Encourages Knowledge

Synergies 79
Sharp – Hypertext in Research and Development 82
Mini Case: WIPRO as a Platform Organisation 84
Financial Service Provider: Replicating Financial Services 86
NovaCare – The Rehabilitation Service Provider 88
3M – The Product Generator 90
The Indian Youth Climate Network (IYCN) 91
Mini Case: Mindtree II 95
KAO – Creative in Japan 98

Fairness Increases Performance – Two Lab Experiments 117
Making Time-off Predictable & Required 120
Mini Case: The «gardener» at MindTree Consulting 125
The Company Breakfast 133
«Sharing Knowledge Earns you Miles» – Initiative of a Management

Consultancy 136
Gamification: Get Employees to Share Knowledge and Expertise by

Making Fun 136
Career in the CSC world: Become More Precious 141
Dare2Share 142
Knowledge Communities at MindTree 143
Two Examples of Communities of Practice 146
Mini Case: www.innocentive.com – A Platform to Tap External

Knowledge 171
«Sense» Increases Innovation Performance 172
Mini Case: Lighthouse Principle: The «Best in Class» Programme 175
Learning to Improve Processes – Two Examples 177
Transferring Knowledge Through a «Listeners Program» at TCL, India 187
Restructuring General Electric towards a Boundary-Less Organisation 191
Knowledge Work Across the World 204
GIZ: From Worldwide Project Experience to Service Products 208
«Headstart» – Transferring Valuable Knowledge in the Welsh Government

229
The Manifesto of «The New Club of Paris» on the Knowledge Society and
its Economic Foundations Extract 231
India’s National Knowledge Commission 233
Storytelling: The inspiring pot: The Difference Between a Report and a

Story 239
A Normal Research Day at a Global Business Software Development
Company 252
Mini Case: Watson in Jeopardy 258
The MITRE Social Business Platform 260
KM at eClerx – an Example of Knowledge Process Outsourcing 266
Intellectual Capital Statement of Austrian Research Centre, Seibersdorf

(ARCS) 276
Intangible Assets Monitor Applied to a Cricket Team 287
Intellectual Capital Statement of a Home Loan Bank 289
Volkswagen’s Knowledge Relay 294
Better Use of Patents at Dow Chemical 295
Suggestions for Knowledge Management in a Small to Medium Law Firm

314
Share TRAnsactions Totally Electronic (STRATE) 318

Competence Networks in an Electronics Company 323
About the Authors
Klaus North
is Professor of International Management at Wiesbaden
Business School, Germany. His current research covers knowledge and

innovation management, particularly know-how transfer within and
between enterprises in an international context. He was the founding
president of the German Knowledge Management Association and was
scientific director of the German Knowledge Management Award. He
frequently consults with major firms, governments and international
organisations and teaches regularly in business programmes internationally.
In the last 20 years, he has contributed to more than 200 knowledge
management initiatives around the world.
Gita A. Kumta
is on the Information Systems faculty at the School of
Business Management, SVKM’s Narsee Monjee Institute of Management

Studies (Deemed-to-be-University), Mumbai, India, and specialises in
enterprise systems and knowledge management and is a recognised research
guide. She holds a master’s degree in Statistics from the Indian Statistical
Institute, Calcutta, and a Doctorate in Management Studies from the
University of Mumbai. Dr. Kumta has around 30 years experience in
industry predominantly in the area of business analysis and consultancy in
financial systems. She actively participates and contributes papers at
conferences on knowledge management, enterprise solutions and e-
governance.
Klaus North and Gita Kumta, Knowledge Management, Springer Texts in Business and Economics
https://doi.org/10.1007/978-3-319-59978-6_1
1. Towards a Digitally Enabled Knowledge

Society
Klaus North1 and Gita Kumta2
(1) Wiesbaden Business School, Hochschule RheinMain, Wiesbaden,

Germany
(2) School of Business Management, SVKM’s Narsee Monj. Inst. of
In an economy where the only certainty is uncertainty, the one sure

source of lasting competitive advantage is knowledgeIkujiro Nonaka
Learning Outcomes
After completing this chapter
– You will have gained an understanding of value creation in the
digitally enabled knowledge economy,
– You will know challenges and approaches to managing knowledge
intensive organisations;
– You will be able to assess the «fitness» of an organisation for
knowledge based competition;
– You can run a knowledge café.
1.1 Knowledge: A Resource for Creating Wealth

1.1.1 Knowledge Societies and Economies
«Knowledge» as a resource for creating wealth is gaining increasing
importance globally at the level of nations, regions, organizations, teams
and individuals. The emerging knowledge societies develop their
capabilities to identify, produce, process, transform, disseminate and use
information to build and apply knowledge for human development. They
require an empowering social vision that encompasses plurality, inclusion,
solidarity and participation (UNESCO 2005, p. 27). In knowledge societies,
the values and practices of creativity and innovation play a major part for
sustaining competitive advantage. Creativity and innovation also lead to
promoting new types of collaborative processes (UNESCO 2005 p. 19),
which are increasingly digitally enabled.
We have to note, however, that every society has its own knowledge
assets developed often over centuries. It is therefore necessary to work
towards connecting the forms of knowledge that societies already possess
and the new forms of development, acquisition and spread of knowledge
valued by the knowledge economy model (UNESCO 2005, p. 17).
Knowledge societies are are dominated by professional experts and their
scientific methods. Knowledge economies are marked by the expansion of
knowledge-producing or knowledge-disseminating occupations (Burke
2000).
Peter Drucker used the term «knowledge society» already in 1969 in his
book «The Age of Discontinuity». In his seminal study «The Production
and Distribution of Knowledge in the United States» Fritz Machlup (1962)
had focused his research on the patent system, but he came to realize that
patents were simply one part of a much bigger «knowledge economy»
which he analysed. In the 1990s detailed studies on the transformation of
labour, property and knowledge were conducted (cf. Stehr 1994; Mansell
and When 1998; Adolf and Stehr 2017 see also Kornienko 2015).
Three Driving Forces

The increasing importance of knowledge as a resource can be traced back to
three interdependent driving forces (◘ Fig. 1.1):
– Structural change: Moving from labour and capital-intensive activities to
information and knowledge-intensive activities means that the companies
increasingly sell information, knowledge or intelligent products and
services. Work and capital is replaced by knowledge as a scarce resource.
This structural change results in changed forms of organisation and
transaction within and among the companies as well as in a changing
role of management and employees.
– Globalisation: Globalisation of the economy has changed the
international division of labour. The countries known as industrial
nations are now becoming knowledge nations. International learning
processes are picking up pace in such a manner that new competitors are
emerging in the world market in a short time span due to fast learning
cycles. Digitalization enables the international delivery of services.
– Information and Communication Technologies (ICT): ICT enables
dealing with big data, connecting easily, collaboration and interaction at
low transaction costs and brings about worldwide information
transparency. Thus with «perfect information» we can come one step
closer to ideal competition. This results in fast market changes and a
higher innovation rate that is reflected in price reductions, shorter
product lifecycles, personalisation of customer requirements and the
emergence of new business areas. A new global information market
place is established. The digital transformation accelerates structural
change and globalisation.
Fig. 1.1 Three driving forces increasing the importance of «knowledge» as a factor of competition
Towards Digitised & Intangible Assets

Currently, we are witnessing a development towards digitised knowledge
societies on a global scale. What does this mean? The move towards an
increasingly digital world is rapidly changing the ways in which people and
organisations create, use & share data, information and knowledge. A
common definition of ‘digital transformation’ is the one coined by
Bounfour (2016), namely ‘the change associated with the application of
digital technology in all aspects of human society’.
◘ Figure 1.2 shows this development in a historic perspective (cf. van
Doren 1991; Burke 2000) starting with the «Age of Reason» (Knowledge
1.0). Even though in ancient times there have been schools of philosophers
reflecting about knowledge, at least in Europe, the sixteenth century is
considered as the start of a systematic scientific exploration of nature and
the development of a more widely accepted scientific method. From about
1700 it became possible to pursue an intellectual career not only as a
teacher or writer but also as a salaried member of certain organisations
dedicated to the accumulation of knowledge, notably the academies of
science (van Doren 1991, p. 27).
Fig. 1.2 Phases of knowledge production and dissemination
The insights gained in the “Age of Reason” enabled the development of

an “Industrial Society” (Knowledge 2.0) in the eighteenth century.
Knowledge was increasingly embedded in machines and production
systems. Knowledge creation had been professionalised.
The twentieth century witnessed the upcoming of an “Information and
Knowledge Society” (Knowledge 3.0) where information and knowledge
became dominant production factors. In the United States and Europe,
already around the year 2000 more than 30% of the economically active
population worked in knowledge-intensive and creative professions such as
engineering, science, teaching, consulting, banking, management,
journalism, medical practice, law and art; in social professions; or in the
information and communication sector, to name just a few (Florida 2002).
The structural change to an information and knowledge society also
involves changes to labour relations where the status of formal and full-time
employment is increasingly complemented by free lance work, self-
employment and entrepreneurial activity (c.f North and Gueldenberg 2011).
This development is discussed in ► Chap. 4.1.
In this economy intangible investments in products, development,
education and training in software as well in increasing the effectiveness of
management processes and information supply turn out to be the decisive
indicators for the future performance of the economy. The value of a
company is therefore determined increasingly by their “intellectual capital”
and less on the basis of book value, i.e. the physical assets of a company
(cf. Sveiby 1997). Thus since the beginning of the 1980s, we witness see a
divergent development of book value and market value of firms, where
some companies are valued on the stock market at ten times or more their
actual book value. The term “intangible assets” has been coined to explain
the difference between both these values. The elements of these intangible
assets that are traditionally called “goodwill” (while selling the company)
include brand names, customer and supplier base, the related market
knowledge, the individual competence of the employees as well as the
“collective problem-solving competence” that is represented by employees,
technologies, software, production processes, patents etc (Sveiby 1997). It
is therefore not surprising that apart from the software companies, even the
branded companies and manufacturers of knowledge-intensive products,
such as medication, exhibit a particularly high degree of intangible assets
(see ◘ Fig. 1.3).
Fig. 1.3 The value of a company is being increasingly determined based on its intangible assets
Knowledge 4.0 refers to a societal stage where applications of digital

technologies are pervasive in everyday life, leading to a “digital ubiquity”
(Iansiti and Lakhani 2014), and also contribute a significant share to value
creation. Researchers find that smart, connected products with their four
capabilities of monitoring, control, optimisation and autonomy transform
competition in the digitally-enabled knowledge economy (Porter and
Heppelmann 2014). Thus, professional expertise is increasingly leveraged
or “augmented” Davenport and Kirby (2016) by cognitive and networked
systems. For example, McKinsey forecasts a potential economic impact of
five to seven trillion US$ through the automation of knowledge work by
2025 (Manyika et al. 2013).
In the “digitised knowledge society” (Knowledge 4.0), digital
transformation strategies take on a different perspective and pursue different
goals (North et al. 2018). From a business-centric perspective, they focus
on the transformation of products, processes, business models and
organisational aspects owing to new technologies such as big data, business
analytics, cloud computing, cognitive systems, robots, social software and
the Internet of Things. From a human-centred perspective, knowledge
management’s focus on collections of (documented) knowledge has been
extended to comprise connections between people (Kaschig et al. 2016) and
to embrace social relations with their corresponding technology support,
also called social knowledge environments (Pawlowski et al. 2014).
Researchers have associated the capabilities of big data analytics to a
“data capitalism” which is “cashing in on our privacy” (Thornhill 2017). In
this view, data has become an important source of monetisation as it enables
the analysis of customer preferences and provide user-optimised
advertising, products and services, and to further develop them. Algorithms
are increasingly pervasive in many fields (Ausiello and Petreschi 2013).
Be it in business or in everyday life, digital transformation strategies
have certain elements in common. These elements can be ascribed to four
dimensions: use of technologies, changes in value creation, structural
changes, and financial aspects (cf. Matt et al. 2015). The transformation of
analogous assets into electronic representations is associated with new
forms of cognition.
1.1.2 International Division of Labour Based on Intangible

Assets
The worldwide availability of information as well as the low-cost and
efficient facilities of communication has led to an explosive rise in
international trade and foreign direct investments through the participation
of more and more countries.
In a generation, the proportion of the gross national product of US to
world gross product has dropped from approximately 50% to around 20%.
New competitors thrust themselves into the world market and learn fast.
ACER, for example, the electronic company founded in Taiwan in 1976
with 11 employees, learnt things rapidly through joint ventures and
alliances. Today, it is a leading international computer and semiconductor
manufacturer.
In the new international division of labour, «selling» information and
knowledge packed in products and services has gained more and more
importance compared to the mere exploitation of cost differences and pure
«economies of scale» that characterised the international division of labour
in the fourth Kondratiev wave (cf. Huws 2005). In particular, trade in
knowledge intensive services and international royalty and licence fee
payments (as a measure for selling intellectual property) have grown
significantly.1 India is an important player in global Knowledge Process
Outsourcing (KPO) including services such as research and information
gathering, e.g. intellectual property research for patent applications;
business and market research, legal and medical services; training,
consultancy, and research and development (Mehrotra 2005; Agarwal and
Nisa 2009; Contractor et al. 2010). The digital transformation allows for
advanced service outsourcing.
The advanced economies are increasingly turning into «Knowledge
nations». Their companies have knowledge about the worldwide markets,
develop product concepts, organise production processes on an international
level as well as control the international logistics of the «supply chain». The
physical production and to some extent even the development of product
components takes place in the new industry nations or emerging markets.
We call this the impresario concept of international division of work as
described in the case study below (North 1997).
The availability of knowledge is also a criterion for decisions pertaining
to where business activities are located. This involves not only the creation
of local market knowledge but also the availability of corresponding
qualified employees and suppliers. Firms aim to research, develop or
produce in a place where one can learn the most. It is not difficult to predict
that in the future, the use of comparative cost advantage will be of less
importance than the use of comparative knowledge advantage.
Creation and transfer of knowledge play an important role even in the
operative management of international companies. This involves decisions
on «which knowledge is created where» and «how can knowledge be
transferred efficiently». Multinational companies are turning into
worldwide knowledge networks with their customers and suppliers.
Case Study
Production impresarios: Orchestrating international manufacturing
networks
«How to ensure global market presence and minimize own
investment?» is the challenge for global companies. One solution is to
become a «production impresario» instead of a manufacturer with high
vertical integration. A «production impresario» develops the product
concept, commissions the product modules to the system suppliers,
coordinates parts production and assembly in an international
manufacturing network and undertakes the sales and distribution of the
products. The power of the production impresario lies in his knowledge of
worldwide markets, technology and innovations. In order to organise
product development, production and sales, the impresario should be in a
position to transfer relevant information along value chains, i.e. he should
be capable of controlling the international learning process and offer
logistics support. The production impresario concept has taken hold mainly
in the global automobile, textile and electronic industry.
Thus, for instance, the multi-domestic concept of a leading truck
manufacturer is based on the knowledge that markets, especially in the
developing countries, cannot be captured with high-tech vehicles that are
produced in high cost countries but are to be sold on a dollar basis. Only
those trucks that are adapted to the purchasing power and conditions of use
in such countries and that possibly contain many parts from local
production are suitable for these growing markets. The basic idea is this:
The truck manufacturer breaks away from the risks of investment and in-
house production with the purpose of slipping more and more into the role
of a know-how supplier, a developer and a worldwide logistics expert. In
this way the firm gets rid of the risk and becomes more agile by passing the
problems of fixed cost pools to others who are involved in production.
Also Benetton operates as a production impresario. Till 2000 Benetton
made part of its production in its own factories and through a wide network
of domestic sub-contractors, mainly specialized in sewing. Now Benetton
has drastically moved to a new strategy, abandoning Italy and organizing
production around a dual supply chain: close locations (East Europe and
North Africa) for quick production and far away locations (Asia) for more
standardized products. This leads to a redefinition of competences for the
Treviso clothing district, where Benetton traditional sub-contractors have
been in few years, drastically curtailed. Benetton restructuring marks the
transition to a new network of competences between agents in the district.
The sales network is organised through a multi-level franchising system.
Approximately 70 independent firms work as regional dealers of the group.
Over 3000 sales outlets worldwide are operated by independent companies
as franchising partners of Benetton. Benetton is responsible worldwide for
the marketing and has area representatives. Thus, with relevant sales and
market data, it is in a position to grow its low equity quickly by using the
franchising concept (Crestanello and Tatara 2009; Fornengo Pent 1992; see
also North 1997).
1.1.3 Accelerated Competition: Improving Faster and

Becoming Different
Rethinking traditional definitions of economy, wealth creation, business
models and organizations and institutional structures has also consequences
how firms compete and institutions act in increasingly digitally enabled
settings.
While the wish «to improve faster» is aimed at increasing efficiency,
this only brings about short term relief in keeping a competitive lead. Take
an example of a leading electronic company which sees an annual erosion
of 15% in the price of its products. Best practice transfer might lead to an
increase in productivity, but is not a long lasing remedy. In order to avert
such a fall in price, the competition parameters must be changed using
innovation of products, processes or business models. Efforts must be taken
to bring unique and inimitable products and services to the market.
Thus, knowledge-oriented management not only means «improving
faster» but also «becoming different, gradually».
Different, because it becomes impossible or very difficult to imitate the
company that acquires a new configuration of resources as a result of a
change in its culture. Gradually, because in most cases this means a change
to a new company culture based on innovation which is a result of a highly
complex process. Such a change must be initiated, organised and sustained
with a lot of patience.
In this respect innovation can be defined as a new configuration of
knowledge resulting in new or improved processes, products or business
models.
Products can be imitated in the short-term or long-term depending on
their complexity. It is very difficult, however, to imitate the capability that
is organised and fixed in a company to create, combine, transfer and store
knowledge and to generate solutions from the knowledge for the present
and future needs of customers. Thus it is a source of long-lasting
competitive advantage. Knowledge competition rewards the skill of playing
with an infinite number of options in order to find new and better ways of
doing things (Romer 1986). For this companies need to develop «dynamic
capabilities» (see ► Sect. 2.3).
Why can this new «knowledge evolution» not lead to the development
of an altogether new quality of competition within and among the
companies? We can take the analogous example of the development
processes of life, which involves the emergence of higher forms from a
constructive interaction of the different primitive forms, through a «Plus
Sum Game» wherein the advantage of one form is linked with the
simultaneous advantage of the other. Knowledge sharing in and across
organisations is such a «Plus Sum Game» in which the sum of what is
gained by all players is greater than the combined sum of what the players
entered the game with (refer to the discussion of the concept of co-opetition
in ► Sect. 3.1).
Another contributing factor to newer forms of interaction and
competition is that the classical limits of companies change and even fade
away at times, which, for example, applies to the concept of open
innovation (Chesbrough et al. 2006).
Companies are increasingly being considered as virtual entities that
revise traditional business concepts: from competitive-rivalled to
cooperative appreciation of competition, from a mere task based
organisation to a process-oriented organisation that is directed towards
value creation, from mistrust-based alliance management to trust based
alliance management. Everyone in the organisation is involved «in a non-
stop process of personal and organisational self-renewal. Everyone is a
knowledge worker - that is to say, an entrepreneur» (Nonaka and Takeuchi
1995). Corporate entrepreneurship can therefore be characterised by three
dimensions: product innovation, risk-taking propensity and proactiveness in
the pursuit of new opportunities (see Barringer and Bluedorn 1999).
However, significant implementation problems confront the recognised
potential of knowledge management in a company. Despite superior
information technology, databases, exchange of experience, work groups,
steering committees, etc. many companies succeed partially or fail
completely in bringing transparency to the knowledge and in using
synergies. Thus they end up «reinventing the wheel». In many cases,
employees are not aware of the developments taking place in some other
area of the same organisation. When working together within a business
area is a challenge in itself, it is even more difficult to cooperate across a
business segment with the purpose of converting the entire available
knowledge quickly and efficiently into solutions for customers’ problems.
This could be viewed as a result of misunderstanding the process of
knowledge creation. While one view is restricted to information processing,
the more successful approach is to view knowledge creation as a process
that enables the company to respond quickly to customers, create new
markets and rapidly develop new products and services. Information
processing only creates formal knowledge in terms of data, codified
procedures and principles, and is measured using metrics such as increased
efficiency, lower costs and improved return on investments (Nonaka and
Takeuchi 1995).
The multi-divisional form of organisation found in a number of major
enterprises often stands in the way of smooth flow of knowledge across the
segments. Hence there is an argument that an efficient creation and transfer
of knowledge within the framework of a hierarchical and multi-divisional
organisation is difficult (Hedlund 1994). Apart from the organisation
structure mentioned above, even the values that are practiced in the
organisation can create restrictions, for knowledge is power and is kept
under wraps. The «not invented here» syndrome hampers the transfer of
knowledge. Often, the rewards and appraisal systems that have an
individualistic orientation offer very little incentive to create and distribute
knowledge (see ◘ Fig. 1.4).
Fig. 1.4 What hampers the creation and transfer of knowledge?
However, there is an increasing awareness that «Creation and exchange

of knowledge is very important for our business and takes us forward».
This increasing awareness among management and employees is a good
starting point for changing-over to a new quality of competition.
Managers interviewed by us summarised the problems and potential of
knowledge management as follows:
If we knew what our company knows, we could fulfil the customer
requirements in a better way, offer innovative products earlier, react faster
to the market changes and increase our productivity. In short, we could
improve at a faster rate.
Case Study
K&P Engineering: Learning fast
K&P Engineering carries out structural analysis for complex buildings
(for example bridges) at two offices with approximately 30 employees,
mostly engineers. Only those engineers who handle projects efficiently and
learn quickly from their mistakes as well as those who distinguish
themselves as experts in a specific area are successful in this business. The
brains of these employees contain highly specialised knowledge about
solutions and recurring errors in construction. How can this information be
stored, made available to all and used for training and continuous
improvement of the younger employees?
At K&P, frequently recurring construction errors as well as good
solutions are documented using a database structured according to types of
buildings. If an employee has to conduct a structural analysis for a new
object, he can update himself with the frequently recurring construction
defects by referring to the database, detect them quickly, avoid them in his
construction work if possible and learn the elements of a «good solution».
This generates a commonly accessible collective knowledge of the
engineering company.
Though it is easy to use the solution database, it is not always easy to
convince the employees to feed their information in the system. They
commit errors, since they work under high pressure, and they would not
like to be linked with errors by documenting them. Further they possibly
feel that the value of their expertise will reduce if others too have access to
their experience. Until now, K&P has succeeded in motivating its
employees to feed information by communicating with them and
convincing them. With an increase in the content of the database, there is an
increase in its use by the employees. Thus a culture of learning from errors
begins to establish itself.
Some typical knowledge problems in organisations

– Employees are unable to find critical existing information when
required. This results in employees using incomplete information or
re-inventing the wheel. Information about a study conducted in a
particular area, if found easily, will help reduce the time in initiating a
study in another similar area and estimate the effort more realistically.
Knowledge is of little value if it cannot be found when needed.
– Lessons are learned but not shared. Knowledge gained through failure
is often undervalued. Events that caused a delay in the project
completion or those that affected sales adversely are often forgotten.
One tends to repeat past mistakes due to a lack of knowledge or the
inaccessibility of the lessons learnt from failures.
– Organisations often don’t know what they already know. In the
knowledge-based economy survival depends on the best possible
response to a multitude of challenges primarily using the knowledge
gained through past experience. Due to a lack of sharing culture and
facilitation, best practices of a group do not get embedded into the
organisation’s procedures.
– Very often individuals who have valuable information are not tracked
in the organisation and this knowledge moves with them with no
benefit to the organisation.
1.1.4 What Is Knowledge Management?

Since the mid-1990s, there has been an intensive academic discourse and
practical experimentation regarding models and practices of managing
knowledge in organizations. Research focused on “The knowledge-Creating
Company” (Nonaka and Takeuchi 1995) and the “New Organizational
Wealth” (Sveiby 1997) and “Intellectual Capital” (Stewart 1997). The latter
two discussing new ways of measuring and managing knowledge-based
resources. Multidisciplinary approaches to managing knowledge emerged in
fields such as information and computer science, library science, business
administration, psychology, sociology, education, engineering, philosophy
and other scientific areas (c.f. Heisig 2015).
Zack et al. (2009) postulate that knowledge management (KM) has
progressed from an emerging concept to an increasing common function in
business organizations.
The path to an intelligent, knowledge-oriented company initially begins
with five basic questions:
1.
How important is knowledge as against physical assets for the success
of our business?
2. Which strategic goals do we want to support by knowledge
management?
3.
Which knowledge/competences do we have and which

knowledge/competences do we require in the future to ensure long
lasting competitiveness?
4.
How do we manage the «knowledge» resource in the company?
5.
How should we organise and develop our company so that we can cope
with present and future knowledge-based competition?
◘ Figure 1.5 shows that by contrasting current and future knowledge
organisations can develop answers to the above questions. How to do this
based on a systemic understanding of KM will be expanded upon
throughout this book.
Fig. 1.5 Basic questions for the knowledge management of an organisation
Before we provide our definition of Knowledge Management we would

like to make clear what is our understanding of management. The role of
management in a learning organisation has been well formulated by
Drucker:
Management means:
1.
Making people’s strengths effective and their weaknesses irrelevant
2.
Enhancing the ability of people to contribute,
3.
Integrating people in a common venture by thinking through, setting
and exemplifying the organisational objectives, values and goals
4.
Enabling the enterprise and its members to grow and develop through
training, developing and teaching
5.
Ensuring everyone knows what needs to be accomplished, what they
can expect of you, and what is expected of them. Management allows
us to coordinate hundreds or thousands of people with different skills
and knowledge to achieve common goals.
Based on this understanding we define KM as follows (a search of the
literature reveals a huge number of KM definitions which contain similar
elements2):
Definition Knowledge management enables individuals, teams and

entire organisations as well as networks, regions and nations to
collectively and systematically create, share and apply knowledge to
achieve their strategic and operational objectives. Knowledge
management contributes to increase the efficiency and effectiveness of
operations on the one hand and to change the quality of competition
(innovation) on the other by developing a learning organisation.
Role of Knowledge Management in “VUCA” Environments

In the past, organisations primarily engaged in knowledge management
(KM) practices that focused on managing current knowledge and past
experiences with a strong emphasis on documentation (Pawlowsky et al.
2011, Bolisani and Handzic 2015). Today, a hypercompetitive “VUCA”
environment (volatile, uncertain, complex, ambiguous), changed
communication behaviours and the evolution towards knowledge work 4.0
set the scene for managing knowledge within and across organisations in
the digitised society.3
In analogy to the concept of “ambidexterity” (Tushman and O’Reilly
1996), KM has to support a number of conflicting knowledge activities
such as “exploitation” and “exploration” or “sharing” and “protection” at
the same time in such VUCA settings. In the light of the ensuing conflict
between stability and flexibility, KM stabilises the organisation’s
capabilities in a mode of protection and exploitation on the one hand and
concurrently supports dynamic capabilities in a mode of exploration and
sharing to enhance agility and renewal. An organisation’s ability to manage
such seemingly contradictory processes and practices increasingly gains
importance with digital transformation. Let us look in more detail into these
two functions of KM.
Operational KM as stabiliser
Also in the future, operational KM will continue to aim at making the right
knowledge available at the right time and place to support the employees of
an organisation, plus the relevant stakeholders in the organisation’s
environment for day-to-day operations. The means and ways of how to
achieve this ambitious objective, however, will change under a KM 4.0
perspective. Organisations can engage in the following activities to stabilise
the portfolio of competencies in an organisation:
1. Facilitate ubiquitous and curated knowledge flows: Quick, easy and
ubiquitous access to the knowledge base of the organisation and across
organisations gains importance and can be characterised by
decentralized, and increasingly peer-networked repositories augmented
by rapidly evolving machine intelligence. Murray and Wheaton (2016)
argue that there is a need for “knowledge curation” as even advanced
technologies such as machine-readable ontologies have not yet come
close to being able to extract deep meaning or accurately organize
content into proper contextual categories. Curation establishes,
maintains and adds value to repositories of knowledge and helps to
keep them relevant and up-to-date. In practice, curation could mean
that an expert compiles a selection of links and shares them, adding a
clear explanation of the selection criteria used to compile the list as
well as brief introductions explaining why each link is relevant.
However, the decisions necessary in such a process might also be
augmented by machine intelligence, by a team or crowd who are
engaged in the domain that is curated by the expert.
2.
Enable collaboration: The emphasis of KM has shifted from the
support for collecting to connecting knowledge activities (Kaschig et
al. 2016) that help to make collaboration work. Connecting knowledge
activities are viewed comprehensively to comprise connections
between people, that is joint knowledge creation, sharing and
acquisition, and connections of knowledge both in an abstract and a
manifest form - the integration of knowledge from diverse sources be it
people, documents or algorithms. KM needs to help people to develop
the competencies needed for work 4.0, amongst which competencies
for technology-mediated collaboration and collaboration with machines
as “team mates” stand out.
3.
Monitor and control augmented learning and decision-making: As
organisations increasingly develop and deploy algorithms to automate
routine knowledge tasks and decisions plus provide decision support in
known situations, such automated knowledge behaviour needs to be
monitored and controlled to be not only efficient, but also compliant
with an organisation’s internal and external regulatory system. The
corresponding experiences made need to be systematically reflected
and interpreted in this respect, KM will have to ensure transparency of
cognitive technologies, so that users will always be aware of how
cognitive systems “think” and act. A particular challenge here is to
identify and leverage the tacit knowledge of subject matter experts or
communities and to provide the means for humans to keep up to date
with the exponential growth of opportunities created by self-learning
systems.
Strategic KM as Catalyst
In an increasingly turbulent and complex environment, it is the
responsibility of KM to critically examine knowledge and competencies of
the organisation, a network or business ecosystem and identify its “blind
spots”. Here, KM takes on the role of an innovator and “irritates the
system” by questioning past learning, established behaviours and practices.
KM must succeed in supporting the development of “dynamic capabilities”
of organisations to reconfigure, realign and integrate core competencies
with the help of external resources. Organisations can engage in the
following activities to productively foster the growth of capabilities for
improved organisational performance under shifting environmental
conditions:
1.
Identify critical knowledge: KM needs to provide deep insight into
the critical knowledge assets required to embark on the learning
journey involved in the activities to pursue future organisational goals.
Therefore, KM also questions current core competencies, intellectual
property rights, market and industry comprehension, and customer
understanding and expectations (MacMillan et al. 2017). KM should
identify the pockets and islands of knowledge creation within and
beyond the organisational boundaries that can be connected to acquire
new core competencies that can be appropriated by the organisation.
Hence, organisations need to integrate isolated knowledge on and
views of the environment to make sense of information as a basis for
seizing new opportunities and transforming the organisation. Strategic
knowledge mapping helps to uncover and take an integral view on
critical knowledge assets, providing the context for discovering the
most promising digitalization strategies (MacMillan et al. 2017).
2. Facilitate sensemaking and shared understanding as a basis to act:
describe sensemaking as a way of understanding connections between
people, places and events that occur now or occurred in the past, in
order to anticipate future trajectories and act accordingly. The ability to
frame (set in context) and reframe problems and observations is
particularly important when big data analytics seem to provide answers
without adequate context knowledge (Madsbjerg 2017). Deep insights
and shared understandings emerge through multiple discourses of
people. The underlying mechanisms of meaning making can be seen as
the essence of collaboration and highlight that negotiation processes are
interactive, reciprocal and that meaning resides in the social realm and
can be manifest in socio-technical systems. Sensemaking is a shared
and communal activity that produces knowledge appropriate for action,
but biased heavily based on the individuals doing the sensemaking –
that is, each group of people who have the various sensemaking
conversations will “talk into existence” a very different set of
situations, organisations, and environments (Weick et al. 2005). In this
situations, organisations, and environments (Weick et al. 2005). In this
view sensemaking is a process that is highly collaborative, effective for
organisational growth and planning in both the short and long-term,
and highly dependent on interpretation.
The increasing complexity of work tasks intensifies the demand for
collaboration, which in turn requires KM to support the creation of
shared understanding among work groups (Bittner and Leimeister
2014). On the organisational level, shared understanding among
organisations that collaborate in business ecosystems is vital for
efficient knowledge creation in such ecosystems. Researchers found
that at the beginning of business ecosystem formation, organisations
need to share their capabilities, expertise, and knowledge and in
particular make the tacit knowledge explicit in order to boost
integration.
3.
Encourage renewal, agile learning and reflection: To ensure renewal
in an ever changing and often disruptive environment, firms have to
learn how to systematically develop new business models and non-
profit organisations need to be capable of redesigning their missions in
an accelerated manner (cf. Kotter 2014). KM can play a key role in
these above described issues related to render organisations more
dynamic in the future. In an environment that is characterised by
unpredictability and various unanticipated crises, KM must support
quick problem-solving, encourage constant experimenting, foster
collaborative learning and facilitate professional reflection to learn
from mistakes. For example, KM can be responsible for developing a
“next practices” process in an organisation. Future developments in a
business or technology area, or in a business model can be explored in
cross-departmental workshops which include a range of stakeholders
such as customers and the scientific community.
4. Build platforms for engagement: In an era of information overload,
human attention is a scarce resource. In order to attract heterogeneous
and unexpected knowledge it is of strategic importance to build
platforms that engage members in and beyond the organisational
boundaries. Ghazawneh and Henfridsson (2010) point to the
importance of governing third-party development through specific
knowledge which they call “platform boundary resources”. These
include the design of technical boundary resources such as software
g y
development kits and application programming interfaces and social
boundary resources such as incentives, intellectual property rights, and
control systems. KM’s role is to build platforms that attract engagement
of a wider community for the strategic development of organisational
competencies, products and services.
Case Study
The rise of the knowledge market
Today, we witness the emergence of online knowledge marketplaces
where you can sell your personal knowledge. You can see its roots in the
crowd sourced Question & Answer trend that spawned sites like Quora,
Aardvark, Stockoverflow or ► Ask.com and where you can get your
questions answered for free.
The Swedish start-up ► www.Mancx.com is proving the success of
their concept of an online knowledge market to exchange personal
information for money. Mancx is a fully transactional knowledge market
with global paying/payout capabilities. For information buyers, Mancx is
the place to go to for answers to business questions they face on a daily
basis. For information sellers, Mancx offers a way to capitalise on
accumulated knowledge and to build their personal brand profile as sources
of valuable information. Mancx provides a secure environment and
anonymity to negotiate and broker a deal of knowledge selling, taking a
20% commission on every concluded transaction.
This is the same philosophy that ► www.Acabiz.com has regarding
information. Acabiz is an Italian company funded by private investors and
the finance arm of Lombardy’s governmental body. Acabiz came up with
the idea of a knowledge marketplace out of a desire to create a platform for
academics to connect with businesses, governments and NGOs. It thus
provides a direct link between the final consumer and supplier of
specialised knowledge and cuts out middlemen or consultants.
«Accessing niche or specialized knowledge is mission-critical for any
successful and targeted business activity today,» said Guido Uglietti, the
founding partner of Acabiz. «Everyone recognizes the importance of
academia to business knowledge transfers, but has been no global platform
tool to facilitate and promote knowledge transfer in any simple and scalable
way.»
Acabiz created a platform for academics, who they call knowledge
holders, to connect with businesses, known as knowledge hunters, who are
interested in their specific research expertise or knowledge. The Acabiz
platform allows businesses to easily and directly tap into the knowledge
network of thousands of academics worldwide who all have highly
specialised knowledge in fields such as architecture, engineering, law,
medicine, science, financial, economics and other areas.
Source: Adapted from: Jeniffer Hicks: The Rise of the Knowledge
Market. ► http://www.forbes.com/sites/jenniferhicks/2011/06/27/the-
rise-of-the-knowledge-market/.
1.2 How Organisations Learn

Competing in an ever changing environment requires organisations to learn.
How does this happen? The following subchapter is adapted from Brenda
Barker Scott’s excellent literature review on organisational learning.4
What Is Learning?
The question of whether learning is a cognitive process as well as a
behavioural process has practical and theoretical implications.
Theorists adhering to a purely cognitive perspective view learning as
the development of new insights through the revision of assumptions,
causal maps or interpretive schemas. An organisation has learned «if any of
its units acquires knowledge that it recognizes as potentially useful to the
organization».
Theorists favouring a dual cognitive–behavioural approach suggest that

while cognitive development is necessary, action is also required for full
and complete learning. Here learning is said to occur as new insights,
assumptions, and causal maps lead to new behaviour or conversely, new
behaviour leads to new insights. Pointing to the intimate relationship that
learning has with action, Argyris (1999) suggests: «An organization may be
said to learn to the extent that it identifies and corrects errors».
Organisational knowledge (OK) theorists have also noted the
behavioural–cognitive distinction, but from the point of view of the product
of learning; either the development of know what or know how.
Central to the cognition-behaviour question is the notion that learning is
a function of conscious thought. Potential learning, however, is blocked
when members lack the appropriate cognitive apparatus for noticing or
experiencing a «learning need» and for sensemaking. Sensemaking has
also been linked to the levels of cognitive development, whereby routine
learning is associated with single loop learning, and double loop learning
with deeper cognitive adjustment. Those exploring the interplay between
cognition and action have delved into how action springs from, or leads to,
deeper cognition through reflective processes such as action learning and
after action review. Since knowing is highly situational, its lessons cannot
be easily codified and transferred in protocols and training manuals. Rather,
practitioner-developed knowing must be absorbed through interaction via
improvisation, apprenticeship, conversation, and storytelling.
Can Organisations Learn?

While some academics maintain that organisational learning is simply the
sum of what individuals in organisations learn, others contend that
organisational learning is a reflection of the collective ideas, activities,
processes, systems, and structures of the organisation. Nonaka (1991),
describes a company as a living organism with a collective sense of
identity and a fundamental purpose, which in turn influences each
member’s commitment to learning and sharing knowledge.
Independent of the benefits to individual learning, social interaction, and

common experiences also play an important role in the development and
transfer of group knowledge.
Those exploring group level learning have identified how social
processes enable the exchange, synthesis, and broadening of individual
member knowledge into the synergistic knowing that resides amongst the
group. Here academics have studied the many processes and conditions
associated with productive learning interactions via conversation and
interaction principles, and common working-in-learning experiences.
To this end practical theorists have developed social technologies like
café conversations, whole systems change processes, and theory (Scharmer
2007) to offer philosophical, procedural, and logistical tenants for the
facilitation, focus, pacing and flow of productive learning experiences
amongst and between groups and communities.
The Fifth Discipline – Learning organisations are organisations …
– where people continually expand their capacity to create the things
they truly desire,
– where new and expansive patterns of thinking are nurtured,
– where collective aspiration is set free, and where people are
continually learning to see the whole together.
The elements:
1.
Personal mastery
2.
Mental models
3.
Building shared vision
4.
Team learning
5.
Systems thinking
Source: Senge (1990).
Organisational Features That Promote Learning

Others, primarily those working from the organisations can learn
perspective, suggest that an organisation’s ability to learn is dependent on a
host of organisational features. In answer to the call for adaptable and
responsive organisations, ones in which learning is the norm, not the
exception, scholars have identified a number of pertinent features including
a firm’s learning intent, strategies supporting innovation or capability
development, enlightened leadership and distributed authority, norms and
belief systems supporting learning, the use of whole systems planning and
decision making forums, processes and tools that permit the flow or transfer
of knowledge between individuals and groups, and support and legitimacy
of practitioner oriented learning.
An organisation’s ability to exploit new knowledge has been attributed to

how well it is able to act on new insights (flexibility and speed), how
extensively it is able to spread new insights to other parts of the
organisation (breath), and the degree to which it embeds the learning in
organisational features such as norms, protocols, products, processes and
structures (depth).
Alternatively, describing organisations as interpretive systems, noted
theorists Richard Daft and Karl Weick (1984) have attributed interpretive
schemas to organisations that, in turn, influence how organisational
decision-makers notice, attend to, and interpret the signals in their
environments. In turn, different interpretations lead to different
organisational responses, which ultimately shape strategy, norms, form and
protocols for learning.
Daft and Weick’s (1984) account of discovering versus enacting
organisations, provides a useful lens through which to explore how different
interpretive schemas influence the nature and type of organisational
learning. In a discovering organisation managers assume that the
environment is predictable and analysable. Following this, managers
attempt to adapt and learn by setting predictable performance goals for
continuous improvement efforts. Conversely, managers in an enacting
organisation assume that the environment is unpredictable and malleable,
and therefore innovate and learn through trial and error experimentation.
Here managers understand that as they learn and apply their learnings, they
in turn co–create or enact an enriched environment. The world transforms
as they transform.
Independent of how a firm defines it features, it is widely appreciated
that these contextual factors shape individual and group learning.
In an exploratory study Chawla and Joshi (2011) looked at the impact of
knowledge management on learning organisation (LO) practices in India,
and based on a small sample of firms they concluded that IT-firms and IT-
enabled services score highest on most of the LO dimensions. The testing of
their hypothesis revealed that most of the KM dimensions had a positive
impact on LO. The type of industry, however, did not have any statistical
differential impact on the dimensions of LO in most cases.
1.3 The Knowledge Firm: A Quick Assessment

A knowledge-based firm is characterised by its ability to learn and thus
generate relevant knowledge to derive business success from this resource.
The economic success of such firms is attributed to their knowledge related
capabilities, which vary according to the type of business. A specific
category are knowledge intensive firms or organisations,5 such as auditing
firms, consultancies, engineering firms, research labs, schools or
universities which sell «packed knowledge» of highly qualified experts or
organise learning processes. For a franchise company like McDonalds, the
creation and transfer of knowledge means efficiently training employees
with few qualifications to reach a competence level necessary for
expanding the standardised and replicable processes and standardised
operations of preparing a «BigMac®» worldwide. Indian IT biggies Infosys
Technologies and Wipro have successfully incubated «learning services»
and are selling these to global customers struggling with technological and
process changes in their companies as well as demographic shifts in the
workforce. While Infosys integrated the service in its Enterprise Solutions
Group in 2010, Wipro leveraged its capability in the learning space to
extend it as a service to customers in terms of managing learning content,
learning delivery, and hosting and managing learning platforms (Das 2010).
Dimensions of Knowledge Intensity

Until now, we have been talking about the «knowledge-based firm» or
about «knowledge-intensive firms» without explaining what knowledge
intensity means. Knowledge intensity has two dimensions – knowledge
intensity of the process and knowledge intensity of the product/service. We
have distinguished four fields in the knowledge intensity portfolio (see ◘
Fig. 1.6):
– Product intelligence: Products and services vary in the degree of
knowledge embedded in them. An indicator for «product intelligence» is
the research and development (R&D) effort as a percentage of total cost
or sales. Product intelligence is high in the case of software products,
machine tools that identify their own errors, pharmaceutical products,
etc.
– Process intelligence: Refers to the complexity of processes and the
knowledge embedded in them. The amount of R&D investments in
process development and improvement as well as the qualification level
of people employed in production are indicators for process intelligence.
High process intelligence can be found in «Mass customisation» (Pine
1993) wherein custom-made products are produced with over millions of
variations. The resulting products, such as a bicycle or a tailor-made suit,
are not particularly intelligent in themselves, but the intelligence lies in
the conceptualisation and execution of the process. Increasingly
sophiscticated algorithms govern processes, for example in the financial
industry («FinTechs»).
– Product and process intelligence combines both the described
phenomenon. A practical example is a firm that manufactures high-
precision balances in a customer-oriented production.
– Value added by physical work: Low knowledge intensity in the value
added chain and in the performance is evident while selling physical
work (even boxing brings money!).
Fig. 1.6 The knowledge intensity matrix (Source: Adapted from Porter and Millar 1985)
Definition A good overall indicator of knowledge intensity is the

added value of a product/process. This reflects the value generated by
transforming an input (raw materials, components, information) into an
output valued by a customer. The more specialised and unique
knowledge is embedded in the transformation process the higher the
value added (see Porter and Millar 1985).
What Makes a Knowledge Firm?

What are the characteristics of a company that converts knowledge into
sustainable competitive advantage? Knowledge oriented companies can be
distinguished by a number of the features that are described here briefly. At
the end of this chapter, the reader has the option to assess whether his
company is a «company insensitive to knowledge» or a «knowledge-
oriented company». This short analysis enables the raising of awareness
about the subject and to take initial steps toward creating a knowledge firm.
However, this does not mean that every company has to turn itself into a
knowledge company, for a company that is insensitive to knowledge can
also be successful (but for how long?).
We recommend the reader to look at the short analysis at the end of this
chapter. The following text explains the individual sections of the
subsequent analysis.
Companies will specifically develop into a knowledge firm when
customer requirements are highly differentiated and demand custom-made
products. Knowledge firms will counter a fall in the price for standard or
«me-too» products and services by offering complex integrated solutions.
This, for instance, applies to the supplier industry for the offer of modules
and systems as opposed to production of individual parts or components.
Even in a consultancy, the deployment of standard products is valued less
by clients than turn-key projects or complete solution packages which
demand significantly more knowledge and are therefore pay better. Markets
with a high speed of innovation and short product life-cycles require speedy
creation and transfer of knowledge.
A knowledge firm offers solutions for customer problems, which are
less intensive in terms of labour and capital and are more and more
knowledge-intensive. It is difficult to imitate and substitute them, since they
draw on complex knowledge and skills. Even the ability to imitate
efficiently under the «We are unbeatable at imitation» motto can be a
successful business strategy.
Case Study
Mumbai’s Dabbawalas – «A model of managerial and organizational
simplicity»
The case of Mumbai’s Dabbawalas demonstrates how a simple business
idea which offers solutions to customer problems can become a successful
business model which is difficult to imitate when executed with discipline
and dedication.
It has gained recognition world over for its service and operation and in
the words of Prof. C. K. Prahlad, is «A model of managerial and
organizational simplicity».
«Dabbawalas», is a group of people in Mumbai, India, whose job is to
carry and deliver home-made food in lunch boxes to office workers.
«Dabba» means lunch box or tiffin. Daily, on the streets of Mumbai, 5000
dabbawalas routinely deliver home cooked lunches in tiffin carriers to
200,000 working people all over the city.
They have been in the business for over 100 years and in 1998, Forbes
Global magazine conducted an analysis and gave them a Six Sigma rating
for efficiency. In the same year two Dutch filmmakers, Jascha De Wilde and
Chris Relleke, made a documentary called «Dabbawalas, Mumbai’s unique
lunch service».
The system the dabbawalas have developed over the years revolves
around strong teamwork and strict time-management. At 9 a.m. every
morning, home-made meals are picked up in special boxes, which are
loaded onto trolleys and pushed to a railway station. They then make their
way by train to an unloading station. The boxes are rearranged so that those
going to similar destinations, indicated by a system of coloured lettering,
end up on the same trolley. A simple colour coding system doubles as an ID
system for the destination and recipient. The meals are then delivered –
99.9999% of the time to the right address. The organisation relies entirely
on human endeavour in the form of links in the extensive delivery
chain with no technology. The success of the system thus depends on
teamwork, an attitude of competitive collaboration and excellent time
management. Synergy and cooperation is very high, as all of them come
from a single sect from remote villages around Mumbai.6
The ability to combine the knowledge of different business fields in order to

innovate is gaining importance, and the same applies to the speed of
generating new business fields and developing products more effectively
than the competitors.
The investors in the knowledge firms are interested in a long-lasting
increase in a company’s value, especially those dealing in intangible goods.
Traditional companies often treat knowledge as a commodity, like
information, that can be divided and stored («frozen food»). But knowledge
firms are aware that the creation and transfer of knowledge is an individual
and collective learning process that cannot be dominated and controlled
completely. Employees of such a company can discern correctly that we
learn fast from other companies, we transfer knowledge effectively within
the company and to/from our customers, suppliers, alliance partners and
competitors.
The knowledge firm is mainly characterised by values, processes and
structures, the organisational «ecology», that allows the «plant knowledge»
to grow and prosper in a company. In this regard, we can also speak of a
«knowledge ecology». Basic values practiced by such an organisation are
trust, openness to new concepts and authenticity.
The term authenticity indicates that the employees are supported in the
use of unconventional solutions, enjoy freedom in their demeanour and in
organising their work and are allowed to be their own self. In knowledge
firms good ideas get implemented notwithstanding who moots them.
For instance, highly-paid software specialists who often live in
unconventional office environments and can afford their «ticks» because
they are creative and encourage liberties through their creativity. Google is
a good example of a firm that has understood how to nourish creativity and
commitment.7
The corporate vision and mission emphasises the importance of
knowledge for the success of business. Leadership and incentives must be
organised in such a way that they reward both individual performance and
the contribution to overall success of the company. This gives rise to an
interest in generating good performance not only for one’s own unit but also
to help other units, customers and suppliers to improve.
While there are no key performance indicators (KPI) for the creation
and transfer of knowledge in the traditional company, the knowledge firm
measures both based on the business goals. Creation of knowledge does not
make any sense if it is isolated from these goals. Such indicators are an
integral part of the reporting system showing how knowledge is converted
into the success of the business. Non-financial indicators that refer to
customers, employees and processes gain importance over traditional
financial indicators.
In a knowledge firm, a significant change as opposed to the traditional
hierarchical companies is that the position of the management and experts is
valued equally. In a traditional company, one requires responsibility for a
certain number of employees or the responsibility for a certain budget in
order to scale a position of a department manager or chief department
manager. But in a knowledge firm one achieves his position in the company
by the knowledge that one has, the knowledge that one gives to the others,
the ability to coach other employees, the ability to learn new things and to
demonstrate expertise. The person who is in the position of an expert must
continuously develop himself.
Knowledge firms develop «knowledge markets» wherein demand and
supply are decisive for the creation and exchange of knowledge. A
knowledge company achieves transparency about «who knows what»
within and outside the company and knowledge transfer and development
are based on common interests. Best practices and expertise are emphasised
in the company thus offering a permanent stimulus for implementing good
practices. Knowledge companies have overcome the «knowledge is power»
syndrome; now «knowledge-sharing is power».
Various agents, processes and media support the operative tasks in our
vision of a knowledge firm. In such a firm, knowledge transfer processes
are defined as well as the structure of developing new business fields,
products and processes. A top-ranked coach promotes knowledge creation
and transfer as «Customer Focus Coordinator» or «Director of Knowledge
Management». However, these coaches do not manage knowledge the way
one manages financial resources. Instead, they ensure that the «knowledge
ecology» is right and the rules of the knowledge markets are followed. They
promote the growth of employees in this new type of company.
Strategically important knowledge of an organisation is bundled in
competence networks that are also responsible for the distribution and
protection of this knowledge. Employees exchange knowledge in
«communities of practice». In a knowledge firm, a number of cooperative
projects promote teamwork across the functions and business areas in a
«boundaryless behaviour».
A knowledge firm practices intensive benchmarking both internally as
well as externally. It finds out best practices, distributes them, enquires
wholeheartedly whether such practices can be used in the individual units
and if not, looks for the reasons. A number of problem-solving groups yield
all the available information of their employees. The «not invented here»
syndrome is replaced by «implement good ideas from wherever they come».
Training and competence development are a high priority. Individual
and collective learning processes are based on demand and joint learning
happens in teams close to work situations and business units. Employees
are no longer «sent» for training. Instead, they themselves control their own
learning process actively.
While informal contacts are not appreciated in the traditional
hierarchical company – «you’d rather not talk to our colleagues in Delhi
because they could snatch away our business» – team work and informal
contacts are promoted in the knowledge firm by means of knowledge fairs,
knowledge brokering, attractive canteens, lounges, coffee corners and other
options of informal meetings. But not all options for electronic
communication are implemented in order to enable colleagues to get to
know each other through personal meetings. In such a company, the office
layout and the overall structure of the workplace and social spaces support
interaction amongst the employees.
Information and communication technology is an important component
of a knowledge firm. It connects all the employees of the organisation as
well as relevant customers, suppliers and other external know-how experts.
Electronic media is used intensively for discussing and transferring
knowledge. The databases and other information sources are available for
an updated, complete and integrated access to relevant information which is
beyond the limits of functional and business units. Such databases and
sources build the collective memory of the organisation. The media is user-
friendly, easy to learn, adaptable to an individual’s method of working and
allows easy contributions (e.g. wikis, blogs).
The well-informed reader will argue that such a company described
above does not exist in reality or that this utopia will also not find any
practical application in the future. This argument can be countered because
there are already many companies that closely match the criteria mentioned
here, thus drawing us close to this vision. One such successful company is
General Electric which has already gone far ahead in its «reinventions»
towards a knowledge oriented company and is mentioned a number of times
in this book. Phonak (Switzerland) and Oticon (Denmark), both
manufacturers of hearing systems, exhibit many of the characteristics of a
knowledge firm mentioned here. The list continues with Buckman
Laboratories and Sequent Computers in the USA, KaO in Japan, Semco in
Brazil, the MLP financial services in Germany, Infosys, Wipro, Tata Steel,
Eureka Forbes, and Tata Chemicals in India, etc.
For the employees and management, a change towards a knowledge
firm means a change in the working method and roles as they were
described by the leading representatives of organisational learning (Argyris
and Schön 1978; Senge 1990; Flood 2009). Employees of this new
corporate context must be able to «to learn learning». Apart from their
field-specific competence, they must have the basic ability to deal with new
information and communication technologies to procure information as
early as possible and convert it into knowledge. Employees are expected to
have a distinct communication competency and the skill of self-
management as well as an ability to be creative and solve problems
themselves. The social competence or «capability to work in a team»
involves consulting within the group, solving conflicts, dealing with stress
and unexpected behaviour of the others. Management is mainly responsible
for organising the above mentioned framework conditions «ecology» as
well as for determining the goals and measuring the achievement of goals
as per the extended criteria of a knowledge firm. The management itself is
an expert – be it for a specific theme, be it for coaching others to learn or be
it for communicating the values and goals.
Short Analysis: Fitness for Knowledge Competition

Grade how you assess the position of your company in the knowledge
competition between a «knowledge-oriented company» and «company
insensitive to knowledge». (You might also use the self-assessment on p.
41). Students can do the same with their university, department or
teamwork with their fellow students. A good approach to sensitisation is
copying and distributing the questionnaire given below among colleagues
so that the results can be discussed subsequently on points such as how
different the categorisation turned out to be? Where was the maximum
difference in the grading? Where do we see the biggest obstacles on the
way to a knowledge firm and which measures can give maximum results
with less effort? How can each of us contribute to the distribution of
knowledge in the company?
Short Analysis: Fitness for knowledge based competition

– Knowledge as a resource and the capacity to learn become the main
ingredients for sustainable competitiveness.
– All over the world we view structural changes towards a knowledge
economy and society giving rise to changed education systems, new
forms of learning and valuating talent and competence.
– Intangible assets increasingly determine the value of organisations.
– Self-assessment provides insights if an organisation can be considered as
«knowledge firm».
1.5 Questions
1.
What are the characteristics of a knowledge economy?
2.
What are the driving forces of knowledge based competition?
3.
What is the influence of intangible assets on company value.
4.
How would you define Knowledge Management? Describe at least five
factors that determine the success of knowledge-based management.
5.
What are the objectives and basic questions of knowledge-based
management?
6.
What hampers creation and transfer of knowledge in and across
organisations?
7.
What are the characteristics of a «knowledge firm».
1.6 Assignments
1. Knowledge Oriented Company
Give examples (or prepare a poster) on firms which display the
characteristics of a «knowledge oriented company» according to the
criteria described in the test at the end of ► Chap. 1.
2.
Knowledge Management Definitions
Conduct an internet search on the definition of KM and compare
them.
1.7 KM-Tool: Knowledge Café

What is a Knowledge Café?
A Knowledge Café is a means of bringing a group of people together to
have an open, creative conversation on a topic of mutual interest to bring
to the surface their collective knowledge, to share ideas and insights and
to gain a deeper understanding of the subject and the issues involved.
Why use it?

A Knowledge Café provides a space for people to meet, discuss and
reflect. This ultimately, leads to action in the form of better decision
making and innovation and thus tangible business outcomes.
How to run it?

A simple session may go something like this:
1.
The facilitator «Coffee house owner» welcomes people to the café
and explains what knowledge cafés are all about and the role of
conversation in business life (max 15 min).
2.
The facilitator spends 10–15 min outlining the subject or theme of
the café and poses a single open-ended question. For example, if the
theme is knowledge-sharing then the question for the group might
be «what are the barriers to knowledge-sharing in an organisation
and how do you overcome them?»
3.
The group breaks into small groups of about five each and discusses
the questions for about 30–45 min and then we come back together
as a whole group for the final 30–45 min where the individual
groups share their thoughts.
O ti ll i th ll g i l h g t bl
4. Optionally in the small group sessions, people change tables every
15 min to broaden the number of people they get to interact with and
thus the differing perspectives of the group.

Usually no attempt is made to capture the conversation as doing so tends
to destroy the conversation. The value of the café is in the conversation
itself and the learning that each individual takes away. In some
circumstances though it makes sense to capture things from the café
depending on its purpose and there are ways of doing this that interfere
minimally with the dynamics of the conversation. A good idea is to have
a paper table cloth and café tables on which participants can write, draw,
mindmap.
For more information refer to:
► http://www.gurteen.com/gurteen/gurteen.nsf/id/run-kcafe
► http://en.wikipedia.org/wiki/Knowledge_Cafe
► www.youtube.com/watch?v=NTZ0vf0Tmi4
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Footnotes
1 A review of concepts of knowledge and knowledge management can be found at Anand and Singh
(2011).
2 The following text is adapted from North et al. (2018
3 Compare the annual WTO trade statistics, 7 www.wto.org
4 The full text with all sources can be found under: 7 http://irc.queensu.ca/gallery/1/dps-
organizational-learning-a-literature-review.pdf
5 7 http://www.som.cranfield.ac.uk/som/dinamic-content/media/ISRC/What%20really%20is%20
a%20KIF.pdf
6 Varma, Shailena; The Amazing story of Mumbai Dabbawalas 7 http://toostep.com/insight/the-

amazing-story-of-mumbai-dabbawalas
7 Regarding inspiring office environments see 7 http://www.youtube.com/watch?v=

TaGO7XlP2EU
https://doi.org/10.1007/978-3-319-59978-6_2
2. Knowledge in Organisations

Germany
A learning organisation is an organisation skilled at creating,

acquiring and transferring knowledge and at modifying its
behaviour to reflect new knowledge and insights David A. Garvin
Learning Outcomes
– You will know the difference between information, knowledge and
competence,
– You will be able to apply the SECI-model of explicit/tacit knowledge
conversion to real organisations;
– You will be able to explain competitive advantage by the resource
based view using the «VRIN»-concept and the construct of «dynamic
capabilities»;
– You will learn approaches to structuring organisational knowledge and
assessing the value of knowledge resources;
– You will be able to run an idea competition.
2.1 Knowledge Based Value Creation

2.1.1 The «Knowledge Ladder»: Information, Knowledge and
Competence
Knowledge in organisations takes many forms. It includes the competencies
and capabilities of employees, a company’s knowledge about customers and
suppliers, know-how to deliver specific processes, intellectual property in
the form of patents, licences and copyrights, systems for leveraging the
company’s innovative strength and so on. Knowledge is the product of
individual and collective learning and is embodied in products, services and
systems. Knowledge is related to experiences of people in organisations and
in the society, but only a small part of knowledge is made explicit. Tacit
knowledge largely determines how people behave and act.
For firms knowledge is a resource, an intangible asset and forms a part
of the so-called intellectual capital of an organisation. In order to enable
knowledge-based value creation, management has to understand what
knowledge is and how knowledge is related to competitiveness. In the
following we will explain the underlying terminology of knowledge-based
value creation first through a short case study and subsequently by
systematising the relationship by means of the knowledge ladder (◘ Fig.
2.1).
Fig. 2.1 The knowledge ladder
Data and Information: Raw Material for Value Creation Let us start at the
bottom of the competence ladder. People communicate by means of
symbols; these may be letters, numbers or signs. These symbols can be
interpreted only if there are clear rules of understanding. These rules are
called syntax. Symbols plus syntax become data. Combining the numbers 1,
3, 5 and the unit symbols for degree Celsius plus a point to 13.5 °C
transforms symbols into data. This data can only be interpreted if it is given
an exact meaning. It becomes information if we add to the data whether we
talk about air temperature, the precise time and place of that temperature.
Definition Information is organised data adding meaning to a

message. This information is interpreted differently depending on
context, experience and the expectations of people.
Knowledge: Creating an Understanding as a Basis to Act In the

development of knowledge we distinguish between different levels. The
first, «know what», is a result of interiorising information. For example
reading a book which only creates value for an organisation if a person is
able to apply this information i.e., the «know what», is transformed into
«know-how» by means of application. How difficult this transfer from
«know what» to «know-how» can be is experienced by many people
who read the operating instructions of a mobile phone for instance and
want to apply the information to program specific functions. As the
mental models of those who have written the operating instructions and
those who apply the operating instructions are different, the user may not
be able to interpret the instructions correctly. A solution could be to have
potential users write the operating instructions.
Definition Knowledge refers to the tacit or explicit understanding of

people about relationships among phenomena. It is embodied in routines
for the performance of activities, in organisational structures and
processes and in embedded beliefs and behaviour. Knowledge implies an
ability to relate inputs to outputs, to observe regularities in information,
to codify, explain and ultimately to predict (Carnegie Bosch Institute
[CBI] 1995).
Knowledge in organisations is only to a small extent explicit. Using the

metaphor of the iceberg we can say that only the small part visible above
the water is explicit knowledge and the big part hidden under the water is
tacit knowledge. According to Polanyi (1966) tacit knowledge is personal,
context-specific, often unconscious and therefore hard to formalise and
communicate. Explicit or codified knowledge refers to knowledge that is
transmittable in formal, systematic language. Polanyi says «that we can
know more that we can tell». We shall see below how the transformation of
explicit knowledge into tacit knowledge and vice versa is an important
process of knowledge creation and distribution.
Competence: The Right Action at the Right Time The ability to
apply knowledge is based on specific motives («know why»). People will
only act if they are motivated. Therefore, an important management task to
enhance knowledge-based value creation is to ensure the right motivational
set-up so that knowledge workers develop, share and apply their knowledge
in line with the objective of the enterprise. Value is created when the right
knowledge is applied at the right moment to solve a specific problem or to
exploit a new business opportunity. The right choice of knowledge at the
right moment is termed competence. With von Krogh and Roos (1996) «we
view competence as an event, rather than an asset. This simply means that
competencies do not exist in the way a car does; they exist only when the
knowledge (and skill) meet the task.»
Definition
The term competence (or competency) of a person or a group

describes the relationship between the tasks assigned to or assumed
by the person or the group and their capability and potential to deliver
a desired performance. People mobilise knowledge, skills and
behaviours to «do the right thing at the right moment.»
The interaction of an actor with an audience, the sales skill of a successful

salesman or the adaptation of strategies by an experience consultant in order
to meet the client’s needs of the moment reflect competence which is often
also called expertise (For a more detailed discussion see ► Sect. 4.3).
Competitiveness: Bundle Competencies for Uniqueness If we bundle the

competencies of people or organisations uniquely so that these are not
matched by other organisations, then we talk about competitiveness. Core
competencies of an organisation are considered particularly relevant for
competition.
Definition
Core competencies (Hamel and Prahalad 1994; Rumelt 1994) are a
combination of skills and technologies that deliver value to the
customer. This combination is based on explicit and hidden
knowledge and is characterised by temporal stability and influence on
the products. Core competencies:
1.
Provide potential access to a wide variety of markets.
2.
Make a significant contribution to the perceived customer
benefits of the end product.
3.
Are difficult to imitate by competitors.
They are in synergy with other competencies and make the company unique
and better than others. In this view, core competencies represent the basis
for competitiveness. We shall elaborate on this aspect of competitive virtues
of knowledge in detail in ► Sect. 2.3 where we also discuss the concept
of «dynamic capabilities».
Coming back to the knowledge ladder we can formulate the objective
of knowledge based management as the transformation of information
into knowledge and competence in order to create measurable value in a
sustainable manner.
For this, we need to build each step of the knowledge ladder. As in a
real staircase you cannot say that the top stair is more important than the
bottom stair, you have to build all of them. The bottom-up view reflects the
operational processes of information and knowledge management whereas
the top-down view reflects the strategic view of defining the competencies
of an organisation and its members that will eventually lead to
competitiveness.
Case Study
Transfer of best practice (electronic manufacturing services)
In the morning, the factory manager, Janya Gupta clicked the inbox on
the computer screen. A newsflash showed her that the results of the
periodical benchmarking round the 50 electronic manufacturing units of the
concern had been directly entered in the best practice database. She clicked
on the news and got an overview of the graphically formatted information.
In the benchmarking comparison, her factory was placed in the upper half.
Through voicemail, she requested the best practice team of her factory to
analyse the information and study the possibility to adopt the «best
practices» of other factories in order to increase productivity and thus
compensate for the steady price fall of electronic components. She met the
best practice team in the afternoon and yet again verified the data of her
factory that was reported to the best practice database. Everything was OK.
The best practice team developed knowledge about the differences by
establishing a relation between the benchmarking information of their own
factory and that of the comparable factories. Over a video conference that
was arranged at short notice with the members of the best practice teams of
two «sister factories» they learned and received the know-how. The team
received tips on how to change the configuration for assembly in their
factory. The insights motivated them to act. Results were measurable just 3
days later. The best practice team of the electronic manufacturing services
had demonstrated its collective problem-solving competence. Factory
manager Janya Gupta is satisfied and stresses that in her view, the capability
to learn faster than the competition is a lasting competitive advantage.
Case Study
Thought Experiment: Is knowledge «justified true belief»?
Philosophy professor Edmund Gettier called into question the theory of
knowledge that had been dominant among philosophers for thousands of
years when he defined knowledge as «justified true belief».
According to Gettier, there are certain circumstances in which one does
not have knowledge, even when all of the above conditions are met. Gettier
proposed two thought experiments, which have come to be known as
«Gettier cases,» as counter-examples to the classical account of knowledge.
One of the cases involves two men, Smith and Jones, who are awaiting the
results of their applications for the same job. Each man has ten coins in his
pocket. Smith has excellent reasons to believe that Jones will get the job
and, furthermore, knows that Jones has ten coins in his pocket (he recently
counted them). From this Smith infers, «the man who will get the job has
ten coins in his pocket.» However, Smith is unaware that he also has ten
coins in his own pocket. Furthermore, Smith, not Jones, is going to get the
job. While Smith has strong evidence to believe that Jones will get the job,
he is wrong. Smith has a justified true belief that a man with ten coins in
his pocket will get the job; however, according to Gettier, Smith does not
know that a man with ten coins in his pocket will get the job, because
Smith’s belief is «…true by virtue of the number of coins in Jones’s pocket,
while Smith does not know how many coins are in Smith’s pocket, and
bases his belief…on a count of the coins in Jones’s pocket, whom he falsely
believes to be the man who will get the job.» (see Gettier 1963, p. 122.)
These cases fail to be knowledge because the subject’s belief is justified,
but only happens to be true by virtue of luck. In other words, he made the
correct choice (in this case predicting an outcome) for the wrong reasons.
This example is similar to those often given when discussing belief and
truth, wherein a person’s belief of what will happen can coincidentally be
correct without his or her having the actual knowledge to base it on.
Source: Gettier (1963, p. 122) cited according to ► http://en.
wikipedia.org/wiki/Epistemology
2.1.2 Fields of Action of Knowledge Management

Knowledge management of an organisation means organising all the stages
of the knowledge ladder. If a certain step of the ladder is not constructed
(e.g. lack of data compatibility, incomplete availability of information, lack
of motivation for actions), one «stumbles» while climbing up and down the
ladder. The implementation of business strategies or the operative business
is hampered. Three fields of action of «information and knowledge
management» are deduced from the knowledge ladder:
– Strategic knowledge management passes through the knowledge ladder
from top to bottom to answer questions as to «which competencies are
required to be competitive», thus deducing which knowledge and know-
how is necessary. Knowledge goals should be deduced from the
company goals. Furthermore, strategic knowledge management should
develop a company model that conceptualises the motivational and
organisational structures and processes that make the company fit for
knowledge-based competition.
– Operative knowledge management particularly involves interconnecting
information to knowledge, know-how and actions. The manner of
organising the process of transferring individual knowledge into
collective knowledge and vice versa is decisive for the success of
knowledge-based management. Here the conversion of tacit knowledge
into explicit knowledge and vice versa is of vital importance. However,
this process does not take place without effective incentives. Thus
operative knowledge management also entails establishing enabling
conditions that serve as stimulants for creation, distribution and use of
knowledge.
– Information and data management (Digitalization) is the basis for
knowledge management. If we have a look at the knowledge ladder, we
notice that the supply, storage and distribution of information are
prerequisites for creating and transferring knowledge. From surveys, we
could find that many companies begin to step towards knowledge
management with information and data management measures, but
eventually realise that information and communication technology
cannot be used optimally without appropriate organisational and
motivational conditions.
2.1.3 KM Maturity Asessment

Organisations vary in the degree of maturity of their knowledge-based
management (see ◘ Fig. 2.2). Awareness about the importance to manage
knowledge resources is a learning process and depends on the «maturity» of
organisations. The change towards an «intelligent» knowledge-based
organisation is a progressive endeavour involving some «trial and error».
Fig. 2.2 Degree of maturity of knowledge-based management of a company
To assess the current state of development and provide guidance for

further evolvement towards a knowledge based organisation a number of
maturity models have been developed. In general, a maturity model
describes the development of an entity over time.
A knowledge management maturity model can be considered as a
structured approach to knowledge management implementation. A maturity
model can also provide a common understanding of the terminologies
involved in knowledge management implementation to various
stakeholders.1
Based on empirical studies we have identified four levels of maturity in
the way organisations manage their knowledge (North and Schmidt 2004):
The first level: Information management
Companies at the first stage of maturity concentrate on information
management. They implement an information and communication
infrastructure to enable specific access to databases and documents.
Accompanying organisational measures for promoting exchange of
knowledge are not yet established or are established only to a certain extent.
Efforts are concentrated on information and communication technology. At
this level of maturity, organisations achieve an increase in process
transparency and speed, avoid double work and shorten training periods for
new entrants, which result in an overall increase in the quality of products
and services. Examples of first level KM systems: Implementation of an
intranet, development of community platforms.
The second level: «Island» solutions

Organisations that intentionally implement knowledge management
initiatives in specific areas or business units represent the second stage of
maturity. They have realised that information and communication
technology alone is not enough for knowledge-based management. Instead
they have understood that a «business case» is needed to demonstrate that
knowledge management yields clear benefits. Accordingly, specific
solutions in specific areas are developed, e.g. service knowledge, personnel
knowledge and customer knowledge. KM solutions contribute to process
accelerations (fast response, for example, to customer enquiries), increase
in reuse of internal knowledge (the wheel is not always reinvented) as well
as improved teamwork and increase in quality. Even this approach may lead
to quick wins where «KM islands» are created which might be difficult to
integrate in a later comprehensive KM strategy.
Examples of second level KM systems are the establishment of
Customer Relationship Management Systems integrated into sales
management or a portal with «tips and tricks» for service technicians to
which service technicians contribute actively.
The third level: Professional knowledge organisation

Organisations in the third stage of maturity are those that have implemented
a professional knowledge organisation across departments and business
units and exhibit the following characteristic features:
– Information and communication infrastructure guarantees easy
availability of relevant information.
– Employees are motivated and rewarded for sharing knowledge.
– Integration of knowledge management in business goals, processes and
project organisation.
– Exchange of knowledge is supported through Communities of Practice
(CoPs) and competence centres.
– Benefits of knowledge management are measured.
A balanced distribution of benefits resulting in improved processes,
higher employee motivation and customer satisfaction is a typical feature of
the professional knowledge organisation.
Examples of third level KM systems are the establishment of KM roles
and responsibilities at centralised/decentralised levels of an organisation.
Employees are regularly trained how to use KM-tools.
At this third level KM is seen as a set of rules and tools to enhance
performance. It is, however, not yet fully integrated into the minds and
behaviour of people.
The fourth level: Knowledge culture

The fourth level of maturity represents an ideal condition that has been
achieved only by a few organisations until now. This level of maturity is
characterised by deeply shared values, teamwork, active exchange of
knowledge beyond the boundaries of departments and beyond the firm,
active search for innovation as well as an open and trustworthy culture that
is filled with and lived by management and employees consistently. An
important component of this culture is learning from the outside (e.g.
markets, technologies, rivals, suppliers, customers etc.) and from the inside.
The company culture is supported by a mature information and
communication system and media such as CoPs, competence centres and
work-outs. Collaboration, knowledge sharing and continuous search for
innovation is part of such a knowledge culture. Shared values, not tools,
drive knowledge creation, transfer and protection.
Such firms achieve overall levels of excellence. They would be on level
5 of the KM self-assessment as proposed by Collison and Parcell (2004) in
their practical guide «Learning to fly».
KM Self-Assessment
KM strategy Leadership Networking Learning Capturing
behaviours before, during knowledge
and after
Level Clearly Leaders recognise Clearly defined Prompts for Knowledge is easy
5 identified the link between roles and learning built to get to, easy to
intellectual KM and responsibilities. into business retrieve. Relevant
assets. performance Networks and processes. knowledge is
KM strategy The right attitudes
CoPs have a clear People pushed to you.
is embedded exist to share and
purpose, some routinely find It is constantly
in the business use others’ know-
have clear out who knows refreshed and
strategy. how. deliverables other and talk with distilled.
Framework Leaders reinforce develop capability them. Networks act as
and tools the right in the Common guardians of the
enable behaviour and act organisation. language, knowledge.
learning as role models. Networks meet templates and
before, during annually. guidelines lead
and after. to effective
sharing.
Level Discussions KM is everyone’s Networks are Learning Just-in-time-
4 ongoing about responsibility; a organised around before, during knowledge is
organisation’s few jobs are business needs. and after is the current and easily
intellectual dedicated to Networks have a way we do accessible.
assets. managing clear governance things around One individual
A KM knowledge. document. here. distils and
strategy exists «Knowledge Supportive «Customers» refreshes it,
but is not sharing is power.» and partners though many
technology is in
linked to Leaders set place and is well participate in contribute.
business expectations by used. review That individual
results. «asking the right sessions. acts as the owner.
A clear questions», and
framework rewarding the
and set of right behaviours.
tools for
learning is
widely
communicated
and
understood.
KM strategy Leadership Networking Learning Capturing
behaviours before, during knowledge
and after
Level There is no KM is viewed as People are People can Networks take
3 framework or the responsibility networking to get easily find out responsibility for
articulated of a specialist results. what the the knowledge,
KM strategy. team. Networks are company collects their
Some job Some leaders talk created knows. subjects
descriptions the talk, but don’t Examples of knowledge in one
include always walk the sharing and place in a common
knowledge walk! using are format.
capture, recognised. Searching before
sharing and Peers are doing is
distillation. helping peers encouraged.
People are across Little or no
using a organisational distillation.
number of boundaries.
tools to help
with learning
and sharing.
Level Most people Some managers Ad hoc People learn Teams capture
2 say sharing give people the networking to before doing lessons learned
know-how is time to share and help individuals and programme after a project.
important to learn, but there is who know each review Teams look for
the little visible other. sessions. knowledge before
organisations support from the They capture starting a project.
success. top. what they learn Access to lots of
People are for others to knowledge,
using some access. though not
tools to help In practice few summarised.
with learning do access it.
and sharing
Level A few people KM viewed as a Knowledge People are Some individuals
1 express that management fad. hoarders seem to conscious of take the time to
know-how is Leaders are get rewarded. the need to capture their
important to sceptical as to the learn from lessons in any
the benefits. what they do number of
organisation. Leaders think but rarely get cupboards and
Isolated networking leads the time. databases.
people with a to lack of Sharing is for They are rarely
passion for accountability. the benefit of refreshed, few
KM begin to «knowledge is the team. contribute, even
talk and share power» fewer search.
how difficult
it is.
Source: Collision and Parcell (2004)
Case Study
Evolvement of knowledge management at Eureka Forbes Ltd.
The case of Eureka Forbes Ltd., a USD 250 million multi-product,
multi-channel corporation and a leader in domestic and industrial water
purification systems, vacuum cleaning and air purification solutions in
India, demonstrates how a phased approach helps in eventually gaining
competitive advantage. It is a pioneer in direct selling in India and is Asia’s
largest direct sales organisation. Its 7000 strong direct sales force touches
about 1.5 million Indian homes, adding 1500 customers daily. It has
operations in over 135 cities and 500 towns across India. «A formal KM
function has been in existence in the company for over seven years and has
gone through different phases. Knowledge Management has evolved from
being seen as additional work, to being recognised as providing a strategic
advantage, significantly impacting both the top-line and bottom-line» says
Shubha Ashraf, Knowledge Manager at Eureka. The first phase was the
initial period of setting up structural intellectual capital as the KM
function and processes to facilitate people to know about and be able to
appreciate that it helps an individual to perform faster and better. The next
phase was the «value add» to structural capital by setting up of a portal
enabling different channels and features for attracting people to it. The
focus shifted from being a contact platform to being an enabling platform
for the internal customers thereby improving human intellectual capital.
The third phase focuses on improving social intellectual capital by
leveraging knowledge gathered to improve market responsiveness,
customer and employee happiness.
The success is primarily attributed to the focus being on linking
Knowledge Management directly to business results, thereby providing the
organisation with a distinct competitive edge. Eureka Forbes Ltd. has won
the MAKE award and in January 2010 it was recognised and distinguished
by three UNESCO-Water Digest Awards for Best R&D and Technological
breakthrough for a new product.
2.2 Dimensions of Knowledge

In order to «manage» knowledge in organisations we need to understand
what type of «species» we are dealing with. We, therefore, will take a closer
look at the following three dimensions of the term «knowledge».
– «Nature» of knowledge: What is knowledge? Is it considered to be an
object, a result that can be shared, duplicated and transported like
«frozen food» or is it an individual process that is difficult to control?
– «Availability» of knowledge: In which forms does knowledge become
available and accessible in and across organisations? Here, we shall deal
particularly with the difference between individual versus collective
knowledge and tacit versus explicit knowledge.
– «Value» of knowledge: What is the value of knowledge? Often,
knowledge is also identified as component of intangible assets or as
«Intellectual Capital». Knowledge is capital. The question is how can
knowledge be measured?
2.2.1 Nature of Knowledge

Von Krogh and Roos (1996, p. 334) contrast three epistemologies with three
knowledge perspectives in a company:
– The information processing epistemology assumes that knowledge and
information are roughly the same. In this case it is but natural to invest in
the speed of information processing. From this perspective, the increase
in the capacity to process information leads to an increase in the
development of knowledge in the company as well. Organisations which
focus on this epistemology will invest in information and communication
systems such as relaunching or optimising their intranet.
– The network epistemology assumes that knowledge is a result of
interaction of people in networks. Thus, the firm should invest to bring
the employees of the organisation together. Consequently, the higher the
number of opportunities for the people to meet and exchange, the greater
will be the development of knowledge. Organisations which focus on
this epistemology will promote communities of practice and other social
networks, create meeting zones and opportunities for people to meet (e.g.
brown bag lunch).
– The self-referential epistemology assumes that knowledge is a private
history-dependent process within each of us. Knowledge of one person is
a mere raw data for another. Each person shares organisational
knowledge with another. Hence, it is necessary to find a context that
stimulates continuous dialogue in the organisation. Firms which focus on
this epistemology will promote small teams and task forces, create
«work-out-type» problem-solving groups and provide experts with
stimulating environments (see for example the design and layout of the
Google Zurich office).
Von Krogh and Roos prefer the last perspective of knowledge creation.
However, they emphasise that every organisation works according to all the
three epistemologies at different points of time and for different functions.
Therefore, knowledge can belong to both the extreme position viz.
«knowledge is object» and «knowledge is process» depending on the
situation. For instance, if the sales employees know the number of its A-
class clients, this is information with the characteristics of an object.
However, knowledge exhibits more characteristics of a process if the
available information about the customer is to be used in a better way for
concluding business. Gardner (1995) has described these different aspects
with the terms «know-what», «know-how», «know-why», «know-where»
and «know-when». Polanyi (1966) emphasised the process perspective with
the following statement:
Knowledge is an activity best described as a process of knowing.
The extreme perspective of «knowledge is object» and «knowledge is

process» are perhaps best clear if we break up the new word «knowledge
capital» into its two components, viz. knowledge and capital and find out
the difference between these two terms (refer to ◘ Fig. 2.3). Sveiby
(1997) argues that the analogy between knowledge and capital does not
help in the creation and transfer of knowledge because it leads to a false
understanding of knowledge (see ◘ Fig. 2.3).
Fig. 2.3 Differences between capital and knowledge (Source: Based on Sveiby 1997)
For creating a knowledge-based organisation – a process perspective of

knowledge should be adopted. Consequently, it is necessary to develop
enabling conditions that encourage the creation and transfer of knowledge.
Apart from these different perspectives – «knowledge is object» and
«knowledge is process» – the nature of knowledge is determined by two
features. Knowledge can be private and individual for one and public and
collective for others. Furthermore, knowledge can be present in tacit and
explicit forms. These aspects determine the availability of knowledge.
Case Study
Integration of knowledge: Taking over a foreign company
The Problem:
A German enterprise takes over a French company with approximately
500 employees in order to get additional know-how quickly. On the
German side, the takeover negotiations are conducted by the «Mergers and
Acquisitions» department (M&A). After concluding the contract, an
operative business unit takes the task of integrating the new French
subsidiary in the concern without having prior experience. Though M&A
knows the French company, it is only involved informally in further
integration once the contract is concluded.
The French experts oppose the merger. Value of the acquisition would
be reduced due to attrition. Knowledge is documented rudimentarily. The
German buyer has only a few French-speaking employees who can bridge
the gap towards the new subsidiary or could integrate the French employees
in their teams. There is a lot of difference between the culture of the
German enterprise and the medium-sized French company. The new
German parent company sends a high-level management team to take over
management of the French subsidiary. That’s when the problems begin.
Solution Elements:
How can the integration process be arranged more effectively? The
value of the acquisition is decided by the know-how of the employees.
Therefore, it is useful not only to alert the Mergers and Acquisitions at an
early stage but also to take actions that build faith, e.g. encouraging the
employees of both the companies get to know each other, identifying the
important knowledge bearers and/or teams and positively influence their
attitude towards the merger. After concluding the negotiations, experienced
specialists of the M&A department should start coaching the integration
process. Furthermore, continuous structuring of an M&A process and the
integration process is helpful. In order to ensure success, it is fundamental
that knowledge and knowledge bearers are not regarded as objects that can
be used freely by signing a purchase contract.
Assignment: Identify cross border or cross regional mergers. What
were the reasons for failure or success?
2.2.2 Availability and Conversion of Knowledge: SEICI-Model

The «availability» of knowledge is affected by form, time and place. Form
not only involves the «individual versus collective knowledge» aspect but
also includes the «tacit versus explicit knowledge» aspect. Both these
aspects are closely interlocked (Hedlund and Nonaka 1993; Nonaka and
Takeuchi 1995).
The manner of organising the transfer of individual knowledge into
collective knowledge and vice versa is decisive for the success of
knowledge-based management. «A company is a place wherein individual
knowledge and individual intelligence converge to form a collective and
creative intelligence that can be put to entrepreneurial use» (Morin, 1997,
personal communication).
There are two types of knowledge to describe this process: explicit
knowledge and tacit knowledge.
Tacit knowledge represents the personal knowledge of an individual. It
is based on education, ideals, values and feelings of the individual person.
Subjective insights and intuition embody tacit knowledge that is deeply
rooted in the actions and experiences of the particular person. The term
«tacit knowledge» was first introduced into philosophy by Michael Polanyi
observing that «we can know more than we can tell» (Polanyi 1966, p. 4).
This form of knowledge is very difficult to formulate and to pass on
because it is embodied in individuals. Tacit knowledge is imparted, among
other things, during our upbringing wherein we take on the behaviour
patterns of parents unknowingly.
Unlike tacit knowledge, explicit knowledge is methodical and
systematic and is present in an articulated form. It is stored in the media
outside the brain (disembodied knowledge) of an individual and can be
transferred and stored by means of information and communication
technology. Examples of explicit knowledge are detailed descriptions of
processes, patents, organisation trees, quality documents, etc.
Nonaka and Takeuchi have expressed that the conversion of tacit
knowledge into explicit knowledge is the basic problem of knowledge
management. The reason being that knowledge is useful for a company and
can be used by individuals or groups only if it is present in an explicit form.
Thus, from this point of view, it is the task of the knowledge management
to arrange and direct a process of generating organisational knowledge.
Nonaka and Takeuchi formulated this as follows: «By organisational
knowledge creation we mean the capability of a company as a whole to
create new knowledge, distributed throughout the organisation and
embodied in products, services and systems» (Generation of organisational
knowledge means the ability of a company to generate completely new
knowledge, distribute it within the organisation and incorporate it into
products, services and systems) (Nonaka and Takeuchi 1995, S. VIII; von
Krogh et al. 2000).
Nonaka and Takeuchi (1995) assume that knowledge is created through
the interaction between tacit and explicit knowledge by four different
modes of conversion as shown in ◘ Fig. 2.4. We will explain all four ways
of knowledge conversion as they are the basis for value creation.
Fig. 2.4 Four ways to create and transform knowledge (Source: Nonaka and Takeuchi 1995, p. 72)
Socialisation: From Tacit to Tacit Knowledge The conversion from tacit

knowledge of one person to tacit knowledge of another person is called
socialisation. It is a process of sharing experiences and thereby creating
tacit knowledge such as shared mental models and technical skills.
Socialisation takes place when an apprentice observes a master, when a
newly hired consultant is integrated into a project group and learns through
observation, imitation and practice. Shared experience is the key of
socialisation and of value creation in knowledge based organisations. The
mere transfer of information will often make little sense if it is abstracted
from the associated emotions and specific contexts in which shared
experiences are embedded.
Externalisation: From Tacit to Explicit Externalisation is the process of

articulating tacit knowledge into explicit concepts. Externalisation happens
when we describe a manufacturing process for the purpose of an ISO 9000
certification. In management consulting for example, externalisation takes
place when a project profile is written in order to provide specific
information on project development and lessons learned as a basis for future
similar projects. Many firms have these type of lessons learnt on databases.
Since externalisation reveals only a part of the tacit knowledge, it is good
not to rely exclusively on these written statements but enable e.g.
consultants who have to plan a new project to get a personal contact with
those who have carried out similar projects before. Similarly, a real process
will always differ from the formal project description. Externalisation is the
basis for reflecting experiences, for formalised learning processes and
ultimately for standardisation and process improvement.
Combination: From Explicit to Explicit Knowledge Combination refers to

the conversion from explicit knowledge to explicit knowledge. Individuals
exchange and combine knowledge through documents, meetings,
communication networks. They reconfigure existing information through
sorting, adding, combining and categorising of explicit knowledge which
may lead to new information. In consulting, for example, different
presentations are combined and reconfigured for the purpose of a sales
presentation to a new client. The combination of explicit knowledge to
explicit knowledge often follows an economics of reuse and is also the
basis for a cumulative innovative strategy the products and processes are
improved incrementally.
Internalisation: From Explicit to Tacit Knowledge Internalisation is the

process of embodying explicit knowledge in tacit knowledge. It is closely
related to learning by doing. A service engineer, for instance, reads an
operating manual in order to program electronic equipment. A great part of
our formalised learning processes happens by internalisation. According to
Nonaka and Takeuchi’s model, knowledge creation is a continuous and
dynamic interaction between tacit and explicit knowledge which happens at
the level of the individual, of the group, of the organisation, and between
organisations.
It is therefore an important management task to create opportunities of

interactions between these levels so that knowledge conversion can happen.
According to Nonaka and Takeuchi the enabling conditions are
Intention The most critical element of corporate strategy is to

conceptualise a vision about what kind of knowledge should be developed
and to make it operational in a management system for implementation.
Autonomy At the individual level, all members of an organisation should

be allowed to act autonomously as far as circumstances permit. This may
increase the chance of introducing unexpected ideas and tacit opportunities.
Fluctuation and creative chaos This means to adopt an open attitude

towards environmental signals, to exploit those signals ambiguity,
redundancy and to use fluctuation in order to break routines, habits or
cognitive frameworks.
Redundancy In business organisations, redundancy refers to intentional

overlapping of information about business activities, management
responsibilities and the company as a whole. Sharing redundant information
promotes the sharing of tacit knowledge and thus speeds up the knowledge
creation process.
Requisite variety Based on the assumption, that an organisation’s internal

diversity must match the variety and complexity of the environment in
order to deal with challenges posed by the environment, everyone in the
organisation should be assured of quick access to necessary information and
knowledge. When information differentials exist within the organisation,
organisational members cannot interact on equal terms; this hinders the
search for different interpretation of new information.
Nonaka and Takeuchi have assumed a «knowledge spiral» model for

transforming tacit knowledge to explicit knowledge and for transferring
knowledge from an individual to a group or an organisation. The starting
point of the spiral is the individual employee and his/her capability to create
knowledge. While communicating with the employees in a group, the
individual employee gives away his own knowledge (externalisation) and
transfers it to others. On the other hand, the individual internalises the
experience background of the entire group (internalisation). The continuous
knowledge externalisation and internalisation among employees, and teams
within the organisation and beyond the organisation leads to supply of
knowledge at these various levels as well as results in growth of the
knowledge of the organisation. Personal communication among the
employees and use of information and communication technology is a
prerequisite for this entire process. The knowledge spiral runs through four
phases as shown in ◘ Fig. 2.5.
Fig. 2.5 The spiral of creation and transfer of organisational knowledge (Source: Nonaka and
Takeuchi 1995, S. 73)
– In the socialisation phase (exchange of tacit knowledge), the inner

knowledge, e.g. mental model or technical skills are generated.
– The externalisation phase of knowledge (from tacit to explicit) produces
the conceptual and new knowledge.
– The combination phase (combination of explicit knowledge) develops
systematic knowledge that is manifested in prototypes, new methods or
new business ideas.
– The internalisation phase of knowledge (from explicit to tacit) generates
operative knowledge.
The following case study, «The best bread in Osaka», explains the
above phases individually.
However, the above mentioned model describing the conversion of
knowledge from private to collective and implicit to explicit does not
consider uneven distribution of knowledge in the company that is caused
by structural or motivational barriers in the organisation. On the other side,
the existing knowledge is not available at the desired place at the desired
time.
Knowledge management therefore should not just be restricted to the
individual and organisational learning process as such but should also
remove obstacles in information and communication. To put it positively,
management should create conditions that promote knowledge sharing,
guarantee the interaction of individual and organisational learning
processes. von Hipple (1994) and Szulanski (1966) use the term
«stickiness» to describe the fact that knowledge is freely available only up
to a certain limit. Knowledge has a tendency to «stick». It must be set afloat
by suitable organisational design measures. We will take a closer look at
this topic in the sections on knowledge transfer and knowledge market (cf.
► Chap. 7).
The availability of knowledge is linked to the time and place factor.
Professionals are not available round the clock worldwide, especially in
companies that operate globally. A software problem that appears in a
subsidiary in Europe can at times not be resolved because the specialist in
India is not available or because she is on vacation. In an industry that is
dependent on rapid responses, e.g. consulting firms, McKinsey has set up a
rapid response network within its practice centre. The «on-call-consultants»
in this network guarantee a qualified answer within 24 h to a field-specific
question from one of the approximately 60 offices in 28 countries (Peters
1994, p. 169–171). In Eureka Forbes, the salesman in the field requires a
quick response to his queries. He uses his mobile phone to connect and get
his answers from the on-call consultants who have access to the knowledge
repository.
Decision-making requires a full set of up-to-date information and
knowledge. Today, in many companies, there is a considerable time lag in
making updated information available and thus today’s decisions for
tomorrow’s actions are based on obsolete knowledge. Company-wide
availability of up-to-date knowledge and information is of vital importance
particularly for companies that are surrounded by a fast-changing market
environment.
Furthermore, the availability of knowledge is affected by the place
where the knowledge originates or where an individual looks for
knowledge. Despite electronic media, knowing people personally and the
resulting trust are necessary for exchange of knowledge. It is difficult to
build such trust over huge geographical distances without meeting the
people regularly in person. Apart from these more motivational aspects, the
creation of local and global knowledge centres and their interconnection is
an important strategic task of international companies (Bartlett and Ghoshal
1989; Doz 1997). We will have a closer look at this task in ► Chap. 5.
Case Study
The best bread in Osaka
In 1985, the product developers of the Matsushita Electric Company in
Osaka pondered over the construction of a bread-making machine for home
use. But the prototype could not knead the dough properly and bake it
thoroughly. Despite all efforts, the outer crust burnt while the bread
remained raw inside. That’s when software developer, Ikuko Tanaka, came
up with a brilliant idea. The Osaka International Hotel basked in the glory
of making the best bread in Osaka. Tanaka thought of using this to the
company’s advantage. She went to the master baker of the hotel to watch
his kneading technique and saw how the master baker stretched the dough
in a particular way. After a year of experimenting in close collaboration
with the project engineers, Tanaka finally changed the construction features
of the machine (by adding special ribs inside the case) in such a way that
the device effectively imitated the kneading technique of the baker and
baked the dough the way Tanaka had learnt in the hotel. The result was
Matsushita’s unique «kneading method» and a product that broke all sales
records for new baking devices in the first year alone. Thus, Tanaka had
converted the tacit knowledge of the baker into explicit knowledge in form
of clear specification for the bread-making machine. Ikuko Tanaka first
acquired the inner knowledge of the hotel’s master baker (socialisation).
She then converted these secrets into explicit knowledge that she could pass
on to her team members and others at Matsushita (externalisation).
Thereafter, the team standardised this knowledge, merged it into a
guidebook and an instruction manual and let the product shape accordingly
(combination). Finally, the experiences of Tanaka and the team members
while constructing the new product enhanced their own tacit knowledge
base (internalisation).
Source: The case study follows the description in Nonaka 1991 p. 98–
99.
2.2.3 The Value Dimension of Knowledge

The 1980s witnessed the beginning of a thought process based on the
observation that the market value of companies was rising in relation to
their book value. The experts wondered how this gap – called «goodwill» –
could be explained and concluded that the difference between market value
and book value can be attributed to the value of intangible assets, which is
defined in the International Accounting Standard (IAS 38) as follows (►
http://www.iasplus.com/en/standards/standard38):
Definition
An intangible asset is an identifiable non-monetary asset without

physical substance. An asset is a resource that is controlled by the
entity as a result of past events (for example, purchase or self-
creation) and from which future economic benefits (inflows of cash or
other assets) are expected. [IAS 38.8] Thus, the three critical
attributes of an intangible asset are identifiability, control (power to
obtain benefits from the asset) and future economic benefits (such as
revenues or reduced future costs).
The Swedish insurance company Skandia and the Canadian Imperial Bank
of Commerce were the first companies that developed a new structure of
company capital. In their approach, the finance capital was complemented
by «intellectual capital».
Definition
Intellectual capital is defined as knowledge that can be converted

into value (Edvinsson and Sullivan 1996, p. 358; Edvinsson and
Malone 1997) or as resource utilised in future value creation without
a physical embodyment (OECD 2008).
Knowledge is considered to be part of intangible assets. This integrates

knowledge management in the present logic of management of financial
and physical resources and helps to structure and measure the kind of
«knowledge» available in organisations (see a more detailed discussion in
► Chap. 6).
The «knowledge is capital» analogy is intriguing. However, it tends to
ignore the character of knowledge as a process as we have already
discussed under «Nature of knowledge».
The term «intangible assets» covers further resources for value creation
which are not in the core «intellectual capital». Thus, the customer base, the
image of a company or the value of the brands is only to some extent
«knowledge converted into value». Yet these elements can be added to the
value of the intangible assets.
The knowledge of and about customers that is accessible to the
company as well as employee knowledge about customers, processes,
technologies etc. are a part of the intellectual capital. Employees and
customers do not belong to the company the way tangible assets do – the
control is restricted. That is why the value of employees is not accounted
for in the balance sheet (see ◘ Fig. 2.6).
Fig. 2.6 Organisational knowledge base is part of intangible assets
How can knowledge be structured from the viewpoint of intellectual

capital and which factors determine the value of knowledge?
Following the footsteps of Skandia, while structuring the company
capital, the market value of a company is described by the financial capital
and the intellectual capital (Skandia 1998). The intellectual capital in turn is
divided into human capital, customer capital and organisational capital.
Human capital is comprised of the competencies of the workforce,
their motivation as well as relations and values. In short we might say:
Human capital = competence × motivation.
Customer capital represents the value of the company’s relationship
with the customer. Saint-Onge defines customer capital as the depth
(penetration), width (coverage) and the attachment (loyalty) of the customer
base (Bontis 1996). The examples of customer capital are patients of a
doctor, client base of a mail order company, branch networks of a bank and
their customer relationships. Sveiby emphasised that supplier and
distributor relationships must also be included in this category of capital
(Sveiby 1997).
The third category of intellectual capital is organisational or
structural capital. Skandia divided the organisational capital into
innovation capital, process capital and culture. The combined value of the
value-creating processes is recorded under process capital. This includes for
example the value of the client order process or the value of the
procurement process. The value of procurement process is based on the
knowledge of employees of the purchasing department about supply
markets, their ability to negotiate with the suppliers, in structuring the
process cycle from a purchase requests up to finding a supplier and
managing supplier relations. Knowledge is linked to the databases, software
as well as values and goal-setting of the employees of the purchasing
department.
It is often said that structural capital is the capital «that remains when
the employees go home». We have to note, however, that this capital comes
to life and has a value only with the employees. Though information
codified in the databases, software and process ensures daily operations it is
valueless to a great extent if there is a massive brain drain.
Innovation capital, the second pillar of structural capital, is defined by
Skandia as the renewal strength of a company and is evident in the
protected intellectual property like patents, licences or brand names and
intangible virtues that enable future cash flows. This contains, for instance,
valuation of creativity. The structure of Skandia’s organisational capital is
illustrated in ◘ Fig. 2.7 (See also ► Chap. 9 for further detail).
Fig. 2.7 Skandia’s structuring of organisational capital (Source: According to Skandia 1998)
Criteria to Assess the Value of Knowledge

Above we have explained how to break down knowledge into components
that can be assigned a value under certain conditions.
In the following we will deal with the question of how a value can be
assigned to knowledge and which criteria influences this.
The value of knowledge is measured mainly on the basis of the scarcity
and the value-creating potential of this resource. It is often difficult for
both – the «seller» and the «buyer» to assess the value-creating potential of
knowledge (e.g. what is the value of a patent?, What am I willing to pay for
a technology consultant?)
While evaluating knowledge, the knowledge «seller» might take as a
first orientation the efforts involved in acquiring the knowledge. «I have
invested so much time and money in acquiring this knowledge. Now, I want
to sell it at a higher value if possible.»
The internal sunk costs that are incurred on, for example, the training of
employees or building a team operative in software development are
meaningful only to a certain extent while determining the value of
knowledge resource. This is because, firstly, the expenditure incurred by the
company cannot always be ascertained in terms of cost. Secondly, the
expenditure could have increased because of inefficient training and
advanced training measures, or the knowledge obtained can no longer be of
any value because of fast changes in the market. From this viewpoint, the
valuation of knowledge resources based on expenditure is inadequate. On
the other hand, the knowledge «buyer» is not sure of the potential value that
can be added by the transferred knowledge. This is a basic problem of the
consultancy firms because the client – particularly in case of process-
oriented consulting – buys learning processes without an assured result.
A better orientation might be to consider the replacement cost of an
intellectual asset: What will it cost me to build an effective research team»
and relate this to the value creation potential of the team. In ► Chap. 9
we discuss «Tobin’s q» which relates market value of an asset to its
replacement cost.
The following key questions introduce knowledge «sellers», knowledge
«buyers» and investors to the valuation of knowledge:
– Knowledge users: For which purpose do I use the knowledge and what is
the «value adding potential» related to this knowledge?
– Knowledge «sellers»: What was my cost for acquiring this knowledge
and how can I make this knowledge valuable in the market? Investor:
How will the knowledge of this company contribute to its success in the
market? What is the relation between market value and replacement
cost?
The knowledge sellers, knowledge buyers and investors will assess the
knowledge implicitly by means of a range of criteria which we will discuss
in the following:
Specificity We assume that the more specific the knowledge, the higher its
value. Users value ready made and tailored solutions of their problems.
Knowledge contributing to this will be higher valued than general
principles. This leads, for example, to a strategic discussion in consultancy
companies about the value of standard methodologies versus individualised
advice.
The validity of knowledge can be seen from a content perspective and a

time perspective. The content perspective refers to the way in which
knowledge is created and validated.
– Scientifically accepted knowledge that has universal validity under
precisely defined conditions
– Judgements and evaluations that can be traced objectively
– Individual or collective experiences and acting potential derived from
such experiences.
There is an argument that the cost of acquiring knowledge – and in
certain respect, the value – is lowest for the accepted knowledge and
highest for the potential knowledge. Researchers in pharmaceutics might
buy accepted knowledge in the form of a scientific database at a relatively
low price, but the cost of molecular modelling or acquiring advice from
experienced experts will be much higher. Therefore, the value of a research
team or a strategic alliance with a laboratory should be estimated as
significantly higher than the accumulation of accepted knowledge.
The temporal validity of knowledge refers to its «expiry date». A
general technological knowledge base has a longer validity than market
knowledge that can drop to zero value just within days or weeks.
Yet another criterion of valuating knowledge is its uniqueness or its
scarcity value. However, there should be a corresponding demand when
knowledge is to be evaluated this way. An expert might be the only person
with knowledge about a specific subject without there being any demand
for his knowledge. Equally important is the speed at which this knowledge
can be imitated or substituted.
All these perspectives are considered while valuating knowledge.
Case Study
The value of knowledge
The tractor of a farmer stopped working. All the efforts of the farmer
and his friends to repair the tractor were in vain. Finally, the farmer made
up his mind to fetch a mechanic. The mechanic had a look at the tractor,
activated the starter, lifted the engine bonnet and checked every detail.
Finally, the mechanic took his hammer. With a single blow of the hammer
at a particular place the tractor started functioning again. The engine
functioned as though it had never broken down. As the mechanic handed
over an invoice to the farmer, the farmer was completely shocked and angry
and said, «What? You want fifty Toman for one strike of a hammer!» The
mechanic said, «My dear friend, I charge only one Toman for the hammer
strike. But I have to charge forty-nine Toman for knowing where to strike.»
2.3 Knowledge as Competitive Factor
2.3.1 Knowledge-Based Theory of the Firm
Morin recognises the company as a place where individual knowledge and
individual intelligence converge to form a collective and creative
intelligence that can be put to entrepreneurial use. From this viewpoint,
companies exist because they are in the position to convert individual
knowledge into collective knowledge and employ it for an entrepreneurial
purpose. Accordingly, the business is successful:
– If individuals make their relevant knowledge and experience available
for the operation of the firm and
– If there is an effective knowledge transformation process from individual
to collective level and
– If activities are aligned in an entrepreneurial spirit to achieve the
objectives of the firm.
However, this description of a company from the knowledge point of
view does not explain the existence of the company. Individuals could get
together in order to share their knowledge, to create collective knowledge
and thus to transact business (Spender 1996; Grant 1996; Tsoukas 1996;
Kogut and Zander 1992). According to Grant (Grant 1996, p. 112), the
existence of a company is a result of the restricted capacity of a human
brain to acquire, store and to process knowledge. This gives rise to
individual specialisation in several fields of knowledge. However, offering
complex solutions to problems requires coordinated efforts of various
specialists. Markets alone are incapable of taking up the role of this
coordination because they cannot mobilise tacit knowledge and cannot
answer the risk of theft of intellectual property (in case of explicit
knowledge) by a potential knowledge buyer. Thus, companies exist because
they are capable of creating conditions that favour the production of goods
and services and enable individuals to integrate their specialised
knowledge. Hence, an important task of the knowledge-based management
of a company is to establish conditions so that employees with specific
knowledge are in a position to create collective knowledge and to
implement it to ensure business success.
2.3.2 Knowledge as Strategic Competitive Factor

But how to ensure business success in a competitive environment? In this
respect, knowledge is increasingly being considered as a strategic
competitive factor. This has formed complementary viewpoints – the
market based view (Porter 1985) and the resource-based view (Penrose
1959; Hamel and Heene 1994) further developed by the theory of «dynamic
capabilities» (Teece 2009, see also Teece 2007; Teece et al. 1997, 2000).
The environment related or market-based view (Porter 1985) assumes
that competitive advantage arises out of uneven distribution of information
and knowledge between companies and the resulting positioning of firms in
their sector. Since individual companies are ahead of competitors in terms
of information and knowledge, they recognise market opportunities earlier
than the competition. Since they have the corresponding competencies, they
convert these opportunities into business. From this perspective,
entrepreneurship involves detecting relevant differences in information and
knowledge as well as conversion of this difference into business. But this
results in a dynamic competition wherein the actions of the successful
company are imitated and thus competitive advantages are continuously lost
and it becomes necessary to identify new developments in information and
knowledge as well as implement them in entrepreneurial activities. Hence,
this type of competition requires a company to be faster than its competitors
while it is difficult to build lasting competitive advantage.
In the resource-based view (Penrose 1959; Nelson and Winter 1982),
companies achieve competitive advantages by being and acting differently
than its competitors. As opposed to the environment-oriented approach, this
approach enables continuous differentiation between companies. These
differentiations are difficult to imitate.2 Considering the potential of the
resources to achieve continuous competitive advantage, Barney (1992)
reviewed them in four criteria which are often abbreviated as «VRIN»:
– Valuable (for the customer)
– Rare as compared to the rivals
– Imperfectly imitable due to unique historical conditions, causal
ambiguity and social complexity
– Non-substitutable
The last two criteria are seen as particularly relevant for achieving
continuous competitive advantages. Obstacles in imitation arise firstly
because knowledge is codified but legally protected, e.g. brands or patents.
Secondly, because knowledge exists in tacit form and through facts that
even explicit knowledge is related to persons and groups of persons. The
obstacles in imitation are linked directly or indirectly to the knowledge or
the development of knowledge. Furthermore, it is argued that intangible
assets are the real source of competitive strength and key factors in the
adaptability of the company because of the following three reasons:
Intangible assets are difficult to accumulate, they can be used a number of
times simultaneously and they are both inputs and outputs of business
activities (Itami and Roehl 1987, p.13/14).
Does this hold also for fast moving business environments open to
global competition, and characterised by dispersion in the geographical and
organisational sources of innovation and manufacturing? Teece (2009, p. 4)
argues that sustainable advantage requires more than the ownership of
difficult-to-replicate (knowledge) assets. According to Teece this also
requires unique and difficult-to-replicate so-called «dynamic capabilities».
These capabilities can be harnessed to continuously create, extend, upgrade,
protect, and keep relevant the enterprise’s unique asset base.
Definition
Dynamic capabilities are the ability to reconfigure, redirect,

transform, and appropriately shape and integrate existing core
competences with external resources and strategic and
complementary assets to meet the challenges of a time-pressured,
rapidly changing Schumpeterian world of competition and imitation
(Teece et al. 2000, p. 339).
For analytical purposes, dynamic capabilities can be disaggregated

into the capacity (1) to sense and shape opportunities and threats, (2)
to seize opportunities, and (3) to maintain competitiveness through
enhancing, combining, protecting, and when necessary,
reconfiguring the business enterprise’s intangible and tangible
assets. Dynamic capabilities include difficult-to-replicate enterprise
capabilities required to adapt to changing customer and
technological opportunities. They also embrace the enterprise’s
capacity to shape the ecosystem it occupies, develop new products
and processes, and design and implement viable business models.
(Teece 2009, p. 4)
How are these competitive advantages developed out of production

factors that can be bought on the market? Let us consider the following
example:
A laboratory recruits graduates (production factor) on the labour
market and integrate them into a team of experienced R&D staff in order to
develop an innovative, specialised group of developers. The team becomes
a resource which is difficult to imitate due to shared values and tacit
understanding. The lab has established routines and processes of
technology and project management over the years through which the
individual skills and competences of R&D teams are organised to deliver
unique and difficult to imitate development services. Content and type of
development work are continuously reflected in a strategic dialogue with
leading research institutes and customers. Based on this new areas of
knowledge are integrated and thus an enrichment and of existing core
competences is ensured. Dynamic capabilities are developed to sustain
uniqueness.
It is clear from this chapter that compared to the physical resources,
knowledge is a more difficult to imitate and rarer company resource that
offers a very high potential for generation of value. Knowledge is
increasingly being considered as «a justification of existence»; as a
determining factor for existence and size of a company.
The analysis of what organisations are should be grounded in the

understanding of what they know how to do. (Kogut and Zander
1992, p. 383)
2.3.3 Impact of Knowledge Management Practices on

Performance
«What are the benefits of Knowledge Management?» is an often asked
questions by management.
A number of studies relating KM processes, practices and business
cases to organizational performance provide the answer. Studies which
provide an overview of these relationships have been published by Zack et
al. 2009, Andreeva and Kianto 2012, Inkinen 2016).
Empirical evidence on the association between KM and firm
performance is based on three avenues of research. Inkinen (2016)
describes the first two: First, studies investigating how knowledge processes
(acquisition, sharing and utilization) which typically take place in firms
even without systematic managerial intervention, are related with various
firm performance outcomes. Secondly, studies focus on the impact of
conscious organizational and managerial practices, with an intention to
achieve organizational goals through efficient and effective management of
the firm’s knowledge resources (Andreeva and Kianto 2012). A third type
of studies looks into concrete business cases and establishes a relationship
between intervention and outcome (North and Hornung 2003; North et al.
2004).
The impact of KM processes, practices, business cases and
organizational performance are well summarized by Andreeva and Kianto
(2012, p.619). While it is argued that KM can bring direct economic
benefits to the firm through saving or earning money, a more usual view
seems to be that the impact on financial performance of the firm is indirect.
Zack et al. (2009) found that KM practices are directly related to various
intermediate results of strategic organizational performance and that those
intermediate results are associated with financial performance. KM delivers
economic benefits to the firm by such various manners as accelerating
innovation and structural agility; reducing cycle time in production and
program failures; creating a healthy and knowledge-friendly culture;
attracting and maintaining high-quality knowledge workforce; and by
improving re-use levels of knowledge and corporate memory. KM has also
been connected with product leadership, customer intimacy and operational
excellence, innovation, organizational creativity.
Definition
KM practices are the conscious organizational and managerial

practices intended to achieve organizational goals through efficient
and effective management of the firm’s knowledge resources.
(Inkinen 2016, p. 232 based on Andreeva and Kianto (2012).
Let us now analyze which KM practices yield which results regarding firm
performance. In the following we summarize major findings of Inkinen’s
(2016) literature review.
Knowledge-based human resource management practices The literature

strongly suggests that HRM practices are highly associated with innovation.
Some studies point out that the utilization of HRM practices increases the
knowledge processes, such as acquisition, sharing and creation, which have
an impact on innovation capability. In addition, HRM practices seem to
increase innovations and improve innovativeness by having a positive
influence on the affective commitment of employees and impersonal trust.
Knowledge management leadership practices Top-management support

is associated with an increase in knowledge processes, which result in
higher organizational learning and the capability to develop new products or
services, predict business or risks and cope with new information regarding
markets. Knowledge-oriented leadership, in terms of empowering
employees and promoting trust and learning, increases the effect that
knowledge exploration and exploitation practices have on innovations. A
transformational mode of leadership including idealized influence,
intellectual stimulation, inspirational motivation and individualized
consideration, increases the firm’s relative performance compared to its
competitors through improved knowledge acquisition and financial
performance through learning and innovation.
Technology-oriented knowledge management practices IT support for

collaboration, communication, information search, real-time learning,
simulation and prediction is associated with a firm’s innovativeness.
Researchers also note that IT support is a main facilitator of knowledge
acquisition, creation and sharing, which pushes firms to improved
performance through innovations and organizational agility.
Organization-oriented knowledge management practices One study

found that the establishment of a special unit in charge of KM, is
significantly associated with firm performance in a learning and growth
perspective, an internal process perspective and a customer perspective.
Management process-oriented knowledge management practices
Generally speaking, the firms were found to perform better if all the
necessary strategic KM elements existed, e.g. the concept of KM for top
management, a breadth of knowledge strategy objectives and KM tools and
implementation support elements, such as cultural principles, leadership
and HR practices. Strategic KM practices are especially associated with
innovations. Based on an extensive national survey in Germany Pawlowsky
and Schmidt (2012) confirm a strong positive relationship between KM and
innovation.
Analysis of business cases

To deepen the understanding of the relationship between performance and
KM initiatives, applications of 48 German enterprises for the award
«Knowledge Manager of the year 2002 and 2003» were evaluated. 240
impact statements were grouped according to the dimensions of the
Balanced Scorecard (North and Hornung 2003; North et al. 2004).
Enterprises harvested mainly benefits related to process improvement and
to employee performance. Relatively few statements referred to the impact
of KM initiatives on financial results and Innovation. In the process
dimension, benefits have been realized mainly in the area of process
acceleration, the reduction of double-work and the re-use of internal
knowledge. Having a look at company size, it turns out that small
companies focused particularly on the re-use of internal available
knowledge and the reduction of errors and the big players rank «time
savings» and «process transparency» as top benefits in this category.
Related to employees, dominant arguments are: increase of motivation,
enhancement of personal knowledge base and shorter on-boarding time for
new employees.
For small companies, competence development represents a significant
benefit, while big firms mention improved teamwork as key benefit in this
dimension. In relation to customers, firms argue that KM activities have
led to an increase in quality of products and services. This applies
irrespective from company size. Benefits in the area of «financial results»
refer to an increase in turnover, an improved risk management and reduced
administration costs. Some firms presented calculations how a better
availability of information reduces search times and what the related cost
savings potential is. Effects of KM initiatives on innovation were the
creation of new products & services, followed by –mainly mentioned by big
companies - the application of new technologies. Based on the findings ◘
Fig. 2.8 provides an overview which impact on operational performance
firms can expect from KM business cases.
Fig. 2.8 Performance improvement attributed to KM initiatives (240 impact statements by 48

German firms, North et al. 2004)
– Knowledge in an organisation can be classified in different ways and can
be evaluated. The handling of information is affected by the perspective
«What is knowledge and how important is it for our organisation.»
– The knowledge ladder describe value creation linking information,
knowledge, competence and competitiveness
– There are at least three knowledge epistemologies. Depending on the
situation, knowledge can be viewed as an object or a process. The
process perspective of knowledge is explained in this book.
– The SEICI model describes the transformation of knowledge from
individual to collective and from tacit to explicit.
– Knowledge is viewed as a component of intangible assets or «intellectual
capital». The value of knowledge is based on its scarcity and potential to
add value.
– Knowledge is considered as a factor of production, a strategic
competitive factor and basis of the existence of a company. Knowledge
can be imitated and substituted – these two aspects of knowledge are the
decisive criteria for sustainable competitive advantage.
2.5 Questions
1.
Explain the difference between information and knowledge and
knowledge and competence.
2.
What is the difference of tacit and explicit knowledge? Is explicit
knowledge only «information»?
3.
How would you interpret Knowledge Maturity in an organisation?
4.
Assess the value of a five person research and development team.
Which criteria would you use?
5.
What are criteria to evaluate core competencies?
2.6 Assignments
1.
Transferring successful sales practices
In your company several of the experienced sales representatives
are close to retirement. A number of new sales reps. have been
recruited.
You are asked to propose how to structure an effective knowledge
transfer between old and new sales reps. You remember the SEICI
model of Nonaka and Takeuchi and think that this might be a good
basis for developing a proposal.
2.
Core competence analysis
Apple is often cited as a successful and innovative company.
Analyse the core competencies of Apple.
2.7 KM-Tool: Idea Competition

What is an idea competition?
Leveraging employees’ creative imagination in conjunction with the
thrill of competition is a powerful way to source compelling, well-
articulated ideas.
An idea competition is a well focused way to access innovative ideas
and solutions from employees, users, potential clients. The quality of
ideas increases exponentially when participants’ are given a clear
and focused challenge question.
Idea competitions build on the nature of competition as a means to
encourage participation in an open innovation process, to inspire their
creativity, and to increase the quality and focus of submissions. When
the contest ends, submissions are evaluated by an expert panel. Those
whose submissions score highest usually receive a bonus or an award.
Why use idea competitions?

1. In many organisations suggestion schemes do or work well. People
do not submit their ideas because of bureaucratic procedures. Idea
competitions open a change for a focused, timely and simple
collection of ideas.
2.
Tapping ideas from «the crowd» of users or other people outside the
organisation has a huge value creation potential
3.
Idea competitions create a spirit of interaction and challenge current
practices and wisdom
How to organise idea competitions?

Prepare a clear and transparent process:
Idea competitions involve multiple participants including sponsors,
administrators, contestants and judges. The responsibilities of
administrators include:
1.
Design: Prior to launching a competition it is important to set the
rules, design the structure, select prizes and incentives and
determine the timeline.
2.
Planning: It is essential to carefully plan, anticipate the number of
submissions and define the various roles and responsibilities during
the various stages of the process.
3.
Prioritisation: If hundreds of ideas are submitted, it is important to
efficiently sift through the submissions to quickly identify the best
ideas.
4.
Providing a delightful experience: Each participant must feel
energised to participate and feel the competition process is fun and
easy to engage in.
5.
Transparency: Respond to participants in a timely fashion and
make information accessible to reduce administrative bottlenecks
and make them feel important.
6. Fair evaluation: Uniform judging is critical to fair competition.
Judges should be provided with a scorecard and evaluation criteria
to fairly rate each concept plan/idea.
7.
Managing scale: Due to the viral nature of online competitions,
administrators must be prepared to handle hundreds or perhaps
thousands of entries. Using a robust and proven web-based system
will prevent the administration from being burdened.
Ensure participation and prepare for high quality results.
How can an employee-driven idea competition process be designed
to deliver better ideas? A few important guidelines are as follows:
1.
Executive-level sponsorship: Have a senior executive sponsor the
competition, play a role in defining the strategic focus, and
communicate the importance of the effort in supporting corporate
strategy.
2.
Participant section: Recruit creative, passionate participants with
complementary skill sets and perspectives (marketing, consumer
insights, R&D, channel sales, production, etc.) and assemble them
into teams. Involving key stakeholders in the innovation process
fosters conversations that lead to higher quality ideas. It also creates
the ownership that accelerates the decision-making process and
builds the buy-in necessary for implementation.
3.
Participant preparation: Treat idea competitions (and any
innovation effort) as a process – not as an event. Expecting
participants to innovate without any meaningful preparation, context
or inspiration typically leads to irrelevant «ideas in a vacuum».
4.
Consumer Insight: Ensure that participants have insight into
consumer needs – both articulated and unarticulated. Go beyond
historical consumer data and usage patterns, and seek to understand
the voice, heart and mind of consumers. At a bare minimum
increase participants’ awareness of known issues that consumers
have with current products, services and solutions, but for better
results build in a «consumer experience» module (such as a field
trip) that has participants observe consumers using the current
product or service.
Industry Foresight: Create an orientation towards future-oriented
y g
5. thinking. Help participants identify emerging trends along several
dimensions, for example: «bleeding edge» technologies, anticipated
shifts in the competitive landscape, unusual business models,
hypotheses about societal trends, anticipated regulatory shifts,
emerging sales channels, new manufacturing practices, etc. Be
aware that focusing on historical data and established trends is easy
to do but typically limits the output to closer-in, incremental ideas
such as line extensions. Most companies are familiar with historical
trend data but are uncomfortable thinking about «emerging trends»
– and yet it is critical.
6.
Strategic, imaginative thinking: Push participants to break out of
traditional thinking modes and challenge their own assumptions.
Have them look for lessons and analogs from other industries. At a
minimum, introduce interactive stimuli (videos, advertisements,
«user scenarios», customer testimonials, etc.). Old habits and
thinking patterns are hard to break – stretching participants’ thinking
to entirely new levels calls for a radically different approach.
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Footnotes
1 A good overview over current KM maturity models is found at Kuriakose et al. (2010). See also
Vanini and Bochert 2014 and 7 http://www.kmmm.org/, 7 http://wisdomsource.com/
K3MOverview.pdf
2 Barney (1992), see also 7 http://www.valuebasedmanagement.net/methods_barney_resource_

based_view_firm.html
https://doi.org/10.1007/978-3-319-59978-6_3
3. Organisational Forms to Leverage

Knowledge

Germany
Innovation would take place if we let people with different

backgrounds work together and inspire each otherLars Kolind,
CEO, Oticon
Learning Outcomes
– You will know what are organisational challenges and approaches
to find a balance between stability/renewal and
competition/collaboration;
– You will be able to apply game theory to knowledge sharing
behaviour;
– You will know the strengths and weaknesses of different
organisational forms regarding knowledge flows
– You will be able to evaluate and determine an appropriate
organisational form for a specific business setting
– You will be able to run an After Action Review;
3.1 Balancing Antagonisms

How can we create a boundaryless organisation where knowledge flows in
and out, from top to bottom and bottom-up, where knowledge flows across
units and «knowledge silos» do not exist? How can we create an agile
organisation which learns quickly, innovates and performs its day to day
routines in an effective manner?
In this chapter we will deal with the challenges to find the right
organisational forms to make a reality this vision.
The art of organising is related to balancing antagonisms: To be
successful in knowledge competition organisations must learn to balance
stability and renewal as well as cooperation and competition. An excess of
stability can obstruct renewal. At the same time, excess renewal could mean
that a regulated business process is no longer possible. This is seen in
companies that have to struggle with «the curse of high growth rates». The
same applies to the act of balancing cooperation and competition within and
among companies. Excess competition – e.g. while selecting a supplier
company – might bring high returns in a short term. However, this may
result in extreme price wars, quality problems and cutting-off from
knowledge sources. An excess of internal competition in companies limits
knowledge exchange. Too much cooperation makes competitive knowledge
accessible to competitors or obstructs cost-effective solutions because the
similarities and teamwork are searched at every price (Hansen 2009).
Stability and renewal as well as cooperation and competition are the keys to
knowledge-based management of a company as we will see subsequently.
3.1.1 Stability Versus Renewal

In a highly global competitive environment companies need to address a
few critical questions – How do companies balance the two conflicting
factors of stability and renewal? How do companies enhance order and
control while responding to challenges and how do they renew themselves
and learn new things? How can companies establish relatively stable
general conditions that provide flexibility in organising and combining
employees and resources? (Ciborra 1996, p. 113). On the one hand,
organisations must constantly strive to be «different» by re-combining their
resources. Knowledge represents a portfolio of options and a platform for
future developments. The concept of «platform organisation» (Ciborra
1996; Kogut and Zander 1992) discussed below facilitates this perspective.
On the other hand, companies must be in a position to enhance their
operational efficiency, i.e. to use their competence and skill as optimally as
possible in short-term competitive situations. How can companies balance
these factors as shown in ◘ Fig. 3.1?
Fig. 3.1 Balancing stability and renewal
In an evolutionary perspective,1 a company accumulates knowledge

over the course of its existence. This knowledge is a source of specific
competence of the firm. In its development over time certain thinking
pattern are adopted by the employees of the companies, certain behaviour is
expected and practiced and particular decision processes are built into the
operating procedures and inculcated in the minds of the employees. In this
sense, these «core competencies» can become «core rigidities»: «Firms are
stuck with what they have and have to live with what they lack» (Leonard-
Barton 1992a, b; Burgelmann 1994).
In successful cases, this accumulated knowledge enables the company
to process its operative business effectively, strengthens the unique
advantages of the company further and contributes to continuous and
progressive development of knowledge. Quality Management is based on
this type of stability focussing on processes and routines.
Renewal – the other side of the balance – implies an ability of the
organisation to develop and change its resources and capabilities through
learning and innovation. This includes continuous improvement processes
as well as disruptive change challenging current wisdom and accepted
patterns of action. As we will see in the Oticon case below, it is not easy to
institutionalise a renewal process in organisations.
How can firms balance stability – exploiting current capabilities- and
renewal – exploring fundamentally new competencies – in order to achieve
long-term success? While earlier studies often regarded the trade-offs
between these two activities as insurmountable, more recent research
describes ambidextrous organisations (Tushman and O’Reilly 1996;
Raisch et al. 2009) that are capable of simultaneously exploiting existing
competencies and exploring new opportunities.
Definition Organisational ambidexterity refers to an

organisation’s ability to be efficient in their management of today’s
business and also adaptable for coping with tomorrow’s changing
demands (Raisch and Birkinshaw 2008).
To compete, companies must continually pursue many types of innovation

aimed at existing and new customers (O’Reilly and Tushman 2004):
– Incremental innovations = small improvements in existing products and
operations
– «Architectural» innovations = technology or process advances to
fundamentally change a component or element of the business
– Discontinuous innovation = radical advances that profoundly alter the
basis for competition in an industry
It is not easy to combine these various types of innovation. Kodak for
example has long time excelled at analog photography but hasn’t been able
to make the leap to digital cameras.
◘ Table 3.1 shows that exploitative and explorative business develop
different mind sets (tacit knowledge) thus making it so difficult to excel at
both.
Table 3.1 The scope of the ambidextrous organisation
Alignment Exploitative business Exploratory business

of:
Strategic Cost, profit Innovation, growth
intent
Critical tasks Operations, efficiency, incremental Adaptability, new products, breakthrough
innovation innovation
Competencies Operational Entrepreneurial
Structure Formal, mechanistic Adaptive, loose
Alignment Exploitative business Exploratory business
of:
Controls, Margins, productivity Milestones, growth
rewards
Culture Efficiency, low risk, quality, Risk taking, speed, flexibility,
customers experimentation
Leadership Authoritative, top down Visionary, involved
role
Adapted from O’Reilly and Tushman (2004), p. 80
For discontinuous and sometimes also for architectural innovation it is

therefore recommended to set up as an independent unit with its own
culture, processes, and structure, but the unit is still integrated within the
existing management hierarchy.
What does it take to become ambidextrous?
Based on a number of case studies O’Reilly and Tushman conclude that
ambidextrous organisations need ambidextrous senior teams and managers
– executives who have the ability to understand and be sensitive to the
needs of very different kinds of businesses. Combining the attributes of
rigorous cost cutters and free-thinking entrepreneurs while maintaining the
objectivity required to make difficult trade-offs, such managers are a rare
but essential breed. Organisational units should operate in a separated
manner, but the senior team needs to be integrated.
Furthermore, a company’s senior team must be committed to operating
ambidextrously even if its members aren’t ambidextrous themselves.
Resistance at the top levels of an organisation can’t be tolerated, which
means that a shift to an ambidextrous organisation can be a wrenching
experience.
The authors also have found that a clear and compelling vision,
relentlessly communicated by a company’s senior team, is crucial in
building ambidextrous designs. These aspirations provide an overarching
goal that permits exploitation and exploration to coexist. For example
Ciba’s «Healthy Eyes for Life» were compelling visions that underscored
the strategic necessity of ambidexterity and the benefits for all employees,
both those in the traditional units and those in the breakthrough initiatives.
To maintain momentum and overcome inertia it is important to highlight the
concrete accomplishments of the new approach.
Case Study
Oticon – The Spaghetti Organisation
Oticon, the Danish hearing aid technology company, was a world leader
in behind the ear hearing aids but its market share began to decline, as
people moved to «in the ear» models. Just as the company’s market share
had dropped from 15% to 7% and it was starting to lose money, Lars Kolind
took over as CEO to turn its performance around.
A former management consultant and associate Professor at
Copenhagen University, Kolind embarked on a classic turnaround strategy:
he pared the company down, shed staff and improved efficiency. And he re-
focused the business on its key markets. One year later, the strategy seemed
to be working and Oticon returned to profit. But Kolind knew that the
changes were not enough. «It was clear that we could not survive over the
next 5 years without taking a radical step» he remembers. «Where was our
competitive edge? Nowhere».
It was at that point that we reached a sort of breakpoint. I realised the
competitive situation was extremely difficult because we were up against all
the big boys you can imagine – Siemens, Philips, Sony, 3M, and AT&T. My
analysis was that we could never beat them in financial resources; we could
never beat them at marketing or at the brand level because they all had
fantastic brands. We could never beat them at technology, so we had to find
something that we could do in a unique fashion. That led me to believe that
if we could design a uniquely innovative, fast moving, efficient
organisation, then this is something they could never replicate.
Kolind’s response to this problem was a radical new organisational
model with no formal hierarchical reporting relationships, a resource
allocation system built around self-organised project teams, and an entirely
open-plan physical layout. He called it the spaghetti organisation, to
symbolise the organic and non-formal structure he was trying to create.
In his concept of the perfect corporate organisation, Kolind placed the
interaction, collaboration, and connectivity of people, customers, suppliers,
and ideas at the company’s heart. Kolind called it «a spaghetti organisation
of rich strands in a chaotic network». The key characteristics of a spaghetti
organisation are choice (staff initiate projects and assemble teams;
individuals invited to join a project can decline); multiple roles (the project
approach creates multi-disciplined individuals); and transparency
(knowledge is shared throughout the organisation). The organisation is
knowledge based and is driven internally by free market forces.
My thinking went like this. If Oticon was to compete with a serious
competitor like Siemens, we had to do something radically different. You
can’t just do it 10% different. You have to do it radically different and use
your imagination, gut feeling, whatever it is, and hope it will work. So I
was aware that I couldn’t simply read the same books as the MBAs at
Siemens. I had to find something that was unique and better.
So how does the spaghetti organisation work? Any individual who
comes up with a good idea is free to assemble a team and act as project
leader. Each project, however, then has to compete with all the other
projects trying to get off the ground at any time. In true Darwinian fashion,
an employee must attract sufficient resources and support for his or her
project or it will perish.
Key to freeing up the way people think and work is Oticon’s mobile
office system. Employees carry their office with them wherever they go at
Oticon’s headquarters. Desks are not allocated; instead workers use the
nearest available workstation, rolling their personal «Rullemaries» (mobile
carts) around the hardwood floor to wherever they need to be in the
building.
The new way of working seems to have worked. During the following
recession, Oticon’s industry experienced some of the toughest trading
conditions in its history. During those dark days, however, Oticon proved
the exception to the rule. It published figures showing an increase of 100%
on revenue and a ten-fold increase in profits in relation to figures of 5 years
earlier.
But Kolind sensed that something wasn’t right. It had been a hard year,
with the company almost exclusively focused on developing and releasing a
new line of digital hearing aids. The new products epitomised the
breakthrough culture. The problem was that the temporary teams created to
push them through had assumed an air of permanence.
The unorganised company was becoming dangerously organised.
Kolind’s solution was to «explode Oticon in a new direction». Projects were
re-arranged geographically within the building. He described the result as
«total chaos» – precisely what he was looking for.
When Lars Kolind stepped down from Oticon after 10 years as CEO he
left it in a strong competitive position.
Source: «Rethinking management’s first principles – Oticon»
New frontiers Tomorrow’s management innovation today
► http://www.managementlab.org/files/u2/pdf/case%20studies/
OticonCaseStudy_.pdf.
3.1.2 Competition Versus Cooperation

When should management, business units or research teams go for
competition and when would collaboration be more effective? What does
collaboration or competition mean for knowledge flows?
To answer these questions consider these two different organisational
arrangements:
1.
A firm creates profit centres in order to introduce competitive forces
into the organisation. Profit centres might compete for clients and
performance of profit centres is ranked so that managers compete for
the best rank. They will focus on their individual bottom lines and
avoid sharing best practices as each manager would like to stay at the
top of the performance ranking and keep the profit centre’s «secrets».
2.
A big international firm promotes cross-unit collaboration. Leaders are
encouraged to form cross-unit networks focused on areas of shared
interest. Over time, this idea flowers into an unforeseen number of
networks and sub-networks sharing best practices. But increasingly, the
firm finds that people are flying around the world and are simply
sharing ideas without always having a strong focus on the bottom line.
With this example Hansen (2009, p.12) illustrate the «collaboration
trap» that when leaders promote collaboration in their companies, they
get more than they bargain for; people often overdo it.
The challenge to balance competition and cooperation is typical for a
knowledge-based firm. Different branches of the same consulting firm or an
insurance company like to compete with each other for the same customers.
However, this competition should not result in loss of a customer because
they cannot come to an agreement among themselves on who «shoots the
bear». Competition must not lead to a conflicting situation wherein revenue
targets of one branch inhibit allocation of right resources available in
another branch.
Hansen advocates a «disciplined collaboration» and defines it as «the
leadership practice of properly assessing when to collaborate (and when
not to) and instilling in people both the willingness and the ability to
collaborate when required» (Hansen 2009, p. 15).
To accomplish disciplined collaboration Hansen proposes three steps:
– Step 1: Evaluate opportunities for collaboration. Ask the question: What
will we gain from collaboration and what is the cost of collaboration?
Make sure that collaboration is not an end in itself.
– Step 2: Spot barriers to collaboration. What are the barriers blocking
people form collaborating well? Particularly look out at the «not–
invented-here» barrier, the «hoarding» barrier, the «search» barrier
(people are not able to find what they are looking for) and the «transfer»
barrier (people are not able to understand and transfer knowledge and
practices to different contexts).
– Step 3: Tailor solutions to tear down the barriers. How to motivate for
collaboration and develop the required competences? To overcome the
barriers Hansen proposes three levers. The «unification lever» refers to
compelling common goals and articulating a strong value of cross-
company teamwork. The «people lever» refers to get the right people to
collaborate on the right projects. The «network lever» focuses on
interpersonal networks and less on formal hierarchies.
Collaboration takes many forms: Projects, networks, communities of
practice, marketing teams, core service teams, research groups and
specialised teams are gaining more and more importance for a systematic
creation and transfer of knowledge. The functions of these collaborative
forms include the identification, transfer and development of knowledge
relevant to the business. For this purpose, teams involved in the competence
network conduct benchmarking activities and meet periodically to discuss
certain topics. They are the competent «drop-in centres» for queries. They
coach and conduct projects and are responsible for creating and maintaining
the contents of databases as well as Intranet.
Two-Person Knowledge-Sharing Dilemma2

The issue of collaboration versus competition (see ◘ Fig. 3.2) has been
explored by game theory. When would people be willing to share
knowledge and when not?
Fig. 3.2 Balancing competition and cooperation
Knowledge sharing between individuals can possibly result in a benefit

for both, but game-theoretically it might not be the equilibrium strategy. We
analyse a situation with only two people and two possible actions. The
action space (A) per player consists of the two possibilities: knowledge
sharing (s) and knowledge hoarding (h).
There are four possible outcomes with the respective payoffs (see ◘
Fig. 3.3):
– hs: Utility of hoarding while the partner shares his knowledge
– ss: Utility of mutual knowledge sharing
– hh: Utility of mutual knowledge hoarding
– sh: Utility of sharing while the partner is hoarding
Fig. 3.3 Payoff matrix of a two-person knowledge-sharing dilemma

The best situation for a player is to hoard the knowledge while the other
player shares the knowledge (hs). The second best outcome is that both
share their knowledge (ss). This difference between hs and ss comes from
the cost of knowledge sharing and the benefit of being the only one who has
this particular knowledge. The third best option is the mutual knowledge
hoarding (hh). Therefore, both would be better off if they share mutually
instead of mutual hoarding. The worst option is that the player spends the
time and effort to share knowledge while the other player hoards his (sh).
This leads to the following ranking of the payoffs: hs > ss > hh > sh.
We also assume a situation where the best collective strategy would be
mutual knowledge sharing rather than a collusion of sharing and hoarding.
The ranking of the payoffs corresponds to the prisoner’s dilemma game.
In this situation, it is always individually best not to share the knowledge,
independent of the choice of the other person, i.e. knowledge hoarding is a
strictly dominant strategy. Consequently mutual hoarding is the
equilibrium. Caused by the payoff structure, the players are trapped in a
social dilemma. In a social dilemma, optimal individual behaviour has the
effect that everybody is worse off than they would be otherwise. Individual
rationality leads to collective irrationality. In a social dilemma there is at
least one outcome in which every person would be better off than in the
equilibrium.
This analysis helps to understand why knowledge sharing is not a
dominant strategy in many organisations and hence the need to create
convincing motives for cooperation.
From a market related game theory perspective, Nalebuff and
Brandenburger have coined the term «co-opetition» (Nalebuff and
Brandenburger 1996). Co-opetition is a business strategy based on a
combination of cooperation and competition, derived from an
understanding that business competitors can benefit when they work
together. Companies participate in «competitive collaboration» in order to
get access to knowledge and acquire knowledge collectively. They compete
with each other in exploiting this knowledge.
The relation between automobile manufacturers and their suppliers is a
good example of competition and cooperation from the knowledge
perspective. While selecting the suppliers, the buyers exploit the
competitive situation very well. However, they stick to the supplier for
longer periods and develop competencies together with the suppliers (North
1997). Competition takes place increasingly at the level of clearly distinct
end products and not at the component level or module level.
Benchmarking between competitors is another example of this strategy
of competition and cooperation. In large companies, some business
divisions cooperate through strategic alliances while some business
divisions are strong competitors. If such an organisational design is well
conceptualised, the competitive collaboration turns into a Plus Sum Game
that strengthens the competitiveness of both the partners for a long time.
Cooperation need not always be planned and agreed formally at the
management level. It can also take place informally. Thus, with an example
of competing steel companies in the USA, Stadler and von Hipple (Stadler
1995; von Hippel 1987) could prove that employees handled information
based on mutuality according to the «GIGI principle: give information, get
information» ◘ Fig. 3.4 summarizes criteria of people whether to share or
not to share knowledge.
Fig. 3.4 Criteria to decide whether to share or not to share knowledge
Balancing cooperation and competition requires choosing the right

organisational setting. Before deciding on organisational structures it is
advisable to make clear what are the guiding principles of a business:
– «Success of a unit has a priority over success of a company» This
perspective emphasises competition as a driving force for success. It is
assumed that entrepreneurs (or «intranpreneurs» in a company, e.g. a
profit centre) act with a motive of optimising unit performance and are
therefore interested in optimum use of the resources of their unit. A
global control cannot assure this optimum utilisation. Company units that
are operated in this manner must be exposed to internal and external
competition. Manufacturing plants compete with each other. If the profit
objective is not achieved, the business unit is closed down. Profit
incentives are dominant. Knowledge is transferred selectively
considering the cost-benefit ratio. Often, in such a mindset, the entire
company turns into a meaningless financial holding with individual
«knowledge silos» that do not cooperate considering that «knowledge is
power and must be concealed». Customer benefits and capacity use are
suboptimal because units never or rarely work together. The customer
does not get a comprehensive service or advice from one source.
– «Searching for synergies is the basis of success» The synergy or
cooperation theory assumes that the possible total performance of the
company is higher than the sum of the individual performances of units.
Search for synergies and cooperation avoids double work and enables a
complete customer service cutting across all the functions of the
company. Competitive advantages can be materialised depending on the
size of the company and the variety of activities. On the negative side,
search for synergy if not leveraged, can be an end in itself. Work groups,
professional discussion groups etc. do not convert the transferred
knowledge into business success adequately and can lead to long-term
strategic disorientation.
– «Segmenting with synergy brings lasting success» Examples of
successful companies show that neither too much segmentation nor too
much search for synergy lead to the success of the company. Instead, it is
necessary to find a synthesis between both guiding principles as
«segmenting with synergy» (Goold and Campbell 1998). Businesses are
tied together by strong shared values, aligned towards common goals and
moral concepts of the entire company. They combine short-term success
of the units with the long-term competence development of the entire
company. This concept considers short-term as well as long-term
competitiveness of the company. The flexibility of a small company is
combined with the resources – especially the knowledge – of a big
company. Such a company can offer complete and complex solutions
that are difficult to imitate and can be redeemed for suitable prices. The
restructuring of General Electric aimed at such segmentation with
synergy. In his introduction to the annual report 1995 Jack Welsh, the
then Chief Executive Officer, General Electric, has expressed this as
follows:
What we wanted to built was a hybrid, an enterprise with the reach

and resources of a big company – the body – but the thirst to learn,
the compulsion to share and the bias for action – the soul – of a
small company.
Case Study
Creating Organisational Linkages – The Eureka Forbes Senate
When Eureka Forbes (EFL), a multi-product, multi-channel corporation
and a leader in domestic and industrial water purification systems, vacuum
cleaning and air purification solutions in India, was searching for a way to
connect with all its employees, it found a model right in its backyard – in
the Indian Parliament (Ghosh 2010). EFL decided to create a senate, a sort
of a parallel governing body, which would have representatives from all
Eureka Forbes’ centres across the country. «The idea was to make sure each
and every one of our employees has a voice,» says Marzin R Shroff, CEO,
direct sales. «We wanted to tell them that they will be heard. The senate, as
we see it, is an important empowerment initiative.»
At the heart of the set-up is the EuroSenate, a 14-member body of
elected representatives – one each from Eureka Forbes’ 14 strategic
business units, or geographic zones. The representatives, called senators,
are assisted by a three-member council, also elected from the SBU or the
«constituency». The 42 councillors and the 14 senators report in to six
governors, regional heads of the company. There is also a president, speaker
and a Senate Administration Committee. «The senate has taken care of so
many of our problems, both big and small,» says H R Ganesh, senator for
the Karnataka region. «Many things were difficult to bring to the notice of
the head office before. We didn’t have an opportunity to meet the Directors
either, and tell them about our problems. Now, as part of the senate, we get
to interact with them at least once every three months.»
The senators and their councillors have a clear mandate. They are to be
the emissaries of the head office in the zones, and a conduit between
workers and the HQ. «They must have their ear to the ground, and their
eyes on their teams,» says Shubha Ashraf, deputy general manager of the
Knowledge Management team, which came up with the idea of the senate.
Source: Interview with Eureka Forbes.
Case Study
Mini case: Mindtree I
Full dependence on directed structures is not enough for the new era the
Indian software company MindTree ► www.mindtree.com has prepared
to meet. MindTree views a new era organisation as a set of interdependent,
collaborating, interacting knowledge workers who are autonomous and who
configure and reconfigure their people-networks dynamically to achieve a
purpose determined by them in the fast-moving environment they work in.
As knowledge workers accomplish their work, they step across their
task boundaries, collaborate, seek knowledge and so on, to accomplish the
task not as originally perceived, but as the solution emerges. «This creates a
highly scalable and agile model of the organisation, and in the long run
creates an organisation capable of self-transformation» says Datta.
MindTree’s vision reads as follows: «What brings MindTree Minds

(what we call our employees) together in building an organisation that has a
unique culture is our value system. Every MindTree Mind is driven by
CLASS, the acronym for our core values of Caring, Learning, Achieving,
Sharing, and Social Responsibility. Everything we are, everything we do,
and everything we believe in revolves around our CLASS values and the
distinct culture that we have built. The two main attributes that characterize
our culture are high achievement orientation and high caring.»
Case Study
Allianz Group Business Services (AGBS) Encourages Knowledge
Synergies
Allianz Insurance Group is made up of huge number of subsidiaries
worldwide. These companies are operated as per the decentralised
philosophy (business is local). However, the continuous utilisation of
synergies within the global network of companies is a critical success factor
of this business model. The prerequisite for this is a pragmatic knowledge
identification and transfer process that is practiced and encouraged by the
management and the employees in all the companies of the group.
AGBS is a unit in the Group Centre which facilitates the global process
of knowledge transfer and provides suitable tools and methods. The
following figure gives an overview of the approach of AGBS’s knowledge
management. First, priority topics are selected based on expected benefits.
Secondly, best practices and expertise are identified and in a third step
discussed and transferred by workshops, community interaction and an IT
platform. It follows a localised implementation process as well as an
evaluation. Results are made public via a «synergy balance sheet». The
following arrangements are considered of particular importance for the
success of the programme:
Expert teams: These are groups of five to eight members comprising
international experts from different specialised fields. These groups are
germ cells of new knowledge and work predominantly on strategic
questions. Every expert team has a basic «mission» as well as an annual
goal that is decided together by the expert team manager and AGBS. The
expert teams share their knowledge and the outcome of their work with the
practitioners around the world through online communities as well as in
regular workshops. Furthermore, they document the developed knowledge
in the «Expert Team Reports» that are provided in the communities and in
compass with others.
Incentive systems: Knowledge management is also integrated in an
established incentive system. Participation in the activities of knowledge
management (e.g. expert team) is a criterion for achieving a certain level of
management. This is documented in a policy in «Group HR Handbook».
Furthermore, specific incentives were created for knowledge sellers and
knowledge buyers, e.g. awards such as Knowledge Manager of the Year,
Expert Team of the Year, etc. Targets are set for knowledge management
actors such as expert team managers. These target agreements can be
considered according to their bonus relevance.
IT infrastructure: AGBS supports the knowledge transfer process using

(web-based) IT infrastructure such as yellow pages; Compass database of
«good practice»; Online communities, Communication platforms for
communities of practice; Info miner, Intelligent search engine; Virtual
project offices, Online team space for collaborations in projects. All the IT
components are based on a uniform IT platform (Group Intranet) and linked
with each other in such a way that usage barriers such as multiple logins or
redundant data entries are avoided.
Synergy portal: There is a synergy portal for internal marketing. This
portal provides access to the knowledge documents and experts as well as
gives an overview of the knowledge management activities organised by
AGBS (workshops, expert teams, projects etc.). Synergy Review, a
quarterly magazine, presents the results and connects the community with
the management.
Synergy balance: Cost and benefits of the described tools and methods
are incorporated in the «Synergy Balance» that is created by AGBS on a
quarterly basis. Benefits of projects are measured on the basis of calculated
«Fair Values» and the benefits of knowledge management tools are
measured on the basis of calculation of opportunity cost. Trends and
developments are identified earlier thus enabling the company to react to
the changes earlier and effectively. This reduces the «time to market» of
new products. Increasing efficiency and effectiveness by using internal best
practice as well as avoiding mistakes has positive impacts on the Economic
Value Added (EVA).
Source: based on material provided by Allianz AGBS
3.2 Platforms for Knowledge Creation

Apart from reformulating the entire organisation of the company in order to
convert the dialectics between renewal and stability, cooperation and
competition into short-term and long-term business goals, there are
approaches designed to maintain the existing organisational forms and also
to institutionalise supplementary or parallel ad hoc organisational forms
such as process and project organisation. Knowledge is linked to
departments, projects and business processes. In most cases, it is not
processed, shared and transferred beyond the limits of organisational
entities systematically.
While the traditional organisation guarantees stability and short-term
business results, the ad hoc forms create contexts for the renewal that can
then be docked to the existing organisation. From a somewhat different
viewpoint, the existing organisation turns into a platform that offers a
certain framework, an infrastructure and a basic layout from which the new
developments can «take off» and also land again accordingly.
Let us have a closer look at two of these approaches –the hypertext
organisation as described by Nonaka and Takeuchi and the platform
organisation as described by Ciborra.
3.2.1 The Hypertext Organisation

The model of the hypertext organisation (Nonaka and Takeuchi 1995, p.
169ff) assumes that a company can have a non-hierarchical and self-
organised structure that cooperates with the hierarchical formal structure.
While the latter ensures stability, the hypertext organisation equips the
company with the strategic capability to acquire, recreate and use new
knowledge continuously in a cyclic process. Like a hypertext, this
organisation comprises of a number of interconnected levels or contexts,
especially the levels of business systems, project teams and knowledge
bases (see ◘ Fig. 3.5).
– The operative business is conducted at the central level of business
system. This can happen not only through a traditional bureaucratic
structure but also through entrepreneurial processes meant for building
an entrepreneurial corporation.
– At the project team level, a number of project teams are engaged in the
development of new knowledge, e.g. development of a new product. The
team members are recruited from various units of the business system
and are allotted to the project team until the end of the project.
– At the knowledge base level, the knowledge created in the upper level is
re-categorised and placed in a new context so that is available commonly
in the company thereafter. The knowledge basis level does not exist as an
independently organised unit. Instead, it gains its existence from the
knowledge workers of a company and the corresponding systems for
saving information or safeguarding knowledge.
Fig. 3.5 The hypertext organisation (Source: Nonaka and Takeuchi 1995, p.169)
The remarkable feature of the hypertext organisation is that three

different levels or contexts co-exist in the same organisation. The process of
knowledge creation is a dynamic cycle that is set in motion effortlessly by
these three levels. The project team members who were selected from
different functions and departments of the business system level perform
knowledge-creating activities. Once the project team functions are
completed, the members take to the knowledge level. They pass their
knowledge on through internal seminars or workshops, make project reports
or enter information in the company’s information system. After re-
categorising and re-contextualising, the project team members go to the
business system level wherein they again dedicate themselves to the
operative business until they are reallocated to another project team.
According to Nonaka and Takeuchi, the feasibility of switching in and out
of different knowledge contexts quickly and with flexibility and thus
building a dynamic cycle of knowledge creation determines the
organisational capability to create knowledge.
Case Study
Sharp – Hypertext in Research and Development
Since its inception in the 1912, Sharp has had a reputation of a «new
product» company. The constant pursuit of creativity and originality is
represented in its slogan «do not imitate». We find all the three levels of the
hypertext organisation in Sharp’s research and development.
– Business system level: The day-to-day business of the R&D is organised
in the traditional hierarchical form. The central R&D is responsible for
basic developments that take three or more years, the company’s
laboratories cover specific themes with a time frame of approximately
one and a half to 3 years and the R&D in the business segments works
based on product and process for a time frame of less than a year and a
half. The R&D facility communicates hierarchically from the centre to
the business segments. Conferences, meetings and workgroups
coordinate the exchange of explicit knowledge of all the facilities.
– Project team level: New products are developed by «Task Forces» that
operate quite independently and parallel to the R&D structure at the
business system level. While new products are normally developed in the
projects of the business segments, the strategically important
development projects are allocated to the «Urgent Project System».
Employees of these projects leave their position in the business segments
and work exclusively for the strategic project for a period of 1–2 years
without any budget limitations enjoying the privileges of directors.
– Knowledge basis level: Sharp’s knowledge base can be described by
explicit knowledge in the field of optoelectronics and tacit knowledge
that is symbolised by the «do not imitate» slogan. The knowledge
generated at the business system level and project team level is re-
categorised and placed in a new context with a view to develop
optoelectronics systematically. The constant exchange within the
business systems as well as with the project teams and process of storage
and transfer of explicit knowledge revive the knowledge base. The tacit
knowledge «do not imitate» is strengthened by frequent exchange and
inner R&D culture.
Source: According to Nonaka and Takeuchi (1995), p. 181–190.
3.2.2 The Platform Organisation

Inspired by his Italian experience and a case study at Olivetti, Ciborra
(1996) had suggested a meta-organisation in order to react adequately to
surprises in unstable circumstances. Management assumes that managers
direct their decisions towards clear goals and strategies based on a rational
problem solving process. Ciborra contrasts this fiction of a systematic
management process, with his view of management that is characterised by
the French term «Bricolage» (repairing, tinkering or improvising like a jazz
ensemble).
Similar to jazz ensemble, the employees in the company have learnt to
play and improvise together in order to solve the arising problems quickly,
respond to unexpected customer demands or implement and test new
product ideas without long justification and approval processes. Ciborra
cites Mary C. Bateson (1994):
Men and women confronting change are never fully prepared for the
demand of the moment but they are strengthened to meet
uncertainty if they can claim a history of improvisation and a habit
of reflection.
Ciborra argues that in a fast changing environment, none of the

organisational forms are in a position to optimise the use of resources. A
«formless» chameleonic organisation that generates new forms through
frequent recombination would be most suitable here. From the structural
view, the platform is a result of the union of existing organisational
mechanisms and forms selected and assembled together by the management
according to subjective and situational plans and interpretations (Weick
1993).
The platform organisation is identified by its flexibility, mobility and
continuous transformation that results from overlapping, intersecting and
juxtaposing different organisation arrangements such as network, matrix or
even hierarchy. A platform organisation appears fragmented and interwoven
at the same time. However, it could be the only form that survives the high-
tech industry wherein a monolithic and fixed company identity would not
have been in the position to cope up with the fast technological changes.
Unlike every traditional form of organisation, platform organisation
features a collection of all the qualities of a clear, seemingly opposite as
well as surprising coincidence. This platform contains an exciting mixture
of prefabricated arrangements and interpretations as well as solutions and
visions that are either found or provided incompletely or have not yet
materialised. It is a model that completely changes our opinion about
structural and permanent or subjective, informal and short-lived. It is the
function of a platform organisation, to cope not only with the often sudden
and radical changes to the products, markets and technologies but also with
changes – to the identity of the business fields or industry segments – that
are sensed by the organisation incidentally over time.
According to Ciborra, the ability to leave old identities and develop a
new identity that is adapted to the respective technological phase represents
a key to this fast sequence of unexpected and unplanned transformation
processes.
The platform organisation is inspired by computer or car platforms on
which a huge number of models are produced. Individual components of
the organisational platforms can represent the organisational units,
departments, functions and division. Every defined unit has a mission and
eases the control at least at local level. The integration of different
components is flexible. Units and organisations outside the limits of
companies are also integrated forming an «eco-system» of partners.
Common research and development projects and global alliances are built
and disintegrated according to the requirements.
Thanks to the existence of platform standards, technologies are
developed independent of products. Thus, technologies can be combined at
«last minute» and bundled into specific products for which a market
demand is identified or into products that react to the activities of
competitors. The research and development must work closely with the
marketing function in such an organisation in order to exploit the market
opportunities quickly.
How does a platform organisation differ from a network? The platform
organisation acts at two levels. Firstly, it works at a structural level wherein
routines and transactions function like those in a network. Secondly, it acts
at the higher level wherein the frequent structural changes are organised.
The dynamic recombination of routines and transactions is important at this
level and not the features of a specific organisational arrangement such as
that of a network. How to form a relatively stable environment wherein the
employees and resources can be used with flexibility? – This important
question for high tech companies was answered by Olivetti in its own way:
the formal structure changes frequently and abruptly while the informal
networks remain relatively stable.
In the following section we shall have a look at selected organisational
forms from the perspective of knowledge creation and knowledge transfer.
Case Study
Mini case: WIPRO as a Platform Organisation
WIPRO was initially set up in 1945 with main product of producing
sunflower Vanaspati oil and various soaps. At that time the company was
called Western India Vegetable Products Limited with representative offices
in Maharashtra and Madhya Pradesh states of India. During the 1970s and
1980s it shifted its focus and begin to look into business opportunities in IT
and the computing industry which was at nascent stages in India at that
time. WIPRO was the first company which marketed the first indigenous
homemade PC from India in 1975.
In 1966 Azim Premji, still the majority shareholder in WIPRO, took
over as the chairman of the company at the age of 21 and with the passage
of time transformed it into one of the finest and largest IT outsourcing
services provider of the world. It is now considered the world’s largest
independent R&D service provider and offers different technology driven
services all over the globe with 46 development centres.
3.3 From «Infinitely Flat» to «Star Burst»

Commonly companies structure their organisation according to product
groups, process investments, geographical necessities or functions in order
to increase effectiveness and efficiency. These organisational forms follow
the criteria of stability – especially that of control. Request for renewal, the
demands of many employees for more freedom and creativity as well as the
information and communication technology, have given rise to a complete
range of new organisational forms. Four such ideal types can be described
as follows (Quinn et al. 1996).
From the knowledge viewpoint, these forms of organisations – viz.
«infinitely flat», «inverted», «star burst» and «spider» – are different from
each other in the following aspects:
– Localisation of knowledge: Where can one actually find the deep
knowledge that presents the core competencies of a company?
– Localisation of «customisation»: Where is knowledge converted into
customer solutions?
– Direction of the knowledge flow: In which direction does the value-
creating knowledge flow?
– Method of leverage: How does an organisation transform the knowledge
from individual to collective knowledge?
All the aforementioned forms of organisation tend to delegate
responsibility to the part where the company comes in contact with the
customers. All the forms create a flat organisation and remove hierarchies.
They all seek fast, adequate and individual customer communication. All
these forms require that you overlook the traditional mindset about
command lines, «one employee one boss» structure, centre being the
leading power and management of tangible assets being a key to success.
But each of these organisational forms varies significantly in terms of their
purpose and management. Let us have a closer look at these different forms
of organisation from the knowledge viewpoints You can see the comparison
of these organisational forms at the end of this chapter. Every type of
organisation is described theoretically as well and is followed by a case
study.
3.3.1 The Infinitely Flat Organisation: Effective Replication of

Routines
The centre of this organisation stays in contact with infinite nodes, e.g.
individual field staff, branch offices of franchise partners etc. The leading
competence or the knowledge on how to create and operate a fast food
chain or how to sell Tupperware and Avon cosmetics lies at the centre. The
knowledge about the customers lies with the employees of the branches that
work parallel with less direct communication. Thus, the centre is the source
of information, coordinator, place of transfer of best practices and problem
solver. It is the core of the growth process. In the market, new nodes, i.e.
branch offices or franchise partners are constantly added to the centre.
Furthermore, the centre continuously generates new products and services
packages that are then provided to the nodes by means of intensive training
and e-learning.
Such flat organisational structures are particularly effective when it is
possible to break up the activities of the nodes in individual sections and to
optimise these activities. This is the case with the recipes and the operating
guidelines of a fast food chain or the basic components of financial
transactions of financial brokers and banks. In the best case scenario, the
training curve is accelerated through the information system across the
company in such a way that employees with relatively few qualifications
are capable of giving higher performance relatively quickly.
This reminds us of a «Tayloristic» division of work wherein the higher
efficiency is linked to fast growth and a continuous innovation process.
However, there is no traditional career path anymore in such infinitely flat
organisations. Wage-incentive systems must contain a balance of qualitative
and quantitative performance parameters. This type of infinitely flat
organisation presents an option to create a «highly intelligent» organisation
with employees having relatively less education and knowledge. It also
gives an option to respond quickly to the market changes by being equipped
with «efficient market antennae».
Case Study
Financial Service Provider: Replicating Financial Services
The operative business of a financial service provider is carried out by
approximately 18,000 brokers in over 500 business units scattered over a
wide region. The company offers custom-made solutions to its customers.
The local brokers act as independent entrepreneurs. Generally, they are not
those clever investment experts who have undergone long years of training.
Yet, by means of information transfer using a widely developed information
system, they are able to provide investment advice as well as detailed and
precise information about huge volumes of complicated financial
instruments. These brokers are supported by the centre wherein a few
financial experts work with outstanding analytical skills. They cooperate
closely with the other external specialists as well as the «inventors» of the
investment model. They analyse the previously concluded business
transactions and bring in their expert knowledge in the company’s software
model and databases. The on-site brokers have access to the detailed
analysis of financial markets, economic trends etc. Thus, the centre breaks
down the process of investment advice in individual replicable steps and
provides them to the on-site broker. The electronic network of the company
guarantees that the broker is always updated with the latest information.
They are informed extensively by the centre about concluding business
transactions, commercial guidelines, profit, conditions of commercial paper,
investment options, fiscal considerations and new offers of commercial
paper. The software of the company is available online and also serves as a
medium of imparting fast training. Thus, it is ensured that all the brokers
work as per valid rules, all the calculation and typing errors are eliminated
to a large extent and the customers are supplied with the latest marketing
information. In short, the entire knowledge is available to each and every
broker. Ad hoc teams are built in case of huge and complicated projects
with a purpose to pool the widely scattered talent temporarily in order to
solve a particular customer problem. Thus, in 1 year, the brokers work
together with different colleagues on various projects. Therefore, in order to
develop the business, the infinitely flat organisation is supplemented by
network structures wherein the reward is linked to the cooperation between
development projects and customer projects. Those who do not work in a
team or do not aim at customer satisfaction are penalised (see Quinn et al.
1996, S. 99ff.).
3.3.2 The Inverted Organisation: Support to Individual

Expertise
The traditional hierarchical pyramid, shown in ◘ Fig. 3.6, is turned upside
down in this organisational form. The core competencies of the company as
well as the customer knowledge are found at the nodes and not at the centre.
Examples of such organisations are hospitals, consultancy firms or
engineering firms (here, the nodes are the doctors, the partners of the
consultancy firm, the engineering experts, etc.).
Fig. 3.6 The inverted organisation
Generally, in an inverted organisation, the exchange of knowledge

between the individual nodes tends to happen informally while exchange of
knowledge between a node and the centre is a formal process. This is
distributive allocation of knowledge, i.e. the organisation offers logistic or
administrative support of experts but it does not give instructions or control
the business operations. The function of a line manager is restricted to
overcoming the bottlenecks, developing the company culture, providing
advice on request, starting exchange of experiences and cooperation as well
as providing a range of services offered to the experts. Hierarchy can exist
to a certain extent in order to ensure consistency in carrying out a task as
per corresponding rules, e.g. statutory orders. In a way, the line
management adopts the functions of the staff.
Inverted organisations function well if the employee handling the
customer has more information and knowledge about the customer’s
problem and possible solutions than the centre and if experts are willing to
learn jointly. Safeguarding effective knowledge transfer and competence
development of the entire organisation (collective thinking) is a special
challenge for such inverted organisations so that on the one hand
knowledge is retained when a specialist or a team leaves the company and
on the other hand it is possible to create new business fields.
Furthermore, the loss of formal authority can be traumatic for earlier
management of the classical type. Specialists gladly ignore the rules and the
norms of the company. As a result, a strong common value system and
incentive system that honours not only the individual performance but also
the contribution to the development of the entire company is necessary for
the functioning of an inverted organisation. If this does not happen, the
individual competence that is generally high cannot be converted into high
competence of the entire company.
Colleges are a good example of this scenario. Generally, the individual
high-school teachers or institutes have high field-specific competence that
is used only in rare cases through effective cooperation to increase the
competence and the renewal ability of the entire entity.
Case Study
NovaCare – The Rehabilitation Service Provider
With the reform in the public health sectors worldwide, there is a search
for new organisational structures. The service provider, NovaCare is an
interesting benchmark for the organisation of paramedical occupations.
NovaCare comprises over 5000 occupational therapists, speech therapists
and physiotherapists who operate in a type of franchising system. These
specialists offer their knowledge at more than 2000 locations all over the
country. The centre undertakes the administrative and commercial functions
of the therapists by signing contracts with rehabilitation services, retirement
homes, etc., by undertaking the accounting as well as supporting the
scheduling and reporting over the course of the therapy. Furthermore,
vocational training is organised and the performance of the therapists is
marketed in order to achieve stability and increase in the income.
NovaCare has saved a major part of the knowledge of its therapist in its
software system. The information about patients, scheduling and invoicing
is added through administrative procedures such as guidelines. The
therapist must follow these procedures. From NovaNet, the company
management can get information on trends or problems that would need
consideration in the near future. NovaNet collects information about costs
and service features from all the therapists, particularly effective treatments
as well as information about changing medical care model in different
areas. This information is very important for recruiting, training, motivating
and further training of the therapists. NovaCare records the work of its
therapists in 10-min blocks so that it is easier to record and analyse all the
knowledge. This detailed information is saved in the database that can be
used by anyone who is interested, e.g. care facilities, hospitals,
rehabilitation clinics, health insurance companies, etc. NovaCare uses
detailed reports of colleagues and patients in order to evaluate the
performance of its therapists and to pay them according the quality and
scope of their service.
The therapists are independent, especially when it comes to treating a
patient. The company’s regional administrative offices responsible for
accounting, marketing and logistics are primarily meant to support the
therapists. Thus, the organisational structure is distributive. Logistics,
analyses and administrative support are the function of the structure. These
functions are carried out by qualified therapists (see Quinn et al. 1996, p.
191ff.).
3.3.3 The Starburst Organisation: The New Business Creator

Organisations that are depicted in the form of a star burst have specialised
and value creating knowledge in the branches as well as at the centre. These
companies continuously generate new business fields or companies that in
turn build new companies. The branch operates largely independently in the
market and raises its capital in the market.
In the analogy to financial holding, the star burst organisation is a
«knowledge holding» wherein new companies are formed continuously
based on the specialised competence. Examples of such companies are film
studios, insurance companies or even software companies that open
different markets and market niche with their firms with the help of a
certain basic software. Large companies which embarked on
implementation of ERP systems set up IT departments to support the
company. When these developed expertise in implementation of IT
solutions, the companies leveraged this expertise and created another
company whose main business was IT solutions. There are a number of
examples of these in India – L&T Infotech from Larsen & Toubro, an
engineering company, 3i Infotech was promoted by ICICI Bank, India’s
largest private sector bank, and NSE.IT Limited, a 100% subsidiary of the
National Stock Exchange of India Limited (NSEIL) which is a Vertical
Specialist Enterprise, specialising in providing complete IT solutions to
stock exchanges, clearing corporations, brokerage firms, insurance firms
and other organisations in the financial sector.
The constant renewal and recombination of knowledge through
cooperation is more important for these companies as compared to
components of stabilisation.
Starburst organisations (◘ Fig. 3.7) are particularly successful when
they have expensive or complex know-how on the one hand and on the
other hand operate in a business environment that changes quickly and for
which entrepreneurship becomes essential.
Fig. 3.7 The starburst organisation
In this way, it is possible to amortise expensive and specialised

knowledge immediately in different markets. Thus, the company can
penetrate the differentiated markets quickly with minimum equity and high
competence. The centre designs the organisational culture, cultivates
innovation and risk, sets priorities, selects key persons (an entrepreneur in a
company or important know-how bearers) and procures resources more
efficiently than the branch. However, the actual entrepreneurial activities
take place in the branches that have extensive freedom in organising their
business fields as long as such branches are commercially successful. A
classical problem in this form of organisation is that, often the central
management loses faith in the branches very quickly if the desired market
results do not appear rapidly enough. Efforts are made to consolidate such
branches thus disturbing its energy. Yet another problem arises when the
branch develops a very high capital requirement that is not covered by the
centre and capitalisation through the market is undesirable.
Case Study
3M – The Product Generator
The Minnesota Mining and Manufacturing Company (3M) is less
known for a long-term strategically planned product development process
than for its «bottom up» approach towards mobilising capabilities,
inventive talent and organisational activities. 3M’s obsession to generate
new products was given a form by the «Eleventh Commandment» – «thou
shall not kill ideas for new products». As opposed to the traditional decision
process, if someone thinks that the idea is not good, the burden of proof is
on the person who thinks that the idea is not good and not on the person
who has proposed the idea. 3M researchers and developers enjoy a free time
of up to 15% of their work time to pursue their own dreams and ideas («15-
percent-rule»). The performance of every business unit is graded on
whether at least 25% of their turnover is achieved with products that are
younger than 5 years. In reality, the share of such products in the company’s
turnover has gone beyond 30%.
3M has announced that an individual inventor or entrepreneur can
develop their ideas and establish new business units continuously under the
slogan «grow and divide». This growth is supported by a categorisation of
core technologies, range of technical forums, cross-functional teams and a
fault tolerance. If a business idea fails, an inventor or entrepreneur shall
have the guarantee of being transferred back to their old position. The
company encourages creation of legends of successful inventors or
entrepreneurs and motivates the others to imitate the same. Thus, stories of
how Art Fry sang in the church choir and his makeshift bookmarks fell off
his prayer book will be narrated again and again. He came up with the idea
of developing the «Post-it» note, materialising this idea technically,
overcoming opposition («we do not need anything like that») and making a
successful business (see Nonaka and Takeuchi 1995).
3.3.4 The Spider Organisation: Creating Value by Networks
The spider’s web is a metaphor for an ideal type of network. Company
networks are an organisational form of economic activities. Such
organisational form binds the coordination potentials of market and
hierarchy (organisation) with each other in an intelligent manner and is
distinguished by cooperative – rather than competitive – and relatively
stable relationships between more than two legally independent companies
or company units that are financially more or less dependent. The nodes can
be products, services or competence centres for specific technologies. They
can bear regional responsibility, have a long-term existence or can be
installed temporarily as projects. Knowledge is mobilised in the presence of
projects or order situations – «the spider starts running to hunt down the
prey». Knowledge flows within numerous nodes. Typically, the individual
nodes work together only temporarily in order to develop specific customer
solutions. See ◘ Fig. 3.8.
Fig. 3.8 The spider organisation
Knowledge development is exponential. Very few nodes give rise to

several combination options. Such project-related or order-related networks
exist already since hundreds of years, e.g. universities or networks of
trading groups. The advantage of the networks is that they can successfully
facilitate high specialisation and handling of different geographical regions
and simultaneously focus on a specific problem of a specific customer.
Hence, the network model is also used in the management of international
companies, e.g. in the form of model of a transnational corporation (Bartlett
and Ghoshal 1989).
Although the network is good for a fast response and for ad hoc
problem solutions, it poses difficulties in developing long-term business
strategies. Competition between individual nodes can obstruct the
distribution of knowledge. Networks function properly only if there is an
open culture and a willingness to cooperate. The grading systems must rate
the networks based on their individual success and their contribution to the
total success of the organisation or other network nodes. Common interests
of the members of a network, a common value system or intersecting value
system and profit – all of which is achieved by teamwork – is essential for
functioning of every network. According to Quinn (1996, p. 22) the
following must be considered for an effective network management:
– Networks must overlap each other in order to increase exchange of
information and the process of learning.
– Hierarchical structures should remain undefined deliberately.
– Network purposes (project purposes) should be set and strengthened
continuously.
– Too much elaboration should be avoided in case of rules meant for
appropriation of funds or distribution of profit to individual nodes.
– Continuous mechanisms must be developed in order to provide the nodes
with latest information about the external business environment.
– Customers as well as the colleagues should evaluate the performance of
the nodes.
– The members of the nodes should be rewarded with individual and group
incentives for their teamwork.
Generally, we find that more of these ideal types of organisational forms
co-exist in real organisations. For instance, the reservation system of one
airline and the respective operative systems are linked but are designed in a
completely different manner in their organisation. The reservation service is
a spider’s web, the flight operations are infinitely flat, the financial
administration is conservative and hierarchical, the maintenance and ground
service is decentralised and hierarchical and the training and advanced
training are organised functionally. Thus, different organisational structures
and contexts can co-exist in one company as long as it makes sense for the
functions that are to be completed.
Case Study
The Indian Youth Climate Network (IYCN)
The Indian Youth Climate Network (IYCN) is a network uniting Indian
youth and youth oriented organisations who are concerned about climate
change and environmental issues. Since it was founded in 2008 it has grown
rapidly and has today offices in six locations, with sub groups in 18
different states reaching out to thousands of youth in colleges, schools,
corporations and institutions.
IYCN works on three levels – as a network of people, as a network of
partners and support- groups, and as a provider of services and projects. By
working in this way the organisation is able to do a wide range of activities
to achieve its aims of generating awareness about and establish consensus
on what role India should play in the global debate on climate change.
IYCN also addresses national issues related to the environment and climate
change. The three strategies IYCN uses to achieve this are awareness
campaigns, policy advocacy and results oriented projects. Through these
three platforms IYCN organises a range of different activities such as Youth
summits and solutions fairs, Environmental Audits for corporations,
ongoing campaigns, policy tracking, advisory work and giving young
people a voice in the international climate change debate by sending youth
delegations to international conventions.
Source: ► www.iycn.in.
3.4 Overcoming Deficiencies of the

Multidivisional Organisation
3.4.1 Independence Versus Integration
In the last 50 years, enterprises, particularly the big ones, across the world
have focused largely on independent and mostly product-related divisions
or segments. These enterprises were and are still successful in markets and
company environments that are relatively stable. Multidivisional companies
are best equipped to react to linear and incremental changes in the
company environment. However, an organisation with a constantly
improved organisational processes and rules of conduct – wherein
everything is governed – has become an Achilles’ heel of the company in a
changing competitive environment. Such an environment requires acting
under turbulent changes that are often unpredictable and are of
discontinuous type (Ghoshal and Bartlett 1995). A multidivisional company
is poorly equipped for strategic renewal and largely incapable of developing
new business fields within the company. Growth in such a company is
mostly restricted to existing business fields by means of economies of scale,
economies of scope or by huge financial power. New activities tend to be
launched by acquisition of smaller create companies.
The independent nature of individual business units create obstacles in
the path towards success in a knowledge competition wherein products and
services bundle different competencies of a company and create value for
customers in an integrated manner. The premise of independence is
preventing the companies from integrating their diverse research,
development, production and marketing resources into a coherent system
for value delivery. The multidivisional company is built on the assumption
of horizontal independence and vertical dependence and in its pure form
does not have any effective mechanism for managing the interdependencies.
Horizontal interdependence is not a part of the mindset of this form of
organisation.
Ghoshal and Bartlett (1995, p. 143–144) argue that the strength of the
multidivisional companies in a linear and increasingly changing
competitive environment is a result of efficient ways of processing
information and knowledge development derived from such processing. In
such companies, information processing is structured according to business
unit level, divisional level and corporate level. Business units deliver data.
This data is analysed and organised into business-relevant information at
the business unit level and division level. The entire company (corporate
staff groups) combines information from different sources for the purpose
of generating value. The company management absorbs and
institutionalises this knowledge in order to derive «wisdom» that becomes a
part of the accepted perspective and standards of a company. Mechanisms
and routines of budgeting, planning and control represent the dominating
strength of divisionalised company through efficient work allocation and
specialisation in procurement, analysis and interpretation of data in the
stages of information, knowledge and «wisdom». The hierarchical
multidivisional company is well-equipped if the information cost is high
and the company environment is stable (Klodt et al. 1997, p. 70ff), as
shown in ◘ Fig. 3.9. Organisational knowledge is generated and used
increasingly for improving the operating process of existing activities.
Fig. 3.9 Evaluation of forms of organisation as per stability of the company environment and
information costs (Source: Klodt et al. 1997, p. 73)
However, these companies lack the antithesis of this sequential and

incremental knowledge-building process that is necessary for strategic
renewal. Multidivisional companies do not have a process that is capable of
challenging institutionalised wisdom, overturning existing knowledge bases
and re-configuring the sources of data. Companies become immobilised in
the absence of these challenges. Too many «sacred cows» hinder the action-
oriented and anticipation process beyond the boundaries of divisions.
This criticism of Ghoshal and Bartlett is shared by another management
researcher, particularly from the viewpoint of multinational companies. In
contrast to M-form (m = multidivisional), Hedlund (1994) proposed a new
form of organisation called N-form (n = new) that is better at dealing with
wide variation and fast changes in knowledge inside the companies. Instead
of bringing information to a given decision point, the decisions should be
shifted to where the knowledge is available. Let us have a look at the
concept of firm that is more capable of renewal as compared to the
traditional multidivisional organisation.
3.4.2 The Entrepreneurial Corporation

Ghoshal and Bartlett (1995) have developed an organisational form called
as «Entrepreneurial Corporation».
The entrepreneurial corporation contains three processes –
entrepreneurial process, renewal process and integration process that links
the earlier two processes. These processes are given a definite form by the
front line entrepreneurs, corporate leaders and the senior level coaches (see
◘ Fig. 3.10).
Fig. 3.10 The processes and roles in an entrepreneurial corporation (Source: Ghoshal and Bartlett
1995, p. 153)
While the processes described below and the tasks of the actors are
commonly found in all companies, the type of implementation is
completely different in each case.
– The entrepreneurial process represents search for business opportunities
and externally-focused ability of the organisation to create new business
fields
– The integration process allows the entrepreneurial corporation to link and
leverage its dispersed resources to build a successful company
– The renewal process maintains the capacity of entrepreneurial
corporation to challenge its own beliefs and practices and to
continuously revitalise itself so as to develop an enduring institution.
Each of these processes requires certain organisational infrastructures
and mechanisms (Bartlett and Ghoshal 1993) that we shall see in detail
subsequently.
Case Study
Mini case: Mindtree II
MindTree, a mid-sized Indian IT services company is known for its
knowledge management practices, its collaborative communities, and its
strong culture and values. At MindTree, innovation, knowledge sharing,
and collaboration is a way of life. It extends through all three of their DNA
elements, beginning with imagination (idea), extending into action
(implementation), and culminating in joy (new product or service). The
company strongly believes that the human ability to create new knowledge
and lead with ideas is central to personal as well as business success.
MindTree’s knowledge management function enables the organisation
to harness the knowledge and ideas of its people, resulting in innovation,
better service delivery and organisational learning. MindTree’s approach to
knowledge management is holistic and focused on building a knowledge
ecosystem which MindTree defines as four spaces within which its people
interact to create value: physical space, virtual space, social space, and
mind space. The key thrust areas of knowledge management in MindTree
are innovation, collaboration and reuse. This has all been realised by
deploying multiple platforms that impact people’s behaviour, creativity, and
productivity.3
The Entrepreneurial Process

The entrepreneurial corporation is a company built around a core
entrepreneurial process that drives everybody and everything, the
company does. (Ghoshal and Bartlett 1995, p. 145)
An entrepreneurial process requires a close interplay among three

management roles. The frontline entrepreneurs are the spearheads of the
company. It is their responsibility to create and pursue new growth
opportunities. The coaches in the middle and senior management positions
play a pivotal role in reviewing. They develop and support the initiatives of
the entrepreneurs. The corporate leaders at the top of the organisation
establish the company’s overall strategic mission that sets the boundary for
entrepreneurial initiatives and also sets the highly demanding performance
standards that these initiatives must meet. We can find four attributes in
companies that have institutionalised a successful entrepreneurial process:
– Firstly, the organisations are built around relatively small units.
Matsushita launched a new company for every new product according to
the «one product – one division» concept. ABB is known as a network of
1300 separate companies with an average of 200 employees per
company. One can observe the same practice in many companies. To
build such small units, these companies have abandoned the notion of
functionally complete strategic business units that had all the key
resources so as to be in full control of their performance. Instead, they
have structured incomplete «performance units» that are interdependent
and must use each other’s resources to achieve their own goals. From the
viewpoint of creation and transfer of knowledge, this is an important
observation because the basis of knowledge integration is laid after
considering the business objectives. We shall come back to this aspect
when dealing with the integration process.
– Secondly, in every stage from the initial idea to product development,
prototyping, market testing and commercialisation, it is necessary to
compile and propose a specific budget. The necessary resources are
allocated in multiple stages (multistage resource allocation process)
instead of committing to clearly articulated long-term plan right from the
beginning. Thus, at 3M, any employee can propose to a business idea
and a single coherent sentence can often suffice as a starting plan.
– Thirdly, the highly structured and rigorously implemented financial
control system ensures that the failures are detected immediately, risks
are minimised and successful businesses are encouraged accordingly.
– Fourthly, successful entrepreneurial corporations have a clearly
articulated and widely shared understanding of which activities are
meant for the company and which results should be expected in which
time horizon. The actual boundaries that are to be borne in mind by the
entrepreneur can be formulated considering either the technology or
specific customer groups. These boundaries serve as a guideline for the
entrepreneurs to focus their own creative energy.
The Integration Process

The entrepreneurial process alone is not sufficient for an entrepreneurial
corporation that threatens to fall apart or is not in the position to offer
complete customer solution if the integration processes is underdeveloped.
In the absence of such an integration process, decentralised
entrepreneurship may lead to some temporary performance improvement as
the existing slack is harnessed, but long-term development of new
capabilities or businesses is neglected. The integration process in
companies has three components:
– Value-based integration that should be achieved by the company
management along with the coaches. It is necessary to develop a
company culture wherein qualities such as teamwork, openness to
problems and solutions of others and being supportive and helpful are
accepted as values of the business (see the case study of Kao). This
works in an entrepreneurial corporation only when charismatic
management sets an example by following these values and demands the
same from the employees and when the incentive systems are directed
towards the success of a unit and overall success of the company.
– Knowledge-based integration of a company involves effective transfer of
knowledge – be it customer knowledge, be it best practices or be it
medium-term and long-term creation of competencies.
– Operative integration aims at managing interdependence and potentials
of the operative business. One such function involves offering solutions
to key customers. Yet another function involves letting a number of
entrepreneurs carry out business – e.g. huge projects – together.
Operative integration can also mean organising the purchasing process in
such a manner that it is possible to increase the purchasing power and
reduce price due to high purchase volumes. In the integration process,
coaches play an important role in knowledge transfer.
They co-ordinate teamwork and show who knows what in the company,
gather initiatives of entrepreneurs in order to be in a position to offer
complete solutions. Enterprise level programmes such as cross-functional
projects or total quality management, can contribute in sustaining a target-
oriented coaching process which gives comparable and measurable results.
Furthermore, the integration process in a company can be given a specific
form through company-wide benchmarking and evolving a common
learning process resulting from such benchmarking.
The Renewal Process
While the integration process links and leverages the existing competencies
of the organisation, the renewal process questions the strategies and their
underlying assumptions continuously and inspires in achieving new
competencies in order to be prepared for the competition in the future. In
any large organisation, there is a need for a structured learning environment
which facilitates continuous learning so as to enable the people to reach out
to end users. This requires content to be prepared as new systems come on
board and processes keep changing. A renewal process comprises of two
symbiotic components:
– Rationalisation and restructuring of existing business units to achieve
continuous improvement in operational performance.
– The second part of renewal process is revitalisation. This involves the
creation of new competencies and new businesses, challenging and
changing the existing rules of the game and leap frogging of competition
through «quantum leaps».
The renewal process is built on the premise of «business not as usual».
The renewal process lays emphasis on the significant symbiosis between
the present and the future. There is no long-term success without short-term
performance just as short-term results mean little unless they contribute to
building long-term vision of the company.
In the renewal process, it is the task of the company management to
maintain a balance between short-term success and long-term vision and the
competence required for this purpose. Finally, the capability of a company
to continuously renew itself depends on the ability of its front line managers
to motivate their employees for continuous rationalisation and
revitalisation. The improvement suggestions and new ideas are brought in
by the sales person, the operator in the plant or the research and
development engineers. They are not willing to accept the possibility that
the company may not be in the position to implement these ideas or present
clearly in the short-term why this or any suggestion cannot be implemented
in its existing form.
Coaches are the motivators of the renewal process just as the trainer of a
team who urges, motivates and communicates vision to the team members.
Simultaneous and equal development of all the three processes is crucial for
the success of entrepreneurial corporation. An entrepreneurial process
without integration will give as few results as an integration process that is
not led by clear business objectives of entrepreneurial process. We have
explained this model of entrepreneurial corporation in such a manner that it
provides a basis for our concrete suggestions on implementation of
knowledge management in later chapters.
Case Study
KAO – Creative in Japan
KAO is known as one of the most creative companies in Japan. The
traditional soap manufacturer has expanded successfully in the field of
hygiene and cosmetic products. The core of its innovative ability is an
entrepreneurial process with small, functional and incomplete units,
aggressive goals, rigorous financial discipline and a structured product
development process supported by a flexible and multi-staged resource
allocation system. Furthermore, the strategic missions are clearly defined in
order to use basic technologies to develop products with increased customer
network.
This entrepreneurial process is incorporated in a value system that is
built on the values of Buddhism and in an open information exchange that
is supported by personal meetings and teamwork as well as by a highly
developed information system. Dr. Yoshio Maruta, Former Chairman, KAO
describes the concept behind this entrepreneurial process as «biological
self-control». The value system of KAO aims at harmony and social
integration following the «everyone is equal» spirit. These values of
equality and free information exchange are continuously observed by Dr.
Maruta and other members of top management and are anchored deeply in
organisational routines.
A large part of the work of the top management functions in «Decision
Spaces» where everyone participates in the discussion and the decision-
making process. Furthermore, the company has an extensive system of
function-related and cross-business meetings for exchanging ideas and
encouraging shared development of new initiatives and projects. The «open
space meetings» that allow the participation of people from any part of the
organisations takes place every week in different business units. The «total
creative revolution project» is an institutionalised coaching process that
constantly pulls together teams and task forces from different parts of the
company to perform specific tasks in order to find creative solutions for a
problem or identify new business potentials. This total creative revolution
aims at achieving innovation through shared learning process. The senior
managers are formally expected to be priests – those who facilitate the
process of shared learning.
KAO is an example of a successful entrepreneurial corporation that
developed itself very fast from a traditional soap manufacturer to a leader
provider in the wide field of hygiene and cosmetic products.
Sources: Ghoshal and Bartlett (1995), p. 148ff; Graham and Pizzo
(1996), p. 342.
3.5 Knowledge Alliances

Organizations take different forms of long term cooperation in order to
form a cartel, to distribute risks, pool complementary resources together
and overcome market barriers together.
A strategic knowledge alliance is an agreement of two

companies/institutions or independent business units of a company
for common use and development of knowledge resources.
Knowledge alliance can contain cross-shareholding (joint ventures). It

can be almost permanent or designed as a project over a course of time.
Experts (research and development employees) can be brought together in a
new independent organisational unit or they can collaborate from their
respective units towards the goals of the alliance. In many cases, such
knowledge alliances are also referred to as networks that cooperate through
multiple nodes or «knowledge ecoscystems (Valkokari 2015).
Knowledge creation and transfer in alliances is influenced by three
criteria: the organisational level, positioning of the alliance in the value-
creation chain and its (organisational) form. Contrary to the narrow
definition of alliance as a basic agreement of a number of companies, we
think that an alliance is also possible within a company. In a company,
wherein the business units operate independently, alliances of business units
are as significant as the alliances across companies.
However, there are indeed a lot of differences in creation and transfer of
knowledge. Intra-organisational alliances operate in an environment that
is characterised by a common corporate guiding principle, a company
culture and an incentive system that is consistent in positive case and
combines the result of the units as well as the entire company. In case of
inter-organisational alliances, it is necessary to «tolerate» different
organisational identities, guiding principles and incentive systems. If
employees of a company have a certain tacit knowledge on how
development work takes place, how new business fields are generated or
which behaviour is desirable, this tacit knowledge of an employee of one
company can be at odds with the tacit knowledge of an employee of another
company.
Therefore, the process of converting tacit knowledge into explicit
knowledge across the company is important for the functioning of
knowledge alliances. On the other hand, it is possible for business units
operating in similar markets but belonging to different companies to have
built similar identities and feel closer to the business units of the alliance
partners than those of their own company. This is applicable particularly
when companies are structured as finance holdings with individual business
units that do not have common interests pertaining to technology, products
or market. Yet another influential factor in the creation and transfer of
knowledge is the positioning of the alliance based on the value creation
chain. Alliances can be horizontal and vertical.
In Vertical alliances partners complement each other in the value
creation chain. This applies for example to supply chains. The same applies
to logistics alliances in which the manufacturing or the trading companies
work on a long-term basis with the forwarding agents that undertake the
distribution and some parts of order processing (Bowersox 1990). In such a
relation, each partner keeps the knowledge necessary for his part of the
value creating chain secret. The commonly created knowledge refers to the
standardisation as well as documentation of processes considering overall
quality management, continuous improvement and exchange of best
practices resulting in increased efficiency of the entire value chain.
Withdrawal of a partner from an alliance can break the entire value
chain. The alliance loses the knowledge of the withdrawing alliance partner
because it is generally not recorded jointly in the alliance related knowledge
documentation system. Thus, withdrawal of a logistics partner can result in
loss of important customer information. Vehicle manufacturing companies
are increasingly wondering whether a reduction in the value creation of up
to 20% of the vehicle value would lead to a loss of critical knowledge in the
company.
Horizontal alliances are characterised by cooperation of the partners
belonging to the same level of the value creation chain. Prominent
representatives of a horizontal alliance are the development partnerships
between companies that are not linked otherwise and could even be
competitors. In the automotive industry, such development partnerships can
be seen between Renault and Volvo or Daimler Benz and Mitsubishi in
order to bolster engine development. High cost of developing new memory
chips can be financed only through the alliance of multiple companies. The
success or failure of such an alliance can be determined by the capability to
integrate highly qualified experts of both the companies in a functional
team as well as creation of an open cooperation within the framework of the
alliance between the companies that are possibly strong competitors in
other fields. Furthermore, it must be ensured that the cooperation within the
alliance does not lead to a knowledge-flow to the third party.
Open Versus Closed Alliances

The form of alliance is important to the alliance partner while creating and
transferring the knowledge. Based on the classification of networks (Richter
and Wakuta 1993), we can classify the form of alliances as open, permeable
and closed.
– Open alliances aim for a short-term opportunistic cooperation with the
changing partner constellation in order to acquire projects of higher
volume. In such an alliance, the knowledge transfer and creation takes
place depending on the opportunity and in accordance with a specific
purpose. Only a little collective learning takes place. The alliance
partners open up only to an extent that appears to be necessary for the
momentary situation. However, by means of such ad hoc alliances,
different partners bring in new knowledge that contributes to the
transparency in knowledge about markets, competitors and potential
partners.
– Contrary to the open alliance, the closed alliances are characterised by
stable partner constellations. Partners are under the obligation to
cooperate only within the alliance and have a share in each other’s
company capital. A typical example of a closed alliance is the Japanese
Keiretsu with clear division of roles, long-term arrangement, a Keiretsu
culture and identity and common tacit knowledge. However, the know-
how lying beyond the experience horizon and the competencies of the
partner are not used because of this stability.
– The permeable alliance represents the combination of open and closed
alliance forms. Permeable alliance contains a relatively stable partner
constellation wherein the partners can belong to multiple alliances and
thus transfer knowledge across the boundaries of an alliance. Examples
of permeable alliance are the distributing companies that develop product
components jointly with the competing buyers [purchasing companies].
These components are then used in the end products that compete in the
market. Ideally, permeable networks combine the stability of an alliance
that is necessary for mid-term creation and transfer of knowledge with
the option to transfer new know-how into the alliance. Thus, permeable
alliances are the best structures if we consider the viewpoint of creation
and transfer of knowledge. However, there is a risk of knowledge being
transferred outside the alliance undesirably because knowledge is
safeguarded only to a certain extent in permeable alliances.
3.6 Groups as Knowledge-Promoting Forms of

Organisations
Group structures have a special meaning in the process of creation and
transfer of knowledge, especially while converting the individual
knowledge into collective knowledge. In many cases, groups build the
smallest organisational unit that then operate in the above mentioned
structural model at the department level of a business unit or the entire
company. We can consider groups as formal or informal alliances of the
employees. The significance of groups in solving problems and in
decentralised creation of knowledge has become popular under Total
Quality Management. The group performance is also considered as crucial
for the «Lean Production» (Womack et al. 1990). Ultimately, the success of
a group-based organisational structure is determined not only by the ability
of the individual groups and their members to solve the problem but also by
the knowledge transfer across groups. While the work groups undertake the
operative business – e.g. the final assembly of a vehicle or guiding specific
customer groups – in the long run, they increasingly have the task of
reflecting upon their activities and improving their own activities
continuously. Thus, quality circles are small groups created for longer
periods. The members of these groups have a common experience
background. They get together voluntarily at regular intervals in order to
analyse the problems of separate work segments under the guidance of a
trained moderator, they process and present solution proposals with the help
of specially learnt techniques of problem-solving and creativity, convert the
suggestions independently as much as possible and take up the verification
process.
The Emotional Intelligence of Groups

Groups have an IQ which is a result of the talent and capabilities of all the
participants. The efficiency in the functioning of a group depends on the
«level» of this IQ. The average «IQ» has turned out to be the most
important element of group intelligence in the emotional sense and not in
terms of academic performance. Social harmony is decisive for a high
group IQ. The difference in the performance of two equally talented and
competent groups could be explained by the harmony or the lack thereof
within these groups. Even if one talented member of a group contributes
to the total performance of the group, other competent members of the
group cannot reap the benefits if there are major conflicts within the
group. One particularly talented member contributes to the total
performance of a harmonic group.
The members cannot give their best in a group wherein emotional and
social tensions are high because of fear, anger, rivalries or resentment. As
opposed to this, if there is harmony in a group, it can reap the biggest
possible benefits from the capabilities of its most creative and most
talented members. Thus, knowledge does not have a mere cognitive
component. The collective ability to solve a problem influences the
emotional intelligence radically.
Source: According to Goleman (1997), p. 205, 206.
A group-related activity can be restricted temporally as in the case of

learning centres wherein the workers meet in the premises close to the
respective production plant at regular intervals with a purpose to share their
experiences, enhance their basic knowledge and to improve and combine
the communication and teamwork under the guidance of moderators.
However, like the quality circle, it is equally important that the results
of individual groups are disclosed and provided to the other groups as well
so that each group does not have to «reinvent the wheel».
Ad hoc problem solution groups are also arranged quite often under the
workout approach of General Electric. The main activity here is to include
various perspectives and interests in a problem solving process. External
factors such as customers, suppliers or the administration are equally
integrated in the internal problem solving processes like various business
segments and company levels.
Yet another more strategically oriented type of groups is the technology
group that deals with new upcoming technologies and looks around for
their possible application in the company. Such groups are in a way
binoculars or antennae of the company for learning and testing the new
upcoming technologies to find out how these technologies can be
introduced and implemented in the company.
Apart from these formal groups, there are a number of informal groups
in the company that arise from the common leisure activities, training and
advanced training, past teamwork etc. These informal groups often outlive a
formal group culture and are profitable for the transfer of knowledge. An
example of such group are «Communities of Practice» (see ► Sect. 4.5).
Evaluation of Organisational Forms

In the following ◘ Table 3.2 the above discussed organisational forms are
evaluated according to their capacity for renewal versus stability and
competition versus collaboration. The dominant form of knowledge
creation and transfer is described.
Table 3.2 Forms of organisations from the viewpoint of knowledge-oriented management of a
company
Organizational Stability Renewal Competition Cooperation Knowledge

form creation and
transfer
Infinitely flat Knowledge Growth by «Grazing» While Efficient
passed over in replication interlocking replicating codification and
replicable customer business replication of
routines groups units, not existing
otherwise knowledge
form creation and
transfer
Inverted Through Rather Dependent on Rather low Overall value and
logistic incidental, positioning of incentive system
support depends on knowledge is needed to
individual bearers convert individual
initiative knowledge into
collective
competence
Star burst Low Continuous Competition for Rather low Branches acquire
generation ideas, (pull) knowledge.
of new competition for Systematic
business searching creation and
units suitable transfer of
entrepreneurs knowledge
between the
branches is
problematic
Network Routines Can be Takes a Between Large number of
supplemented planned and backseat in many nodes contacts promote
by ad hoc controlled presence of (formal, knowledge
teamwork up to a limit cooperation informal) transfer; targeted
knowledge
creation is
problematic under
optimum resource
utilization
Multidivisional High Incremental, High Low Operation use of
else by knowledge
acquisition divisions, less
of know- knowledge
how creation across
boundaries of
divisions
Entrepreneurial Through From the High using High using Good
comprehensive company «entrepreneurial «integration combination of all
processes process» process» the criteria
Hypertext At business By Competition for In projects Through
system level cooperation expert knowledge basis
of project level
teams and
business
systems
form creation and
transfer
Platform Low Continuous Only short- Occasional, Rather intuitive,
and chaotic term/medium- coincidental mostly through
to an extent term success is to some alliances
ensured extent
Alliance (Rather low) Especially Simultaneous competition to Overall
depending on in R&D some extent and cooperation in knowledge
the duration alliances defined areas creation and
and purposes conversion is
of alliance problematic in the
specific contexts
of alliance
partners
– Organisations need to balance stability and renewal as well as
collaboration and competition. Creation and transfer of knowledge is
best supported by organisational forms that accentuate cooperation and
renewal.
– The concept of «disciplined collaboration» is an effective way to harvest
synergies oriented towards clear business related goals.
– In ◘ Table 3.2 we have juxtaposed the above-mentioned organisational
forms under the criteria of «stability versus renewal», «competition
versus cooperation» and «knowledge creation and transfer».
– An entrepreneurial corporation is one that can fulfil the requirements of
stability as well as renewal, competition and cooperation very well.
– Fast growth in new business units is achieved effectively from the star
burst organisation.
– The «infinitely flat organisation» is suitable for growth by replication
(increase in the number of franchise partners or business locations).
– The concept of platform organisation is suitable for the turbulent and
chaotic conditions found particularly in «high-tech» industries.
– Networks are being used increasingly in order to bring independent
organisations as well as units of a company in contact with each other.
– The inverted form of organisation is particularly suitable when highly
qualified experts render services widely and independent of each other
and one wants a logical support or bundling of their services in form of a
complete service.
3.8 Questions
1.
What does «co-opetition» mean? And how is it related to knowledge
sharing?
2.
Provide examples of situations where «disciplined collaboration»
makes sense.
3.
What distinguishes an «entrepreneurial corporation» from a classical
«multidivisional firm»?
4. Which organisational form would you recommend for a consulting
firm? Discuss advantages and disadvantages of such an organisation.
5.
What is a hypertext organisation? What would it mean in practice to
implement this organisational concept?
3.9 Assignments
1.
Organising for innovation
You are hired as a trainee for the organisational development unit of
a big firm which operates in a highly innovative industry.
You are asked to propose organisational forms which could increase
innovativeness. Discuss various organisational forms (Pros and cons)
and prepare a short presentation for a board meeting.
2.
Franchising in small business «Mary’s cup cakes»
You have opened a shop, a friend has designed it nicely for you and
you are successfully baking and selling a variety of cup cakes.
As you have little capital but are convinced that your business idea
would be ideal for franchising, you want to transfer your business
concept and know-how to franchising partners. What are the steps for
transferring your knowledge? Which type of organisation would you
have in mind?
3.10 KM-Tool: After Action Review (AAR)

What is an After Action Review?
An After Action Review (AAR) is a simple process used by a team to
capture the lessons learned from past successes and failures, with the
goal of improving future performance. It is an opportunity for a team to
reflect on a project, activity, event or task so that they can do better the
next time. It can also be employed in the course of a project to learn
while doing. AARs should be carried out with an open spirit and no
intention to blame.
Why use it:
– The AAR is the basis for learning from project success and failures. It
is the starting point for improvements in future projects.
– Team members can identify strengths and weaknesses and determine
how to improve performance in the future by focusing on the desired
outcome and describing specific observations.
– The project team can document the lessons learned and make it
available to the rest of the organisation to improve decision-making.
How to apply it?

1.
Hold the AAR immediately whilst all of the participants are still
available, and their memories are fresh. Learning can then be
applied right away, even on the next day.
2.
Create the right climate. The ideal climate for an AAR to be
successful is one of openness and commitment to learning.
Everyone should participate in an atmosphere free from the concept
of seniority or rank. AARs are learning events rather than critiques.
They certainly should not be treated as personal performance
evaluations.
3.
Appoint a facilitator. The facilitator of an AAR is not there to
«have» answers, but to help the team to «learn» answers. People
must be drawn out, both for their own learning and the group’s
learning.
4.
Ask «what was supposed to happen?» The facilitator should start by
dividing the event into discrete activities, each of which had (or
should have had) an identifiable objective and plan of action. The
discussion begins with the first activity: «What was supposed to
happen?»
5.
Ask «what actually happened?» This means the team must
understand and agree facts about what happened. Remember,
though, that the aim is to identify a problem not a culprit.
N th l ith lit Th ll i b i th
6. Now compare the plan with reality. The real learning begins as the
team of teams compares the plan to what actually happened in
reality and determines «Why were there differences?» and «What
did we learn?» Identify and discuss successes and shortfalls. Put in
place action plans to sustain the successes and to improve upon the
shortfalls.
7.
Record the key points. Recording the key elements of an AAR
clarifies what happened and compares it to what was supposed to
happen. It facilitates sharing of learning experiences within the team
and provides the basis for a broader learning programme in the
organisation.
Source/link: ► www.kstoolkit.org/After+Action+Review, ►
www.skyrme.com/tools/index.htm.
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Footnotes
1 On evolutionary theory see Nelson and Winter (1982).
2 Text based on 7 http://www.diss.fu-berlin.de/diss/servlets/MCRFileNodeServlet/FUDISS_

derivate_000000002325/03_chap3.pdf;jsessionid=DCC25A49443797BEC2C730833FD9884D?
hosts=, p. 60–61.
3 7 http://www.mindtree.com/about-us/knowledge-ecosystem/our-knowledge-ecosystem
https://doi.org/10.1007/978-3-319-59978-6_4
4. Knowledge Work(ers) in the Digital Age

(1) Wiesbaden Business School, Hochschule RheinMain, Wiesbaden, Germany

(2) School of Business Management, SVKM’s Narsee Monj. Inst. of Management Studies, Mumbai,
Maharashtra, India
The most valuable assets of a 20th-century company were its production equipment. The most
valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge
workers and their productivityPeter Drucker (1999, p. 135)
Learning Outcomes
– You will know about the characteristics of knowledge workers and their evolving contractual
relationships in the digital age;
– You will be able to name and explain the six major factors determining knowledge worker
productivity according to Drucker;
– You will know the roles and tasks of the five groups of actors of the knowledge firm;
– You will know how to motivate knowledge workers
– You will be able to evaluate and develop competencies of employees
– You will know what makes a CoP successful or fail;
– You will be able to develop a competence matrix for a specific unit.
4.1 The Future of Knowledge Work

4.1.1 A New Social Contract
Increasingly, knowledge intensive companies are hunting for «brains» rather than traditional «manpower».
Florida (2002) postulates the rise of a new social stratum, the Creative Class, whose values comprise of
creativity, individuality and being unique and performance oriented. «Value creation through knowledge»
is becoming the dominant source of our prosperity, but we can maintain and multiply this prosperity only if
it is based on effective and creative knowledge work.
Definition Knowledge work is an activity based on cognitive skills that has an intangible result and
whose value added relies on information processing and creativity, and consequently on the creation and
communication of knowledge. Knowledge workers are people who primarily engage in knowledge
work.
Along the same lines, Davenport describes a knowledge worker as someone whose principal activity
consists of acquiring, generating, packaging or applying knowledge; in other words «knowledge workers
think for a living» (Davenport 2005).
They are the key source of growth in most organisations. New products and services, new
approaches to marketing, new business models—all these come from knowledge workers. So if you
want your economy to grow, your knowledge workers had better be doing a good job. (Alter 2005)
4.1.2 Types of Knowledge Work
Looking deeper into knowledge work North and Gueldenberg (2011) present a role model of knowledge
work which is comprises six roles (for further classifications of knowledge see Davenport 2005; Levy and
Murnane 2004; El-Farr 2009). For each of the roles there corresponding management challenges are
summarized.
The knowledge creators or «The Creative» Under this role, we think of researchers, developers,
architects, composers, and authors. They are defined as producers of new knowledge. Work outputs are
designs, concepts, new product ideas and developments, processes, strategies, or scientific papers. The
challenge on the one hand is to create enough room for creativity, and on the other hand to integrate
knowledge creators in a market process; because creators of knowledge are of value only if the creative
product finds a buyer.
Knowledge communicators The competency of knowledge communicators lies in target group-relevant

structuring, preparation, communication of knowledge, and thereby also motivation and persuasion.
Knowledge communicators are logisticians: they store, pack, and deliver information and knowledge using
multiple media and channels. People who play this role include, for instance, journalists, trainers, teachers,
managers, marketing experts, and even librarians and research specialists. The challenge for productive
knowledge work in this role lies in «packaging» knowledge suitably by being in direct or indirect contact
with the «customers». Here, distribution of work and co-operation can be of great advantage. For example,
not every teacher needs to create worksheets for every topic. Instead she can co-ordinate with his
colleagues and distribute the work. Journalists for instance, fall back on the ready-made texts of press
agencies and then present these suitably.
Knowledge-intensive service providers Due to specific expertise, individual solutions are developed in
this role in direct or indirect contact with people. Doctor, lawyer, counsellor, teacher, manager,
psychologist, priest etc. are some examples enact this role. The challenge of this role lies in developing
situation-specific solutions from an immense repertoire of possible measures. In many cases an individual
expert is not in a position to have a view of all possible measures and it is therefore useful to encourage co-
operation and teamwork. The much practised culture of individual expertise leads to sub-optimal results
even for the customer (e.g. an illness is not diagnosed or incorrectly treated) and is also inefficient from the
organisation’s point of view (e.g. a lawyer starts work on a contract type for the first time, when another
colleague has already handled it many times before). For this type of knowledge work experienced-based
«intelligent» systems can provide decision support.
Processors of knowledge routines Claims officers of an insurance firm, call centre agents, or accountants
work on rule-based, standardised procedures which can be carried out individually or integrated in an
overall process. The challenge of productive knowledge work lies in the continuous search for «Best
Practices» or «Next Practices», systematic problem solving, and tailoring these routine knowledge
processes to the changing requirements around us. Many of these jobs will be automated in the future.
Knowledge work is carried out also in material production. Service technicians or maintenance
personnel are entrusted with tasks of problem solving, planning, and coming up with suggestions for
improvements (idea management). The challenge in this is learning systematic problem solving and
motivating employees to think of new ideas. In this sense, production employees can also be knowledge
creators. «Intelligent» machines and experience-based systems will support or automate some these tasks
particularly in industry 4.0 settings.
Knowledge workers as life-long learners All knowledge workers are at the same time learners who
reflect upon their experience and structure it, acquire new knowledge and build their competence profile.
Learning new things requires time and freedom of thought and action. However, learning is not limited to
being an individual activity, rather it is increasingly seen to take place in knowledge communities where
experiences are shared and new ideas and solutions are developed together.
4.1.3 Knowledge Work(ers) 4.0
The impact of digitalisation, automation and big data exchange on the world of work is highly debated. A
key question is whether today’s technological transformation could inhibit rather that support the creation
of jobs and what would be the quality of these jobs. Middle-skilled jobs appear to be the category most at
risk of disappearance and/or transformation (► www.eesc.europa.eu/.../eesc-2016-05420-00-00-tcd-tra-
en.docx).
In the following we will summarize major trends that affect knowledge work in the future as have been
identified by a number of studies (cf. Lehtiniemi et al. 2015; Telekom 2015; BMAS 2015; Intel 2014).
Distributed value generation The new world of work is characterized by networks. Standardized back-
end processes are shared between companies, without being visible to customers or employees. This
creates jobs without a clear organizational membership and products without a clear sender. Boundaries
within and between organizations fade as work is organized in temporary projects done by people with
temporary affiliations.
Work without borders Highly qualified specialists work around the world as part of project work.
Qualifications are globally transparent and comparable. The spatial location of the service provider no
longer plays a role. For the first time, labor thus acquires the same mobility as capital. The traditional
places and times of work dissolve. For employees, this results in new options, for example to improve the
compatibility of family and work life, but also new burdens («always on»). Offices will serve as temporary
anchor points for human interaction rather than daily travel destinations. Office as a Service (OaaS) will
become a strategic tool to land employees in the right place, at the right time.
Crowdworking Companies are increasingly focusing on customers instead of employees. Many

(digitizable) services are offered voluntarily by volunteers and free of charge. Prosumerism blurs the
boundaries between producers and consumers. Volunteer digital work replaces professional employment.
In addition, digital services are divided into ever smaller parts and delegated to «Virtual Laborers». Big
data analytics can be used to assign value contributions to specific individual workers. Cloud
/Clickworkers provide their performance in the chord. In the foreseeable future, many of these activities
will be fully digitized.
New forms of interaction between man and machine Smart systems will emerge and collaborate with
humans, changing the nature of work, and driving a re-imagination of work content and work process.
Various forms will coexist in the future: From people who control machines, machines as people’s peers to
the merging of machine and man or the complete takeover of activities by intelligent systems. Creative
activities, however, will remain a domain for humans.
Self-management as a core competence As traditional work relationships and processes are dissolved
knowledge workers have to learn self-management including self-organization and self-control. (Mládková
2015). Self- management means amongst others to organize work, define or redefine work objectives,
choose adequate means and methods, organize one’s own competence development as well as work-life-
balance.
Digital Leadership The distribution of work in different locations is accompanied by a shift from a
presence culture to a result culture («do your work wherever you are»). Leaders need to learn to motivate
these dispersed workforces more than to control them. The art is to build and maintain personal ties
through impersonal channels enabled by information and communication technology.
What does this mean in terms of work and Human Resource practices (cf. Lewin 2005)? Until recently,
most employees performed a pre-structured and clearly defined task for which they were paid. They were
assured that they would be employed in the company as long as this task existed in the company and as
long as they met a certain standard while carrying out their tasks. To a certain extent, they were assured a
work place for a certain period of time. The new viewpoint of the company means a change in the social
contract. Employees provide their intelligence, learning aptitude and knowledge to the company. In return,
the company is bound to use, develop and safeguard these individual capabilities and skills with the
purpose to convert them into «organisational knowledge assets» (collective intelligence) and create value
out of it. Flexibility in allocation of resources is the need of the hour.
As the efficient and effective conversion of individual and organisational knowledge into innovative
services is considered as a primary differentiation option in the market. Firms want to assure the access to
knowledge resources on the one hand and get enough flexibility for an operation in the fast changing
markets. The core of these thoughts establishes the form of future teamwork with different employee
groups and a new definition of affiliation to the company. A workforce in this model comprises «core
employees» who will decrease in number in the future and who will be assigned to the operative business
units. These employees are supported by internal «knowledge centres» that develop and process highly
specialised knowledge and implement it in customer solutions together with the operative employees.
External employees, customers and suppliers also come along to provide additional knowledge of the
organisation on a contractual basis. As a result, the borders between internal and external blur. The
organisation turns into a contract network that comes into being under the criteria of knowledge creation
and conversion of knowledge into customer solutions. The consideration for structuring such a workforce
are visualised in ◘ Fig. 4.1.
Fig. 4.1 Possible structuring of work (Source: Escher and Bajenaru 1997)
Compensation patterns have also changed over the years. An individual is paid as per his/her
contribution to the company’s value creation. The company pays not only in monetary form but also offers
the individual a chance to develop his capabilities and skills further and apply them in challenging tasks.
The classical barriers between employees, customers and suppliers fade out. Thus, customers can
contribute in the development of new products and can be remunerated for their efforts – similar to the
existing practice of remunerating the suppliers for their contribution. Employees develop and control their
own competence portfolio that must then stand the test of time in an operation portfolio that gets
reconfigured time and again.
4.2 Drivers and Obstacles of Effective Knowledge Work
Peter Drucker suggests that knowledge worker productivity is the most important challenge for
management in the twenty-first century. He describes six major factors determining knowledge worker
productivity (Drucker 1999, p. 142, see also North and Gueldenberg 2011) which are still relevant in the
digital age:
1.
«Knowledge worker productivity demands that we ask the question: «What is the task?»
2.
It demands that we impose the responsibility for their productivity on the individual knowledge
workers themselves. Knowledge workers have to manage themselves. They have to have autonomy.
3.
Continuing innovation has to be part of the work, the task and the responsibility of knowledge
workers.
4.
Knowledge work requires not just continuous learning but also continuous teaching on the part of the
knowledge worker.
5.
Productivity of the knowledge worker is not – at least not primarily – a matter of the quantity of
output. Quality is at least as important.
6.
Finally, knowledge worker productivity requires that the knowledge worker is both seen and treated as
an «asset» rather than a «cost». It requires that knowledge workers want to work for the organization
in preference to all other opportunities.»
He also adds that to be successful, the knowledge work must be focused as part of a system, on the
needs of the customer and business strategy.
In order to find answers to Drucker’s challenge formulated above organisations should consider the
following questions:
1.
What performance are knowledge workers capable of achieving if they work under ideal conditions,
and what fraction of these results do they deliver in a real organisation or as independent knowledge
workers in a real work environment?
2.
Under what conditions will knowledge workers be ready to tap their talents and utilise their potential
for the benefit of organisations they work for?
3.
How should an organisation therefore manage employees who align themselves to the organisation’s
goals, are self-driven and co-operative, detect opportunities and solve problems proactively?
Effective knowledge work is not merely a term that indicates efficiency and focus on the «right» issues;
it also comprises conditions and resources which help harnessing and developing the performance potential
of knowledge workers. Effective knowledge in our extended view comprises such factors as quality,
creativity, ability to innovate, efficiency, effectiveness, and – from the individual’s point of view – self-
realisation, satisfaction and fun at work, development of one’s own competencies, and maintenance of
good health.
The dilemma of knowledge-intensive jobs is due to the organisation’s dependency on the commitment
and knowledge of its employees. Having said that, these are perhaps unaware of their own potential and the
potential «best result» which could be achieved under ideal conditions is not known. «The passion to go
well beyond the extra mile is what drives people to create insanely great products and services.» says
Christopher Meyer (1997).
Kim and Mauborgne (2003) reason that it all depends on designing a «fair process». This process
should be based on consistent, transparent, and comprehensible decision-making processes by involving
the employees. In order to do so, all of those involved in the decision making processes should be equal as
regards access to information. If the decision-making process and the teamwork are perceived as fair by the
employees, they will be willing to accept responsibility for the decisions and work actively towards their
implementation even if they do not wholly agree with what the decision entails.
Case Study Fairness increases performance – Two lab experiments

Numerous experiments have shown that employees respond to fair management with higher
performance. Two lab examples conducted by Prof. Falk of the Laboratory for Experimental Economic
Research at the University of Bonn (Germany) make this clear.
Experiment one shows that fairness leads to an increased efficiency. In this lab experiment, the
employer pays a salary to the employee and the employee is requested to give an output as he deems
appropriate. An absolutely self-interested employee would give the lowest possible output, irrespective of
how high the salary is.
The management therefore has no reason to pay any salary, if all the employees start behaving like the
«homo economicus». However, the experiment shows that many employees reward fair salaries. The more
the salary, the more willing the employees are to take up more work. Companies which paid higher salaries
earned more in the experiment than those which were willing to pay the bare minimum. Thus, it would be
worthwhile for companies to handle their employees with a sense of fairness. This fairness also includes
social recognition of performance (compare the economic model of efficiency wages1).
Experiment two proves that mistrust can be de-motivating. Employers in the experiment had the
option to either limit the scope of action of their employees or let them make a largely autonomous
decision regarding a productive task. In practice, examples of such limitations are rigid work instructions,
strict attendance rules or checking of workflows. Keeping in mind the self-interest hypothesis, it would
always be better to closely monitor employees and limit their scope of action so as to curb opportunistic
behaviour at the earliest. In reality though, the experiment showed that the output level was higher if the
employees were not restricted in thought and action; in fact, too many controls proved detrimental to
employee commitment. When questioned after the experiment, the employees indicated that they
interpreted the restrictions as mistrust and reacted with restrained output.
Falk’s conclusion of the experiments: Instead of working solely with incentive and compliance
mechanisms in human resource management, it would be useful to create freedom, give more
responsibilities, and thus show trust in the employees. In doing so, the management obviously runs a risk,
but also reaps profits from it.
Source: Falk (2008)
Buckingham and Coffman (1999, p. 21) studied the factors which are essential to recruit top-class
knowledge workers, to retain them, and engage them in productive work. The following six factors have a
highly positive correlation with productivity, profitability, employee retention, and customer satisfaction:
1.
Knowing exactly what is expected of you at work
2.
Availability of resources to execute the job correctly
3.
Opportunity to do what one can do best
4.
Regular recognition and appreciation for the work done
5.
Recognition of an employee as a human being
6.
Having a mentor at work who supports your development
While these factors are also relevant in industrial work they are, however, critical for enabling effective
knowledge work, which in its core is often an activity involving little structure, a lot of novelty, and
dependence on individual expertise. Moreover, well-being and team spirit in the workplace also affect the
productivity of knowledge work (Hube 2005). Another factor negatively affecting productivity is the
situation wherein knowledge workers increasingly have to start freelancing, or are employed on short-term
contracts, and perceive a high risk of losing their job (Dostal et al. 2001). In such situations knowledge
workers would spend much energy to safeguard oneself, to position oneself vis-à-vis colleagues, and to put
one’s own future above everything else.
Therefore, one of the main tasks of top management is to provide an environment where work is
rewarding and fun. The strategy of managing knowledge workers keeps the focus on people. With the
provision of conditions that promote employee’s initiative, creativity and knowledge transfer, companies
expect to make intensive use of this freedom to create value. Effectiveness of knowledge workers is based
on results and credibility, perceived reputation, and network of relationships rather than formal authority,
job description, or position in the hierarchy (Saxenian 1996).
Freedom to create value goes along in many cases with high work loads. A software developer reports,
«Earlier, after closing a project, we had time for post-processing. Today, a project is immediately followed
by a new one. Earlier, we had time for learning phases but today a couple of hours in the day-to-day
business are supposed to be adequate.»
Individuals to be employed for this type of work are mostly independent and extremely flexible in
terms of time. Therefore, 75% of the employees in the development centres are young singles. On the other
hand, giving freedom without specifying clear targets leads to certain arbitrariness like in the motto, «Do
what you want to but be profitable.»
According to Meyer (1997) knowledge workers
– Primarily identify themselves with their profession rather than workplace; more sensitive to the kudos
and esteem they receive from their peers than those they receive from management
– Are highly mobile and quick to change jobs
– Are driven primarily by the pride of accomplishment
– Have strong beliefs and personalities; they respond much better to being pulled than being pushed
– Have an informal network with peers, inside and outside their own company, which helps them
benchmark their personal efforts and their company’s competitiveness
Quinn et al. (1996) recommend how to make use of the potential of «professionals»: Employ only the
best ones and let them ponder over new problems under high pressure to succeed. After initial training,
these «potentials» are confronted immediately with the complexity of real problems. New employees are
assigned to small teams that contain three to seven people – as found in Microsoft. The new employees
participate immediately in the development of new complicated software systems under the guidance of
their mentors. The legendary 80-h weeks and long nights praised by investment bankers and software
engineers serve the purpose of advance training that is to be taken seriously. They enable the best
employees to move up along the learning curve that turns out to be steeper than that of the other
employees. Training on the job, guidance by mentors as well as pressure of competition among colleagues
helps the experts to reach the highest possible level of knowledge in their field. Quinn et al. are of the
opinion that the specialised knowledge of these experts increases faster when they have to comply with
tough demands.
The specification of targets that demand apparently impossible things (stretched goals) (Thompson et
al. 1997) leaves the knowledge workers with two options – they can either sustain the pressure and go
along with it or search other tasks within or outside the company. «Top companies push their experts
constantly from barricading themselves comfortably behind clever books, simulation models or even
monitored laboratories. These companies mess around mercilessly with the most difficult tasks that exist
such as the real customer outside, the existing system as well as highly complicated external circumstances
and cultural differences. This is not seen in middle mediocre companies» (Quinn et al. 1996, S. 98).
These companies not only have a tough internal competition, regular performance evaluation and
feedbacks but also nurture a culture of sharing knowledge. This is because if one does not cooperate, one
will also not succeed in the competition and have no chance of progressing in the company.
Even at the worker level in the production department, the pressure resulting from the expectation of
better performance – as compared to the organisation based on division of labour – increases with the
increased freedom of decision. When the employees decide their own work process, it is also expected that
they examine their own work carefully and continuously and make improvements. It is also expected that
they pass on their knowledge about process and product improvements as part of their normal activities
and not as an extra remunerative service.
Risk of Burn-Out
However, not all employees will be ready to face this pressure. For instance, some may decide to cooperate
as an external developer in specific projects or to be available as a company consultant in consulting firms
only for X number of days. Others undertake repairs and maintenance tasks assigned externally or
participate in the production network as sub-contractors. They earn less but may be able to organise their
time freely. They may voluntarily or forcibly become «life entrepreneurs.»
Psychological overload occurs especially when workers are confronted with discrepancies between work
requirements, rules and available re-sources that inhibit them from reaching their goals and that are linked
to immediate negative consequences for them.
Reflect a bit on whether you feel overwhelmed with the following five types of disparities:
1.
Contradictory work goals: Additional requests and tasks have to be accomplished and
simultaneously the originally delegated tasks have to be completed within the given time without
requiring additional resources.
2.
Disparity between tasks and execution framework: Colleagues meant to provide help are not
available or occupied elsewhere. The promised resources and tools are not provided.
3.
Disparity between tasks and learning framework (i.e. learning restrictions): The necessary
knowledge or concrete experience cannot be acquired due to lack of sufficient freedom of action. For
instance, solutions have to be developed without proper knowledge of customer requirements.
4.
Disparity between individual and professional goals and expectations: Due to unfulfilled technical
and organisational prerequisites, knowledge workers are not able to do fulfil their professional
standards. They are obliged to work under conditions that they normally cannot support.
5.
Conflict between professional and personal life: There is a lot of stress caused by having to balance
familial roles and responsibilities along with professional obligations such as long working hours,
working over the weekends, etc.
For more information on the (self-) management of knowledge workers see North and Gueldenberg
(2011).
After this description of the ways of working in the knowledge society or knowledge firm, we will look
at the different employee groups in a knowledge-based company.
Case Study
Making Time-off Predictable & Required
People in professional services believe a 24/7 work ethic is essential for getting ahead, and so they
work 60-plus hours a week and are slaves to their Blackberrys. Perlow and Porter based on their research
in several offices of the Boston Consulting Group, however, suggest that consultants and other
professionals can meet the highest standards of service and still have planned, uninterrupted time off –
whether in good economic times or bad. In the action research a requirement that everyone on the team
take one full day off a week was imposed. Since that meant everyone was now working 80%, another
consultant was added to the team to ensure that the client would still have the equivalent of four full-time
people on the project. Once it was demonstrated that taking full days off (working 80%) was possible, the
researchers approached a further challenge whether people working full time could have predictable time
off and still achieve similar benefits for themselves and the organisation. In a second experiment, they
required each consultant to take one scheduled night off a week, during which he or she could not work
after 6 PM – not even check or respond to e-mails or other messages. After initial resistance 5 months later
participants reported more open communication, increased learning and development, and a better product
delivered to the client. Perlow and Porter (2009) conclude that imposing a strict mechanism for taking time
off works if it is accompanied by encouraging lots of talk about what’s working and what isn’t, promoting
experimentation with different ways of working, and ensuring top level support
Source: Adapted from Perlow and Porter (2009), pp. 102–109
4.3 The Actors of the Knowledge Firm

4.3.1 Five Groups of Employees
We distinguish five specific groups of employees who are the main actors in the knowledge firm – see ◘
Fig. 4.2:
– Knowledge practitioners: Expert employees, the «knowledge practitioners» carry out mainly operational
tasks professionally while they gain specialised knowledge continuously.
– Knowledge engineers and entrepreneurs: The second group of personnel comprises of middle level
management, who convert market potential or customer problems into solutions. Middle managers are
in fact knowledge engineers who gather the knowledge of their knowledge workers and convert it for
internal use and package it as per customer requirements.
– Visionaries and context designers: Upper level management comprises of «visionaries and context
designers», who identify the market potential, create a knowledge-ecology, act as leaders as well as keep
a check on the focus of entrepreneurial activities.
– Information brokers and infrastructure managers: The fourth employee group that is to be attributed to
the expert employees based on their qualification are the information and communication employees.
They develop and manage the information and communication infrastructure of a company in terms of
both technologies as well as content.
– Support employees: The fifth group of employees is the «support employees» comprising secretaries,
back office, call centres, reception etc. which support the remaining employees. They are capable of
influencing the image of the organisation decisively in the minds of the customers.
Fig. 4.2 Actors in a knowledge-oriented company
The functions and roles of these groups of persons are largely determined by the organisational concept
or management approaches. Nonaka and Takeuchi analysed the top-down and bottom-up approaches from
the viewpoint of knowledge creation (Nonaka and Takeuchi 1995, p. 125ff) and came to a conclusion that a
third way, «middle-up-down approach», is more suitable for promoting knowledge creation in the
company.
– Top-down approach: In the «top-down approach», upper management receives simplified and selected
information through the hierarchical pyramid. From this information, upper management develops
plans, orders and instructions that are binding on the middle management and are implemented by the
«knowledge practitioners».
– Bottom-up approach: In contrast to the top-down approach, the «bottom-up approach» aims at the
autonomy of entrepreneurially operating individuals without interaction. Tacit knowledge is gained at
the lower levels but is not shared and converted into explicit knowledge. Development of knowledge
does not have a clear target course.
– Middle-up-down approach: Unlike the aforementioned approaches, the «middle up-down approach»
plays a key role in the process of organisational knowledge creation. In the middle up-down approach,
upper management develops a vision or a «dream» while the middle management develops concrete
concepts that can be understood and implemented by the employees at the front, i.e. the specialised
employees. Middle management tries to resolve the discrepancy between the goals that the upper level
management hopes to achieve and the reality at that point of time. To some extent, middle management
is a translator that finds the right words, metaphors and slogans that can be understood by the
specialised employees as well as the customers and inspire them to perform a task or develop a product
concept.
◘ Table 4.1 juxtaposes the three management approaches referring to knowledge creation. Successful
knowledge engineers and entrepreneurs display the ability of the middle level management of packing and
bundling the specialised knowledge of the employees in such a way that the customers find a solution to
their problems in it and are willing to buy these solutions. We shall now take a closer look at the roles and
functions of individual employee groups from the viewpoint of an entrepreneurially oriented middle-up-
down approach.
Table 4.1 Comparison of management approaches with respect to knowledge creation
Top-down Bottom-up Middle-up-down

WHO Main Top management Entrepreneurially operating Team with middle level management as knowledge
knowledge individuals engineers
creator
Role of upper «Commander» Sponsor/mentor Promoter
level
management
Role of middle Processor of information Autonomous entrepreneur Team leader
level
management
WHAT Accumulated Explicit Tacit Explicit and tacit
knowledge
Conversion of Partial, focused on Partial, focused on Spiral
knowledge combination/internalisation socialisation/externalisation internalisation/externalisation/combination/socialisation
WHERE Storage of In databases/manuals In individuals In organisational knowledge base
knowledge
HOW Type of Hierarchical Project groups and informal Hierarchical and «task force» (and principles of the
organisation networks hypertext organisation)
Communication Orders/instructions Principle of self- Dialog and usage of metaphors/analogies
organisation
Tolerance to Chaos/fluctuations are not Chaos/fluctuations are Establishing and strengthening chaos/fluctuations
ambiguity allowed required
Weakness High dependence in upper Time-consuming, Exhaustion of employee, redundancy costs
level management coordination costs of
individuals
Source: Adapted from Nonaka and Takeuchi (1995), p. 130
4.3.2 Redefining Middle Management in a Digital World

With the restructuring of the hierarchical organisation, reduction in management levels and self-
organisation of semi-autonomous groups, middle management was often considered an obstacle to change.
Management gurus explained that the companies of the future can manage almost without middle
management (Kanter 1989; Quinn 1992). In reality, middle management has in many ways lost its
traditional function as implementers of strategies or respected experts in the sense of traditional masters,
while employee groups gained stature through the concepts of semi-autonomous teamwork and
«empowerment.»
However, knowledge-oriented management of a company assigns a key role to middle management.
Despite the heterogeneity in their roles (e.g. manager of a consulting firm, an operations manager of an
electronic goods company or a manager of a developmental project), middle managers are characterised by
common biographical elements that predestine them for these new functions of bundling knowledge and
packaging it as per customer requirements. By the time the members of the middle management reach this
level – after having worked in the company for a few years – they understand the rules of the organisation
and take positions because they are competent and enjoy the confidence not only of their superiors but also
of their subordinates. They are not at a level in the organisation to lose contact with the customers and the
ideas of employees. They are motivated and have the skill to initiate and implement changes and
innovations.
This experience background helps them to carry out their tasks. «Instead of giving orders, they now put
away obstacles, accelerate the granting of funds, conduct investigations and act as advisors» (Quinn et al.
1996, p. 102). This task description applies very well to the operative engineer, who has been turned from a
disciplinary superior into a coach of work groups in the production department. The manager in a
consulting firm acts as an entrepreneur to identify the potential of the consultation demand for a client and
conduct acquisitions.
Lars Kolind, CEO of the innovative Danish hearing device manufacturer Oticon (see case study in
► Sect. 3.1), added yet another management task for middle management: the ability to make the
employees «happy» and give them a feeling of security while they work in a very unstructured, chaotic,
difficult and constantly changing environment (La Barre 1996, p. 50). Middle management, the knowledge
engineers (Nonaka and Takeuchi 1995, p. 154), are intermediaries between what actually exists and what
will exist.
Middle managers change their position in a digital organization to move from being administrators to
leaders. Digital requires managers move from being in the middle of a hierarchy, managing a fixed team of
people and activities – to the middle of a network managing flexible resources to achieve customer and
company outcomes. McDonald (2014) argues that the e middle manager of the future is one that has the
following characteristics:
1.
She knows how the company wins at a conceptual and customer level.
2.
He recognizes the difference between critical and commodity capabilities.
3.
She sees technology through an information rather than application lens. She uses that perspective to
raise the ability of her teams and staff to work smarter with information..
4.
He connects technology investments with tangible outcomes at the customer and operations level.
5.
Together they work in concert to meet specific challenges and customer situations. They recognize
adapting to create customer value requires handling their various needs rather than harassing
customers to fit into a standard solution.
◘ Figure 4.3 illustrates important functions of middle management. You can enter your personal role
profile according to the actual and ideal profile. Every criterion can be evaluated based on its priority (how
important it is…) and its time allotment (which part of my working time do I spend for…).
Fig. 4.3 Functions and roles of middle management
Following the logic of the middle-up-down approach, we will now describe the roles and functions of
upper management in a knowledge-oriented company before turning to specialists and employees of
information and communication technology.
4.3.3 Upper Management: Visionary Context Designers

Bearing in mind the concept of the Entrepreneurial Corporation as discussed in ► Chap. 3, upper level
management performs the main tasks as shown below:
– Managing the tension between short-term success and long-term ambition
– Developing and incorporating values
– Setting strategic goals (guiding principle) and priorities.
The change from hierarchical to entrepreneurial action requires the management to change its role
perception:
Management should leave most of the decisions to the market, establish an organisational
infrastructure that governs the behaviour and encourages teamwork within the company. (Halal
1994, p. 69)
While management in today’s real companies spend a lot of time solving the problems of the operative
business and grappling with the repercussions of misled incentive systems, the concept of knowledge-
oriented management of a company considers upper management as visionary context designers. They
identify market potential beforehand, create a buzz around the product and organise framework conditions,
especially through incentive systems that promote creation and transfer of knowledge. They describe and
evaluate the behaviour expected from the managers and the employees and exemplify it themselves by
behaving accordingly. They develop leaders.
As individuals they represent the values of the organisation and are the highest moral entity in the
company. Their actions are conducted by «wisdom» comprising the rules of conduct which govern the
behaviour of the employees of the entire organisation (Galvin 1996).
Upper management harmonises different interests, coaches middle management, discovers and
develops talent and simultaneously keeps a check on whether the results of the entrepreneurial activity of
the middle level matches the target specifications. Upper management urges all the others in the company
to learn and to develop themselves continuously. However, it should also reserve a certain amount of time
for its own development.
Nonaka and Takeuchi describe upper management as «Knowledge Officers» (Nonaka and Takeuchi
1995, p. 156). They say that these knowledge officers direct the activities of knowledge creation in a
company firstly by articulating how the company should be, secondly by establishing a knowledge-
oriented vision in form of a guiding principle, and thirdly by setting standards for the value of knowledge
that is created. ► Chapter 7 contains the description of how of these individual actions materialise.
In ◘ Fig. 4.4 we have compiled a range of functions and roles for upper-level management. You can
enter your personal role profile as per priority and time allotment of the function and compare it with the
actual situation at a given point in time.
Fig. 4.4 Functions and roles of upper management
Case Study
Mini case: The «gardener» at MindTree Consulting
Subroto Bagchi is best known for co-founding MindTree Consulting in 1999 where he started as the
Chief Operating Officer. MindTree is a global Information Technology services company with head-
quarters in Bangalore, India. Bagchi has now taken on the role of a «Gardener» who develops
leaders/entrepreneurs. This role is based on the concept that a gardener understands the requirements of
each plant and nurtures it accordingly; the plants don’t go to the gardener but the gardener identifies and
nurtures the plants. Bagchi spends one-on-one time with the Top-100 leaders at MindTree on their
«personal-professional» issues to expand leadership capacity and build readiness for taking MindTree into
the billion-dollar league. In addition, Bagchi works at the grassroots by making himself available to its 45
Communities of Practice that foster organisational learning, innovation and volunteerism within the
organisation.
Source: ► www.mindtree.com
4.3.4 Professionals: The Knowledge Practitioners

«Knowledge practitioners» often called professionals, specialists or subject matter experts are the primary
knowledge resource of a company. They convert their specialised knowledge into customer solutions with
the instructions and coordination of the middle level management under the context defined by upper
management. In many cases, they convert the efforts of the company to products/services for customers
which form the image of the company. They are capable of influencing customer satisfaction significantly.
The value of specialists is equal to their knowledge. It is therefore in their best interest to gain new
knowledge continuously and to confront new tasks so that they do not lose their value in the constantly
changing environment.
Definition
What experts like and do not like (Sveiby 1997, p. 57)
– Experts are characterised by profound knowledge of the field in which they specialise. They
contribute actively to this field.
– Experts like complicated problems, progress in their occupational area, freedom to search new
solutions, well-equipped work place/laboratories and public recognition of their services.
– Experts loathe routine work, bureaucracy and rules that restrict their freedom.
– Experts often lack distinct management skills.
– Experts admire specialists who are better than them.
– Experts condemn power oriented persons.
Sveiby (1997, p. 72) has explained this phenomenon as the life-cycle of professionals (see ◘ Fig. 4.5).
Stated generally, the competence of an employee increases with age or the years of work he puts in. In
positive cases, the company finds this increase to be higher than the employee cost. At the beginning of the
career, the employee cost is higher due to training or restricted commitment. In succession, the market
value increases at a faster rate than the employee cost; the employee «rents himself», «brings in more than
his cost». At some point of time, a level is reached wherein the increase in the salary level does not bring in
corresponding increase in the value of the employee’s competence. At the latest before reaching this level,
the company and the employee should think about profitable options of using the experience of the
employee by undertaking new functions or a new qualification. Otherwise, the company will be inclined to
part with this employee in the short-term or long-term. In reality, the competence and cost of an employee
increase intermittently. Knowledge-oriented companies will increasingly evaluate the commercial value of
the specialised competence of their employees. This is easily possible in consulting firms using the realised
daily rate.
Fig. 4.5 Life-cycle model of the market value of specialised competence (Source: Diagrammatic presentation based on Sveiby 1997, p. 72)
Apart from updating competences continuously, professionals have other options to make themselves
indispensable in the company, e.g. by customer relations created by them. If a customer always wishes to
work with Ms. X or Mr. Y, the transfer of this employee may affect the company’s relation with such a
customer adversely. From this viewpoint, in order to safeguard their position, it is important for
professionals to work intensively with fewer customers than anonymously with large number of customers.
Another option of positioning the professional in the company is through cooperation in formal and
informal networks and communities. Here, the employees provide their knowledge, distinguish themselves
as experts of a topic, contribute to the company’s internal information system or are available as contact
persons for certain topics. Even though many experts are sceptical of self-marketing, it should be
considered as an important component within the framework of career development in a knowledge-
oriented organisation.
Individual knowledge management Information overload and varied knowledge gives a feeling of
helplessness and the pressure to react fast. Therefore, individuals need to develop strategies for dealing
with information and knowledge personally. Here are some tips (Reinmann-Rothmeier and Mandl 2000;
Reinmann and Eppler 2008):
– View and throw: Ask yourself which information you need and how often do you need it. Separate the
wheat from the chaff courageously.
– Reduce systematically: Reduce the amount of information coming to you regularly. Are the distribution
lists, mailing lists, magazines, etc. really relevant to you?
– Filter instead of collecting: Do not collect information without selecting. Instead, keep a record of where
you can find information if required.
– Set limits: Say no to yourself when you are confronted with information overloads.
– Courage for a break: Call it a break when the effort of searching and collecting information exceeds the
achievable benefits by gaining information.
– Practice composure: Develop an approach as per the motto «No one knows everything but everyone
knows something». A solid personal knowledge base promises success more than a possibly complete
information pool.
– Use technologies that work for you: You should not use every new technology just because it is new.
Use the options of new media to adjust the time for feedback of requirements of your work situation.
Career development of professionals in flat hierarchies is a challenge faced by knowledge-based

companies. On the one hand, these companies have very few levels of hierarchy and on the other hand not
all the specialised employees are interested or suitable to undertake management functions. There is a
growth option towards middle level management for those employees, who wish to take up management
positions and are capable of holding it. Generally, growth is possible after hard – but not necessarily
uncooperative – internal competition, regular performance evaluations and feedbacks.
Fast growth is possible only when the company grows proportionately. Hence, growth inside the
knowledge firm is connected very closely to the rate of the growth of the company.
Highly qualified researchers who do not aim at management functions or whose specialised
competence is too valuable for the company to place them in management positions, can opt for a separate
expert career and can be drawn close to the status of the upper-level management in terms of their
compensation or competencies. In hierarchical companies, a chief department manager requires a specific
number of employees or a certain budget to be able to rise to this position. This «head count» is not
applicable to a knowledge-oriented company. Along these lines, the World Health Organisation, for
example – an otherwise hierarchically organised body – has opened up career options to their qualified
experts, other firms create positions of «chief scientist» or «chief technical advisor» ranking at upper
management levels.
Personnel development
With perspective: lateral thinkers instead of upward climbers. 2 What does career actually mean?
– If one asks you,

– If one takes your advice,
– If one gives you information,
– If one has trust and confidence in you,
– If one gives you lot of space,
– If one gives you responsibility, then
– You have made a career at the firm.
In short, when you are in demand among customers and colleagues.
Despite all these retention efforts, companies continue to lose qualified employees. However, there are
ways of losing the employee without losing their knowledge completely. Knowledge-based companies
should ensure that professionals pass on their knowledge to team colleagues and save their information
continuously in the information system of the company, pass on their knowledge in company’s internal
competence networks and familiarise new employees with the work and coach them.
In ◘ Fig. 4.6, you find functions and roles of professionals. Based on these elements and according to
the priorities and time allotment, we have created a target profile that can be compared with an actual
personal profile.
Fig. 4.6 Functions and roles of professionals
4.3.5 Information Brokers and Infrastructure Managers

The development of the knowledge firm and digitization gives rise to a new group of employees (a specific
group of professionals) who operate the information and communication system of the company both in
terms of content and technology. This group ensures that ICT technology and relevant applications support
knowledge work (see 7 Chap. 7). While the technical operation of the information and communication
system can be assigned partly or entirely to an external service provider, managing critical content should
be carried in-house.
Knowledge of experts must be codified and stored. Journalists edit project reports to make them
understandable to a third party. The knowledge of competence networks should be stored in a structured
form and made available round the clock throughout the world. Expert systems and E-Learning units
require constant updating.
Social software such as wikis and blogs require co-ordination and often editing support. Information
«brokers» motivate colleagues to contribute content like writing wikis for important topic areas.
Furthermore, research is getting more and more complex and needs to be carried out in very short
intervals. The client, the prospective customer or the senior employee expect to be informed quickly and
comprehensively about a subject area. Simple research can be conducted by the end user himself on the
internet or through the company’s internal high-capacity search engines. In contrast to this, complex
research or selective search requires specific information or information experts who carry out a search
professionally.
4.3.6 Support Employees

It is often said that offices, communication centres and secretarial pools will become unnecessary
following the improvements in information and communication technology. This might be true in drafting
simple texts or routine data analyses. On the other side, there is a rise in demand for quality of
presentations, updating content on the intranet, setting-uo collaborate workspaces, conducting information
research and answering customer queries.
Hence, back office support gains importance with an increase in the variety of functions. A good
command over text processing, graphical presentation and use of software tools as well as complex
communication systems is a part of general qualification requirement of these employees; professionals,
increasingly working under tight time constraints and with constantly changing tasks, become increasingly
dependent on back office support to complete routine tasks.
4.4 Motivating Knowledge Workers

4.4.1 Extrinsic Versus Intrinsic Motivation
Motivation is an often discussed and controversial issue in theory and practice. Current thinking based on
advances in neurological research argues that motivation means creating enabling conditions that reinforce
personal motives and thus make people contribute and in a positive case give their best to achieve the goals
of the organisation as long as they are in line with personal goals.3
In this respect we have to understand the difference between intrinsic and extrinsic motivation.
Extrinsic motivation functions via an indirect satisfaction of needs, mainly through factors like money
or power. In this case, achievement of organisational goals is linked with monetary or career boosting
incentive systems for the employee.
Against this, intrinsic motivation underlines the aspects of direct fulfilment of needs. Intrinsic
motivation may be rooted in the joy of doing the work itself or in a perceived commitment. Commitment
may result from a self-commitment – e.g. due to personally defined goals – or from commitment to other
people, groups, or the society as a whole.
As a rule, the ideal incentive system for intrinsic motivation is the work itself, along with freedom and
conditions which help establish a personal identification with this work and with the existing values. These
three challenges are central in this context:
– Intrinsic and extrinsic motivation cannot be generated and changed to the same degree in every person.
– Intrinsic and extrinsic motivation cannot be considered independent of each other.
– Intrinsic motivation needs not be in line with the goals of the organisation and is very difficult to change.
Pink (2009) has identified three key factors that drive motivation in humans. These are the quest for
autonomy, the innate desire for mastery and the need for purpose. These drivers are strong in knowledge
workers. Therefore management styles that support autonomy, mastery, and purpose are required to enable
a significant shift in the performance and productivity of knowledge workers. Carleton (2011) suggest for
the retention of knowledge workers giving them attention, providing challenging work, offering
developmental opportunities, providing appropriate resources, placing them in a supportive environment,
and recognizing their contributions.
◘ Table 4.2 describes important extrinsic and intrinsic work motives and incentives that support
them.
Table 4.2 Work motive and incentive
Work motive Incentive

Extrinsic work motives Material and status related incentives
Money Salary, bonus
Security Pension, loans
Prestige Status symbols
Intrinsic work motives Options to interact and personal development
Contacts Belonging to the professional community
Performance Feedback about one’s own performance (e.g. by appreciation and constructive critique)
Self-realisation Independence (e.g. flexible working times empowerment)
Work motive Incentive
Learning options through challenging activities
Good working conditions
Job rotation, job enlargement and job enrichment
While traditional forms of performance related payment is largely based on the extrinsic motivation,
the intrinsic motivation gains importance when it comes to sharing and developing knowledge. An intrinsic
motivation compatible with the objectives of the company is necessary for promoting the transfer of
knowledge. With regard to knowledge development, one can say that the creative activities rest largely on
intrinsic motivation.
Learning processes in particular are boosted by intrinsic motivation («I learn because I like the topic»
as opposed to the extrinsic motivation «I learn because I get something in return»).
While designing a knowledge-oriented incentive system it is to be borne in mind that every employee
is a knowledge source for the company and it is essential to motivate him/her through individually
configurable incentive systems for knowledge objectives and objectives of the company.
4.4.2 Motivating Knowledge Workers

How can well-trained professionals be motivated? Initially through a task or varying tasks that challenge
their specialised knowledge and give them a chance to grow. The practice of assigning young employees
with easy routine jobs at the beginning is disastrous from the knowledge viewpoint. Accomplishing
challenging tasks leads to learning and a demonstration of competence which is motivating. Recognition
from customers as well as from experts with higher qualification is generally considered as a very
important motivational factor (Sveiby 1997; Maister 1993).
A further source of motivation is enabling advanced learning. From an employee perspective, an
opportunity to participate in a highly rated seminar (thanks to his/her outstanding performance) or to train
under the guidance of top experts in his/her field of specialisation is of much more value than an increase
in the salary.
Another motivational factor is efficient work equipment and a stimulating office environment. This
relates to an open information culture as well as workplace lay-out and equipment such as a high-
performance computer or a laboratory that eases the work of a specialist on the one hand and accords a
certain status among colleagues on the other, because traditional status symbols loose importance in a
knowledge-oriented company.
Monetary rewards, naturally, continue to be yet another motivational factor. Incentive systems (e.g.
share options) that are based on the success of the entire company can stimulate a positive behaviour and
be supplementary to incentive systems designed exclusively for individuals (For more details see ► Sect.
4.4).
There are a number of options for promoting teamwork directed towards the interest of the entire
company. One such option is paying the employees as a group instead of paying them individually. This
compensates the success of the group and not the individual performance. Furthermore, there is an option
of connecting a significant part of the salary to the success of the entire company. This is particularly
important for the upper level management. For instance, in General Electric over 22,000 employees at all
levels have share options in the company and thus a clear financial incentive to have the overall success of
the company in view. Thus, the support of the colleagues in the same or in other business units contributes
simultaneously to the improvement in the entire situation of the company. The rewards from the shares are
often significantly higher than the bonus that is linked to the performance of the individual business unit. A
number of companies have abolished the individual-oriented bonus systems and award fringe benefits
depending on the results of teams, units and the entire company. Even improvement suggestions can be
arranged keeping the group in mind. Thus, the employees are motivated to work on and implement the
improvement suggestions together.
Example
Nudging to reinforce knowledge sharing and collaboration
Developed by nobel prize winner Richard Thaler “Nudge” theory is a concept in behavioural
economics which proposes positive reinforcement and indirect suggestions to try to achieve non-forced
compliance to influence the motives, incentives and decision making of groups and individuals (Thaler and
Sunstein 2009). Nudges should appear when people are open to making a change. They should be
connected to small steps that are easy to take and reward people’s accomplishments rather than point out
their shortcomings. Nudges are more successful when there’s a plan behind how they’re used, they’re
social, they hold people accountable in some way — but don’t penalize them — and offer small incentives
for reaching intended goals.
Mobile devices, enterprise social network tools and other workplace apps have made it easy to deploy
such digital nudges to encourage behaviors that benefit both employees and the organization. Companies
are using nudges to reduce absenteeism, increase productivity, incentivate competence development
improve communications, meet individual and team objectives, and boost performance in other ways. To
nudge share knowledge so called “micro kitchens” were introduced by Google to increase knowledge
transfer amongst knowledge workers in an easy and pleasant way (Ebert and Freibichler 2017).
Sources: Thaler and Sunstein (2009), Ebert and Freibichler (2017), ► http://www.talenteconomy.io/
2017/08/24/digital-nudges/
In case of «Management by Objectives», the targets are agreed upon between the seniors and the
coordinators, the responsibility of every individual is defined in form of results expected from them and the
result is measured based on the «target-actual» comparison. Extending the target catalogue by individual
knowledge objects is called as «Management by Knowledge Objectives». Here, the operative and strategic
knowledge objectives are the source of agreements on objectives. These objectives can be directed not only
towards the enhancing personal competence but also towards passing the knowledge further (e.g. briefing a
new employee about work). Qualification objectives are measured and adapted periodically. Employees are
encouraged to participate in the development of objectives.
A firm has integrated incentives – in form of bonuses – into agreements on objectives. For this purpose,
knowledge required for certain tasks was defined in «skill blocks». A successful completion of a «skill-
block» leads to an increase in the salary. For this, the employee has to take a test that is assessed by seniors
and colleagues who already have a command over these skill blocks. This incentive system resulted in an
increased flexibility and improvement in the work processes.
Another version of objective agreements is the integration of knowledge objectives in the work process
which is then linked to payment. In case of a consulting firm, the performance of the advisor is evaluated
based on five categories, one of them being «contribution to the knowledge of the company and its
benefits.» In another company, a part of the salary of an individual employee is ascertained based on his
activities to share his knowledge (e.g. lessons learned). Even the employee appraisal or the periodical
employee discussion has a place for creation and transfer of knowledge. A management consultancy has
developed these questions related to the topic of dealing with knowledge resources.
Knowledge and competence related criteria for employee appraisal
– Employees are asked the following:
– What have you done in the last year to increase your own competence?
– How have you contributed to the further development of the knowledge base of the company (e.g. by
cooperating with networks, inserting presentations in the information system, by presenting project
reports, project profiles etc.)?
– In addition to the above questions, the management is asked the following:
– How have you encouraged your employees to build up their competence?
– Have you managed to increase the revenue per employee?
– Have you contributed to innovations, to improve processes or to build new business areas?
The integration of knowledge related criteria into employee appraisal ensures that the employees are
retained in the long run to generate and share knowledge in order to develop themselves in the company.
However, this also means that «career» has gained a new definition that is based on the recognition of
professional and social competence. Appreciating the know-how in a certain field is an important incentive
for strengthening the intrinsic motive. At the same time, the belongingness to a social group is connected to
this appreciation. The common engagement in trade unions, trade organisations and honorary office shows
the effectiveness of motivation by appreciation. The option of presenting oneself as an employee with
one’s own homepage in the intranet, a competition of the documents downloaded from individual
homepages are the options of rewarding the involvement in sharing the knowledge.
For example, a company has installed a «Virtual Knowledge Centre». The documents of which that are
used most often are published in a «hitlist». The advisors who have placed the highest ranked case studies
have the option to participate in the annual event of «Knowledge Centre Conference».
For a knowledge worker, time is becoming more scarce day-by-day. Sharing and developing
knowledge can therefore be rewarded by giving time and space to the employees. The option to take a
vacation for half a month, to attend an MBA program or «10% of total work time at the employees’ free
disposal» can be stronger incentives than payment and promotions. Employees are motivated by the option
of working in a project team with the leading experts, solving complicated problems, making technical
advances in their field, freedom of searching new solutions, well-equipped work places/laboratories and
appreciation of their performance.
The «fun» incentives that supplement the formal incentives are useful for creating awareness and
motivation for knowledge management. Following this, a consultancy firm launched the «sharing
knowledge earns you miles» initiative that was used by a number of companies ever since it was coined
(see also Box «gamification» on 137).
If a company succeeds in developing in enabling conditions required for leveraging the motives of its
employees, the «motivation spring» is twisted in the right direction. High motivation leads to higher
productivity and quality of work that in turn leads to success in terms of customers. This success results in
the success of the company which in turn is reflected in generous compensation in form of further training
options and career development.
Case Study
The Company Breakfast
In order to establish an open exchange of information as a component of the company culture, a
manufacturer of optical and electronic equipments has introduced a regular practice of a common breakfast
of all 150 employees approximately four times a year. There is a name card for each employee. These
name tags are mixed like playing cards and distributed on the tables of the canteen randomly. Thus,
employees from different departments and hierarchies sit together. Thereafter, over the course of the entire
breakfast, the company management gives information about different topics like current business
situation, new interesting projects, personnel changes or internal and external problems and gives an
insight into the future. In turn, the employees are requested to ask questions, bring forth problems and give
suggestions to the management.
Case Study
«Sharing Knowledge Earns you Miles» – Initiative of a Management Consultancy
Consultants are often under enormous time pressure and therefore, are often not completely willing to
spend time on documenting and passing on their knowledge. Apart from the comprehensive incentive
systems of the company, playful incentives can contribute in creating awareness about transfer of
knowledge. Hence, analogous to the miles collection of airline companies, the «Sharing knowledge earns
you miles» initiative was launched in one of the branches of the management consultancy. The message
conveyed by this initiative can be articulated as follows:
We want to motivate you to share knowledge, offer help to your colleagues and contribute successful
concepts and lessons learned from project work. In order to achieve this, we want to find the «knowledge
leaders» in our organisation, i.e. the employees who transfer knowledge actively to others.
The rules: Every quarter, you receive 50 points which, if you wish to, you may distribute among the
colleagues who have supported you. Every employee thinks about the following questions: Who has
helped me actively in solving a problem, shared his experiences with me and particularly encouraged the
creation and transfer of knowledge in our company? At the end of the quarter, you send the distribution of
your points to the miles office through email. Colleagues considered for the points collect these points in
their miles account and can pick up a gift from a range of gifts depending on the number of miles (e.g. top-
class seminars of their choice, including seminar fees and travelling expenses). The redemption of «miles»
should contribute to further creation of knowledge leaders.
Case Study
Gamification: Get Employees to Share Knowledge and Expertise by Making Fun
Gamification is about taking the essence of games – fun, play, transparency, design, and challenge –
and applying it to real-world objectives rather than pure entertainment.
Over the past several years, companies like Samsung and Nike have added gamification to their
consumer websites to get customers to engage with them and take certain actions – anything from buying a
particular product to answering questions in an online forum. Now, firms are starting to apply these tactics
internally to motivate their work forces.
The major gamification factors can be classified into the following aspects:
A Scoring System where points are awarded for completion of tasks and accumulate over time. A
progress bar which shows how close a user is to completing a task once the bar is full, the user is awarded
a certificate or a badge as a token for achievement. This is reflected in the contributor’s profile and
signifies his expertise in a particular area. He/she can also appear on a public score board that displays the
«Top 10 High Achievers» points tally which in itself is an award. The contributor can also be assigned a
level which may signify a users’ proficiency in the area such as beginner, intermediate, advanced.
Gamification has a potential for increasing user generated content and engagement which enhances use
of knowledge management systems by employees within organisations. Some examples are Deloitte and
Accenture. Deloitte has successfully implemented gamification with applications such as Yammer and
Badgeville. At Accenture – a management consulting, technology and outsourcing company – gamification
techniques are being deployed to, quite literally, «change the game» when it comes to encouraging and
empowering its people to collaborate and share with one another across its global network of more than
250,000 employees. According to Gartner, gamification is «positioned to become a highly significant trend
over the next five years,» with more than 70% of Global 2000 organisations set to have at least one
«gamified» application by 2014.
Source: Stieglitz et al. (2017), Palmer et al. (2012), Rosenbaum (2012), APQC (2013)
4.5 Competencies for the «Intelligent Firm»

4.5.1 Managing Talent and Competencies
In a knowledge-oriented company management of competencies goes beyond the traditional concept of
training. It includes self-learning, taking responsibility for one’s own competence portfolio, using and
marketing the competencies (see ► Sect. 4.6 Communities of Practice). This will be clear when we see
typical problems that can be solved using competence management.
– Project staffing based on competence: We often assign projects to employees that we know, without
knowing whether there are even more suitable colleagues. The «competence profiles» that describe the
competencies of an employee offer the option to identify suitable employees for the project.
– Identifying competency gap: Imagine you have come from a strategy workshop and would like to realign
your business units. You ask yourself questions – «Do my employees have the competencies necessary
for the future alignment? How can we impart selective training to the employees or which profiles
should we hire?» Increasing the present competencies, deriving the necessary competencies as well as
the «actual-target» comparison enables us to take appropriate measures.
– Passing on knowledge across employee generations: Highly specialised employees work in the
development, production, sales and IT department. The firm often does not know what individual
experts know. The value of the knowledge that is lost becomes clear only after these employees have left
the unit or firm. A customer complained that she is no longer advised as before, there are unexpected
problems in the production process or crucial technology know-how is not available. Competence
descriptions help identify the «hidden experts» to pass on knowledge to the employee generations.
– Career by developing competence: In flat hierarchies, it is often not possible for the employees to make
a career by climbing up the greasy pole or promotion. Yet, we can offer a long-term development
perspective and retain qualified employees in the company by means of competence extension and
consolidation. The agreed development is incorporated in target agreements as well as appraisal and
incentive systems.
– Finding competent contact person: Very often the company is on the look out for a particular
skill/profile and is confronted with questions like-who is good at database programming? Who can help
me quickly with the supply and knows the customer? Who is an expert on US accounting in our
company? We can locate expertise quickly using «skill databases» and take measures. Software solution
of «skill based routing» can be used for this purpose to reach out to a wider circle.
– Evaluating training needs and effectiveness: A training provider serves many small companies with the
function of determining training requirement of the employees and structuring a specific program. The
training department within the company has a similar function. Employees often register for seminars
without finding out how such seminar would contribute in developing their competence or of the
working group. How can training needs be assessed and training effectiveness evaluated systematically?
How can the employees manage their own «competence portfolio», especially if they change the
companies more often and wish to increase their «employability» in the market?
The answer is provided by mapping a company’s competence requirements of jobs with competence of
existing employees. After assessing this, improvements in performance and changes required in behaviour
can be evaluated.
4.5.2 How Does Your Organization Deal with Competences?

In the short analysis that follows, you can evaluate the competence management of your company by
means of eight criteria.
A good approach to raise awareness would be to copy and distribute the form given below among your
colleagues in order to discuss the results subsequently and answer the following questions:
– How different was the categorisation?
– Where was the maximum difference in grading?
– Where do we see the biggest obstacles towards a competent organisation and which measures should we
take?
– What can each of us contribute to ensure that the required competencies are developed and the existing
competencies are used optimally?
Grade each point according to the school grades: from 1 = very good to 5 = unsatisfactory.
Short Analysis: How does your organization deal with competences?

No competence management 5 4 3 2 1 Systematic competence management
1. Core competencies are not defined Core competencies are defined and updated regularly
2. Employees do not have a competence profile Employees have a competence profile for core processes,
core functions. Profiles are updated regularly
3. Competence development is not interconnected with human Human resource development is based on a systematic
resource development competence evaluation
4. In case of time pressure, learning and advance training must Learning has a high priority (time and budget for every
take a back seat to operative functions employee provided)
5. Informal learning at work is not recognised Informal learning is supported with suitable measures
(Coaching, mentoring, etc.)
6. There are no development plans for individuals Individual development plans are implemented consistently
7. Training and application are not interlocked Training is always connected to the application
No competence management 5 4 3 2 1 Systematic competence management
8. Employees do not get incentives for developing competence Competence development is supported consistently by
incentive systems
4.5.3 Developing Competence

The objective of learning of knowledge workers is to develop professional skills and competencies.
Knowledge, experience, intuition come together in concrete situations that require action. Competence (or
competency) is therefore the capability to act adequately in a given situation. This includes the capability
of self-organisation. Competency comes into effect in the interplay of individuals, groups and
organisations.
Competence materialises at the time of knowledge application and can be measured with the result
achieved from the action («performance»).
Definition The term competence of a person or a group describes the relationship between the tasks
assigned to or assumed by the person or the group and their capability and potential to deliver the
desired performance. People mobilise knowledge, skills and behaviour to «do the right thing at the right
moment».
The competence of a person encompasses a combination of skills and behaviours to carry-out a task
(interpretation of a piece of music). Competencies embrace several skills. A skill is an ability that is
learned and practiced for a period of time (playing violin). In contrast, a talent is defined by resources as
the ability by a person that is inherent, inborn, or naturally occurring. A talent is said to be a special ability
to do something without prior experience, study, or tutelage (e.g. musical talent). Because it occurs
naturally, a talent is also seen as raw ability which can be developed and improved over time with direction
like instruction and training.4
The typical components of a competency-based approach are as follows (Draganidis and Mentzas
2006):
1.
Identify the desired results: Which output or result is desired for a «successful» completion of a role or
a job?
2.
Describe the competencies that truly have an impact on results based on a competency model.
3.
Evaluate employee competency using a competency model and grade the level of proficiency. Usually
one would combine self-evaluation and peer–to-peer or rating by a superior.
4.
Implement employee development strategies and resources to close the gap between real and desired
competency level.
The more unstructured a job is and the more freedom knowledge workers have to reach their goals the
more difficult is it to answer the question «which competencies are required in a specific job or role?» as
people with different sets of competencies might achieve similar results.
For each of the competencies a description and proficiency level need to be formulated. For the
purpose of structuring commonly competencies are categorised in «hard» and «soft» where technical and
functional competencies are considered as hard competencies whereas creativity, interpersonal, and
behavioural skills are soft competencies. Other frameworks classify competencies into functional,
managerial, methodological as well as social and personality related competence (cf. Janjua et al. 2012), in
reality these competencies interact and are difficult to separate.
After describing individual competencies, the level of each of the competencies should be evaluated.
Different expertise models are recommended in the literature wherein the three tier evaluation of
professional and method competence has established itself in reality.
Beginners have theoretical knowledge with less experience of application of such knowledge and are
able to use the pre-structured solutions of problem in theory on real problems (e.g. project management
course was conducted successfully and the first experience of executing project was collected).
The proficient have multiple experience in application and can react appropriately even to new
unforeseen situations (e.g. multiple projects of different complexities were carried out at one’s own
authority).
Experts are capable of anticipating problems to a large extent by means of self-organisation and
intuition. They are also capable of solving such problems. They stand out through profound knowledge of
topics (e.g. managing complex and novel projects, contributing to further development in methods of
project management). Further nuances are possible depending on the desired degree of differentiation.
Social competence can be gauged with the levels such as «less distinct», «distinct» and «more distinct».
Various Methods of Competency Development

Knowledge workers use various methods of competency development.
Mainly, the execution of new challenging tasks is a motivation and an opportunity for learning. The
challenge for highly differentiated knowledge work is to be able to better integrate learning and work. The
opportunities offered by e-learning and blended learning approaches support this.
The time consuming activity of following knowledge domains through newsletter subscriptions,
observing technical portals, or reading through technical journals can be better organised. Colleagues can
mutually assign topics and exchange knowledge periodically; for instance as a recurring item in the agenda
of regular meetings. Initiatives such as «colleagues learn from colleagues» support this sort of mutual
learning. This can also foster learning across professional groups.
Coaching and supervision help knowledge workers reflect upon their learning process and reflect self
and peer assessment. In the predominantly individualistic cultures of many professional circles, there are
barriers to open up to colleagues and superiors. Coaching and supervision can provide personal support
and also allow for taking individual learning to group learning sessions.
A fantastic form of combined learning is possible in projects where new interdisciplinary questions are
tackled. Team members gain experiences which are of great value for the members themselves and for
future teams with similar questions. In a process of self-reflection, every team has to summarise all the
critical experiences gathered and what future teams with similar problems must pay particular attention to.
Often different perspectives emerge only in such reflection sessions, which can thus prove to be a valuable
source for participants to evaluate their own work.
Under the point «lessons learned» we urge organisations to more frequently revisit the experiences and
learning experiences from their successes as well as from their failures. Lessons learned represent the
essence of all experiences that were made during a project or in a particular position. In order to make
adequate use of lessons learned, there should above all be a suitable framework for recording them.
What are your objectives for competence development and how do you want to achieve it?
Case Study
Career in the CSC World: Become More Precious
In the service model of an organisational unit, the service know-how that is offered is presented in
segments of a circle. This «competence wheel» describes the know-how of an employee and his/her know-
how careers in the medium term (earn more during stability phase). The segments of the service model
stand for the service spectrum that is relevant for the respective organisational unit with key elements from
industry and technology. Thus, the main features of the fields of activity that are to be observed by the
employees are documented. Simultaneously, it is shown which topics should be covered. One such sheet is
a component of all the documents required for an employee review and is used to discuss medium-term
career planning. Information on the segment wherein an employee works at present and the segments
wherein he is supposed to go through in the next 3–10 years is also documented. This concept of personal
development will promote not only multiple qualifications but also creativity, initiative, ability to learn and
the courage to try new things (◘ Fig. 4.7).
Fig. 4.7 Branch competence and technical competence (Source: Guidelines for junior advisors in the brochure of CSC Ploenzke AG)
Case Study
Dare2Share
In a survey of staff, British Telecom (BT) found out that 78% of its engineers preferred to learn from
their peers, but to date, very little money or attention had been focused on affecting and improving the
learning and development that naturally takes place in the workplace. Following the survey, BT replaced
much of its traditional formal training programmes for its engineers with a social media, contribution-
based platform that they called Dare2Share. The company deployed a YouTube-like platform that allowed
engineers to pull learning content, in the form of content contributed by other engineers, when they need to
do so. The overall outcome has been an increase in sharing and network building, faster problem
resolution, lower costs and the replacement of off-the-job training with performance support.
If you want to know more about BT’s Dare2Share visit ► http://www.youtube.com/watch?
v¼gtVYkEdGtfo.
4.6 Communities of Practice: A Learning Approach

4.6.1 Understanding Communities
Value creation in a knowledge-based organisation and beyond the limits of that organisation is determined
considerably by the ability to mobilise the shared knowledge across markets, customers, products and
processes with a specific purpose and generate a value out of it for customers.
However, traditional and formalised structures of hierarchy and business units are equipped
inadequately to perform such functions. Hence, self-organised communities that take initiative, learn
together, share experiences or develop new products and services thus overcoming the boundaries of
hierarchy and organisational units gain importance. Innovation circles, experts, groups become
increasingly popular.
Case Study Knowledge Communities at MindTree
MindTree is a mid-sized Indian IT services company known for its knowledge management practices,
its collaborative communities, and its strong culture and values. From the beginning, MindTree has
considered communities as all those self-organised groups which take on a mission. They don’t appear on
the organisational chart and they don’t report to anyone. Yet, they are driven by their self-defined
objectives. These could be focused short-term goals (for example, building a software component) or
broader, long-term goals (such as building capability in a domain).
At MindTree, communities with long-term goals are called «knowledge communities». The company
has more than 30 of them and they are highly visible, while others with short-term goals use the available
infrastructure, but are not tracked in the same manner as knowledge communities. «Overall, communities
create the fractal structure – and the feeling of belonging – that keeps smallness alive,» says Datta.5
The various forms of learning and exchanging knowledge are discussed under the terms «Communities of
Practice» (Wenger 1998a, b) or learning communities, or knowledge communities.
Definition Communities of practice are groups of people who share a concern, a set of problems,
or a passion about a topic, and who deepen their knowledge and expertise in this area by interacting on
an ongoing basis. (Wenger et al. 2002, p. 4)
Communities of practice have a range of functions for procuring, accumulating and distributing knowledge
in the organisation and beyond the boundaries of the organisation (Wenger 1998a, b; Wenger et al. 2002):
– They are nodes for the exchange and interpretation of information. Since the employees involved in
communities of practice have a common understanding, they know which information is relevant and
can be passed on and how it can be presented in a useful manner. From this point of view, the
communities of practice are also ideal for spreading information beyond the boundaries of the
organisation.
– They can keep knowledge alive unlike databases or manuals. The tacit elements of knowledge are
maintained and passed on and adapted to the local terms of use. Thus, these communities are also ideal
for inducting new employees, educating them and sharing experiences with them.
– They help develop competencies further and bring about the latest developments in the organisation.
They are often faster and less clumsy than the business units. The feeling of getting into the act at the
start of latest developments gives an identity to the members of communities of practice.
– They are a «home» for identities. In times when the project, short-term teams and allocations to the
business units change faster than ever, the communities of practice build a long-term professional
identity for their employees. In flat hierarchies, the communities of practice build a space for
experimenting and learning in which the employees can often exchange ideas.
According to Wenger, the approach of situational learning or social learning becomes important in
contrast to a traditional view of learning and advanced training in the company:
Our institutions, to the extent that they address issues of learning explicitly, are largely based on the
assumption that learning is an individual process, that it has a beginning and an end, that it is best
separated from the rest of our activities, and that it is the result of teaching. Thus, we learn in
seminar rooms and organised computer-aided training programmes with individual sessions. We
test the success of teaching by means of individual tests. Wenger argues that as a result a huge part
of our institutionalised training and advance training is considered as boring and irrelevant to
practical application (Wenger 1998a, b, p. 3).
In contrast to this, the basic assumptions of the social and situational learning define learning as a
group process that is not restricted by time and takes place unknowingly to some extent. Learning takes
place in the context of activities. Instead of directing training primarily towards abstract process
descriptions, learning involves handling situations together (e.g. meetings with customer) and discussing
how one can improve these situations or even sharing experiences. Situational learning or social learning is
based further on a variety of forms of teaching and learning as close as possible to the environment
experienced by the one who learns and the one who teaches. The following checklist provides ten factors
of success of CoP. In the following we will discuss in more detail how to ensure that communities create
value for its members and the organisation.
Checklist
CoP − 10 Factors of Success: How Do Your Communities Perform?
– Management Challenge
1.
Focus on topics important to the business and community members.
2.
Find a well-respected community member to coordinate the community.
3.
Make sure people have time and encouragement to participate.
4.
Build on the core values of the organisation.
– Community Challenge
5.
Get key thought leaders involved.
6.
Build personal relationships among community members.
7.
Develop an active passionate core group.
8.
Create forums for thinking together as well as systems for sharing information.
– Technical Challenge
9.
Make it easy to contribute and access the community’s knowledge and practices.
– Personal Challenge
10.
Create real dialogue about cutting edge issues.
Source: Richard McDermott ► http://www.co-i-l.com/coil/knowledge-garden/cop/knowing.shtml.
4.6.2 Ideal Type of Communities of Practice

We need a vision or guiding principle to launch communities of practice. North et al. (2000) have
identified the features of an ideal type of community of practice from their personal experience with a
number of knowledge communities.
Ideally, a community of practice is a community of people:
– Who wish to cut through a topic
– Who consider themselves to be teachers or students
– Who open themselves completely to a topic
– Who let others express their beliefs and experiences
– Who talk openly about mistakes and failures
– Who have enough time and space for sharing this information
– Who protect each other
– Who do not cling to the existing concepts and are open to think about new things
– Who listen to each other and try to understand each other
– Who do not wish to enter commercial competition with their knowledge
It seems to be plausible that such communities of practice can be effective only if they are embedded in
a nurturing organisational culture. Therefore, the following four framework conditions are the essential
components of a typical community of practice:
– The inner values of the organisation, inculcated in the members of the communities of practice, should
be as follows: trust, openness to new things, individual responsibility, authenticity (of one’s identity) and
so-called «boundary-less behaviour», i.e. a behaviour that encourages teamwork beyond the boundaries
of organisational units. Communities of practice will not flourish in a command and control culture.
– A balance between short-term, medium-term and long-term results: If we think about the events in the
ecology, we can also formulate a balance between sowing and yielding. Predominantly short-term
company objectives and short-term objectives of the communities of practice mean that we want the
yield too soon without having sowed enough. The controller breathes down the neck of the researcher
with a deadline. This appears to be a problem in many real research groups and competence networks.
– Incentives for common activities: Regulated communities of practices rarely prosper. The comparatively
stable factors in such communities are a shared interest for the selected domain or shared values that can
be followed or transported using the content of the communities of practice. Opportunism and
differences in interests are bad starting points for working together in a domain. Incentive should never
be searched in monetary form. However, many companies have introduced incentive mechanisms that
are highly successful and motivating. (cf. ► Sects. 4.4 and 7.3).
– Balance between implementing and experimenting: Finally, companies should put the knowledge of the
communities of practice to a practical application and incorporate it in the value creation process. But
what could be a solution that can be realised? A visible product or a document? What about the
participants’ learning experience which is used in several other activities? Leonard Barton (1992) has
shown the importance of experimenting to generate knowledge. This can mean that the communities of
practice get resources for pilot applications and implementations. Thus, while restructuring the exchange
of information in a company it was ensured that the members of the research groups comprised experts
as well as members from the management who were competent to take decisions for implementing the
targeted results.
Case Study
Two Examples of Communities of Practice
Case I: Sharing tipps and tricks
In a work analysis, a manufacturer of a photocopying machine found that the customer service
employees spent a considerable amount of time chatting with each other in the warehouse or kitchen and
not with the customers. A traditional rationalisation measure would have been elimination of this time so
that the employees could focus only on the customers. However, the anthropologist who conducted the
analysis found that the chats provided a forum to exchange important knowledge about improving
maintenance or tips on techniques of repairing. Hence, the company encouraged this exchange by
establishing framework conditions for communication among the technicians even when they were in
transit. Thus, a second frequency was installed in the radio of the technicians which turned into a
knowledge channel. The French subsidiary established an information system in which one could enter
important experiences of the service technicians so that they could also be provided to other groups of
people (Brown and Gray 1999). This example shows that even self-organised informal groups can be
supported by the organisation.
Case II: TechClubs
A car manufacturer operates since 20 years with Tech Clubs that reflect the problems of car platform
structure. They are informal groups organised along disciplines like electronics or chassis. They take
responsibility for the further development of relevant knowledge, innovation and new skills. They have
provided a basis for and ensured success of the «Engineering Books of Knowledge» for reducing
development cycle time (a group of 60 for 30 months) and development cost. These tech clubs have
developed through different phases. In the first few years, the supervisors came together to discuss the
problems pertaining to certain parts, suppliers or new technologies. In the second phase, they tried to carry
the learning processes further by inviting all the engineers of a certain domain such as representatives of
purchase, scientific laboratories, etc. In the subsequent phase, the tech clubs took over more responsibility,
checked the plans for products and processes and recorded important knowledge in a Lotus notes database.
Today, these forms of generation and exchange of knowledge should be spread worldwide and encouraged.
However, the company is still searching for options to support these communities of practices all over the
world (Blair 1997; Karlenzig 1999).
4.6.3 Dimensions of Communities of Practice

Raj Datta of MindTree believes that KM and community movements are inter-dependent. The fact is, KM
will fail if you don’t allow people to channel their passions and the best way to do that is to let them self-
organise to create the right kind of conditions and enabling environments. The other fundamental shift –
psychologically speaking – is to believe that people are intrinsically motivated to share and don’t
necessarily need to be motivated by external factors.
The contexts for active communities of practice can be developed consciously. The MIEO-Model
shown in ◘ Fig. 4.8 comprises four dimensions (North et al. 2004): Members, interactive community,
effect (result), organisational support.
Fig. 4.8 Dimensions of communities of practice: the MIEO model
According to the model, the individuals – through interaction in the communities of practice –
contribute to a transformation of knowledge of the entire organisation and thus, change the value creation
process of the company. Some of the dimensions are directly controllable, e.g. the membership criteria or
the selection of people for communities of practice. Others can be influenced only indirectly by
establishing valid framework conditions, e.g. the motivation of the members of communities of practice.
We will now discuss the most important dimensions.
The «Member» Dimension: Challenging and Manageable Topics

The motivation for teamwork in communities of practice can be influenced indirectly by organising
contexts that are conducive. The commitment to the challenging quantitative or qualitative objectives of
the company such as «increasing the productivity of all the factories by ten percent every year» or
«increasing customer satisfaction» can work as short-term motivation for exchanging experience.
However, reasonable objectives that the groups of employees set for themselves and inspiring groups and
meaningful meetings motivate the employees for high and long-term commitment. How is membership
regulated in the communities of practice? Generally, the community of practice itself decides who can be a
member. A number of difficulties may result if the self-organised selection process is impaired from
outside in order to retain or retrieve «control». Members appointed by the management can easily become
foreign bodies that can damage the trust that has developed, bring in an unwanted sense of hierarchy and
damage the matured work culture. As CoP are learning instruments it is advisable to include members with
different levels of expertise and knowledge diversity be it functional experience (e.g. marketing, sales or
product development) or cultural experiences (e.g. languages, courses, hierarchy levels).
Based on their study of 45 successful CoPs of multinational companies Probst and Borzillo recommend
sticking to strategic objectives. They found evidence that setting clear and measurable objectives provides
COP members with a concrete direction to follow. Such quantifiable objectives limit COP members to
specific metrics (% of cost reduction, % of revenue increase, % of time reduction, increase in customer
satisfaction, etc.) that must be respected when they participate in the process of developing and sharing
best practices with other members. They also argue that classifying objectives into subtopics gives COP
members absolute clarity regarding the goals that a COP must achieve (Probst and Borzillo 2008, p. 338).
The «Interactive Community» Dimension

The work of the people in communities of practice is characterised by their interaction that can be
described in terms of intensity, communication form, atmosphere and identity.
The intensity is identified particularly by the frequency and duration of the meeting or contacts of the
members of communities of practice. The form of these contacts – e.g. regular personal meeting, video
conferences, and chat rooms on the internet or different seminars – determines the type of contact
alternatives and options and limitations in the exchange of knowledge.
The selection of the form of communication is decisive for the quality of interaction. The authors have
polled the members of communities of practice on the form of communication. The unanimous opinion
was that the personal acquaintance of members of communities of practice simplifies the subsequent
exchange through electronic media. The adequate form of communication is further dependent on the type
of the knowledge exchanged. The higher the exchange of tacit knowledge, the higher is the reliance on the
face to face personal communication. The higher the exchange of explicit knowledge, the higher is the
suitability to use the electronic media.
The interaction of people in a community of practice is further characterised by the atmosphere in
which they work together. For instance, a code of conduct that takes up the aforementioned rules of an
ideal type of communities of practice and defines the behavioural rules of the members can be helpful here.
Addressing each other with names and avoiding titles encourages an interaction at the same level.
Atmosphere also includes selecting attractive venues for meetings.
Apart from the corporate identity of a company, one can also support in building an identity of the
community of practice. Communities of practice can be given a space on the internet to showcase
themselves or they can develop their own logo. The community can develop its own language over a
course of time and perhaps even its own methods, rules and tools that mark the independent identity as an
outline from the rest of the organisation.
The «Effect» (Result) Dimension

Interaction between people not only involves exchange of knowledge but also creates new knowledge.
Communities of practice contribute in transporting knowledge to the company on the one hand and are
germ cells for new thoughts on the other hand. Many thoughts that are developed and shared in
communities of practice are not conveyed directly to the third party. A person who has not shared certain
processes has a tough time understanding their cognition. In many cases, the trust in the integrity of the
members of community of practice is given importance as against exact verifiability.
Parts of knowledge can be visualised, fixed and evaluated as result of knowledge transformation.
The questions at the individual level are:
– What have I learnt?
– What can I implement in my daily practice?
The questions at the level of communities of practice are:
– Which knowledge was created?
– Which parts of our work have the highest demand?
– How have we developed our common resources (methods, language, etc.) further?
– How have we contributed to the value creation process of the entire company?
This analysis helps to connect to the entire organisation or to a network with other communities of
practice.
The «Organisational Support» Dimension

The organisational support is decisive in implementing the knowledge for creation of value. This
dimension considers the criteria of level of formalisation, restriction and time frame.
While some authors see CoPs as widely self-organised entities which are not accountable to anybody
(Wenger 1998a) others argue that CoP must be tightly managed. Along these lines Probst and Borzillo
(2008) recommend having a sponsor and a COP leader who are «best practice control agents» and that the
COP leader must have a driver and promoter role.
The extent of formalisation of communities of practice ranges from complete «indefiniteness» to
recognised strategic meaning. Wenger (1998b) came up with five categories of relation to formal
organisation (extent of formalisation):
– Unknown: unknown to the entire organisation and to some extent even to the member of communities of
practice
– «Illegal»: visible only informally for a group of people in the environment
– Legitimised: approved officially as useful unit
– Strategic: widely known as centrally important for the success of the organisation
– Transformative: capable of redefining their surrounding and the direction of the organisation
The organisational support from the communities of practice is further characterised by its boundaries
or demarcations. Here, one should differentiate between communities of practice within the business units
and those that exceed the business units or organisational boundaries. Yet another factor is the geographical
distribution of its members. Thus, in terms of boundaries, we can differentiate between local, regional,
national, international and global communities of practice.
Another aspect of communities of practice is their demarcation from each other. In reality, the
communities of practice often overlap because no clear organisational limits are defined. For instance, this
applies to a community of practice that is oriented towards customer satisfaction and other communities of
practice that are oriented towards quality where customer satisfaction obviously constitutes the aspect of
quality. A conscious overlapping by twin membership helps prevent later conflicts in coordination. Probst
and Borzillo recommend forming governance committees with sponsors and COP leaders which discuss
and assesses the overall activity of the various COPs in their specific functional area of the organisation.
The following checklist allows the reader to plan communities for success.
Investigation Results
Why Communities of Practice Succeed and Why They Fail
(Probst and Borzillo 2008)
An investigation of 57 COPs from major European and US companies led to the discovery of ten
«commandments» that lead to the successful development and sharing of best practices. It also
identified five main reasons for failure.
The ten commandments of successful COP governance
1.
Stick to strategic objectives
2.
Divide objectives into sub-topics
3.
Form governance committees with sponsors and COP -Leaders
4.
Have a sponsor and a COP leader who are «best practice control agents
5.
Regularly feed the COP with external expertise
6.
Promote access to other intra- and interorganizational Networks
7.
The COP leader must have a driver and promoter role
8.
Overcome hierarchy-related pressures
9.
Provide the sponsor with measurable performance
10.
Illustrate results for COP members
The main reasons for failure of cops
1.
Lack of a core group
2.
Low level of one-to-one interaction between
3.
Members
4.
Practice intangibility
– There is an increasing international competition for talent.
– We witness the development of a «multiple-class knowledge working society» with different contractual
bonds with the company. The roles of upper-level management, middle-level management and
specialised employees have been redefined. Same applies to the functions of ICT employees and support
employees.
– The knowledge of the company is to a great extent located in the brains of its employees. The evaluation
of employee competencies and their targeted development are of great importance.
– Knowledge-based management of a company means creating motives and inspiring environments for
employees to convert their creativity knowledge to profit the company and their own development.
– Incentive systems are essential for aligning behaviour for sharing and developing knowledge.
– Knowledge workers increasingly work and interact in (social) networks and share their experiences via
communities. Companies should know how to support communities.
4.8 Questions
1.
What are the differences between intrinsic and extrinsic motivation? And which are the implications
for incentive systems?
2.
Please name at least five success factors of communities of practice.
3.
The need to share knowledge more broadly has increased as decision making has been pushed down to
more people within organisations. While sharing knowledge is important, simply opening the
floodgates is risky. Discuss.
4.
Which factors influence/determine knowledge worker productivity?
5.
List some important competences of a sales representative.
4.9 Assignments
1.
Making knowledge sharing happen
For 3 months you have been working in a consulting company. The firm has invited you to join a
working group to improve knowledge sharing. The company has an intranet platform, a number of
discussion forums and expert groups, but consultants keep important knowledge for themselves and
share only information which is not central to their activities. Particular senior consultants are reluctant
to share. They have been working for many years in their area of expertise, each of them has a
different work style, some think that they are better experts than their colleagues, some of them believe
that the firm depends on them and behave like this.
The working group is asked to analyse the reasons for this behaviour and to propose possible
solutions.
2.
“We have to have ideas”
The reason that we have to involve everyone in the process,’ says Dr. Geoffrey Nicholson, Vice
President, Corporate Technical Planning and International Technology Operations, 3M «is because we
can’t schedule creativity. We don’t know who is going to have a good idea. But we do know that to
have good ideas, we have to have ideas – the good, bad and the ugly. We must empower the individual
to pursue his or her dream to help the good ideas survive.»
You are asked to propose possible measures. Be inspired by examples of creative firms.
4.10 KM-Tool: The Skill or Competence Matrix
What is a skill or competence matrix?
A skill or competence matrix is a widely proven and suitable method for structuring, evaluating and
visualising the distribution of skill or competencies in a unit or a firm (an example is shown. in ◘ Fig.
4.9). It is also easy to apply SMEs.
Fig. 4.9 The competence matrix: who can do what and how well?
Why use a skill/competence matrix?

– The matrix shows were skills/competences are lacking or a unevenly distributed
– The matrix helps you to assess training needs
– By the matrix recruitment of new staff (which competences and skills do we need?) and succession
planning is supported
– A wider skill/competence distribution (multiskilling) increases the flexibility of the organisation.
How to create a skill/competence matrix?

1.
List tasks and skills/competences needes to carry-out these tasks.
2.
The employees and skills/competencies are placed together in a matrix (see ► Fig. 4.9). Thus,
you get an overview of the performance profile of your company. You can see whether particular
competencies are covered satisfactorily and plan the creation of new competencies systematically.
In a table, the skills that are typically found in daily work in the company are placed next to the
employees. You might structure skills/competences according to process steps, technologies,
language and social competences.
3.
Every employee does his/her own evaluation and in parallel the supervisor assesses the
competencies of collaborators. In an appraisal meeting evaluations of both sides are discussed and
unified.
You can read the competence profile of an individual employee vertically. If you see horizontally,
ou ca ead t e co pete ce p o e o a d v dua e p oyee ve t ca y. you see o o ta y,
4. you get an idea of how well the respective competence is covered in the company. Set minimum
standards. Depending on the size of the company, one or more employee should have top grades in
each competence.
5.
Knowledge gaps are formed if none or only one employee has top grades for a competence
category. If this person is missing, the efficiency of the company reduces because no employee can
fill in with matching skills. You should fill in such knowledge gaps. Create a goal for yourself: For
example, in my company, each competence category should have three employees with «+++» and
two employees with «++».
6.
You can extend the table by entering new competencies. The central question is, «which
skills/competences must be available in the company in one, five or ten years?» Subdivide the
objectives in smaller actions or necessary individual skills. You can set a deadline in the table for
these tasks. It would be useful to note down not only the name of the employees but also further
information such as cost centre, scope of work, activities or qualifications (for instance, ability to
operate certain machines, first-aid knowledge etc.).
7.
You can also use the table to set incentives for the employees. For instance, an employee who has
top grades in four competencies would get a bonus.
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Footnotes
1 7 http://en.wikipedia.org/wiki/Efficiency_wages
2 CSC Ploenzke information brochure.
3 An overview of work motivation research can be found at Latham and Pinder (2005), an overview over motivation theories can be found
under 7 http://www.goldsmithibs.com/resources/free/motivation/notes/summary%20-%20motivation.pdf
4 Cf. 7 http://www.differencebetween.net/language/words-language/difference-between-talent-and-skill/
5 Ash, Jerry, «Ideas Emerging», Case Report on Mindtree.

https://doi.org/10.1007/978-3-319-59978-6_5
5. Strategies for Managing Knowledge


Germany
A resource-based approach tends to place more emphasis on the

organisation’s capabilities or core competences. A knowledge-based
strategy formulation should thus start with the primary intangible
resource: the competence of peopleK.E. Sveiby (2001)
Learning Outcomes
– You will be aware of guiding principles for a successful KM
strategy;
– You will be able to develop a KM strategy guided by five
questions;
– You will know how to develop a «Best Practice» process;
– You can name the differences of KM strategies for process and
project oriented organisations;
– You will be able to run a knowledge market.
5.1 The Need for a Knowledge-Oriented Strategy

Typically most organisations develop their strategy around a well-
recognised business model. Therefore it would seem logical to map
Knowledge Management (KM) issues to a recognised business model. The
idea is to articulate the issues around business terms and not KM by itself.
KM should be seen as a set of concepts that could be tailored to meet
business needs (Dilip Bhatt 2000).
While talking about knowledge management in companies, we

should also see how organisational knowledge potential is converted
every single day into successful practices that increase market share,
strengthen competitive advantages and satisfy/inspire stakeholders.
(Deiser 1996, p. 49)
The question therefore is:

– How can organisations leverage past experiences to be able to cope with
today’s dynamic business environment?
– How can firms develop the competences needed to compete successfully
in the future?
– How can business strategy be driven by knowledge that can enhance the
quality of products and services and accelerate the time to market thus
giving the organisation a competitive edge. What we need is a sort of
mental clearing house where knowledge and ideas are received, sorted,
summarised, digested, clarified and compared.
A strategic knowledge gap analysis as shown in ◘ Fig. 5.1 might be

helpful to answer these questions and identify knowledge and competence
gaps to be closed.
Fig. 5.1 Strategic K gap analysis
5.1.1 Guiding Principles for a Successful Knowledge

Management Strategy
In developing a knowledge-oriented strategy firms should take into account
the following guiding principles which we have identified based on an
analysis of knowledge management initiatives:
– Total Knowledge Management: This involves integration of knowledge
management in all the business processes. On the lines of Total Quality
Management (TQM) which assumes that «there is quality in everything
we do», one could also talk about Total Knowledge Management (TKM)
in terms of creating, protecting and using knowledge in all business
processes. Knowledge management will have a lasting effect only after
one realises that «knowledge organisation» is an independent
organisational dimension with corresponding resources and processes.
However, just as a quality manager or an environment protection officer
is not solely responsible for quality and environment in a company, a
knowledge manager can take the responsibility of creation and transfer of
knowledge only to a certain extent. The principles of knowledge
management should be followed by everyone – be it inspirers, coaches or
sponsors of knowledge.
– Value-based knowledge management: Knowledge management should
be linked clearly to the objectives of a company. Generation of
knowledge, transfer of knowledge and «feeding» the information system
are not objectives by themselves. The purpose is not managing
knowledge, instead managing the company under optimum utilisation of
knowledge resource – adding value by knowledge. Value-based
knowledge management can be considered similar to value-based
management. From the viewpoint of knowledge management projects,
this means concentrating on few definite objectives.
– Personal interaction and codification: It is necessary to select the
suitable mix of personal interaction to share and learn and codification.
Knowledge management initiatives often debate whether knowledge
should be documented in databases or exchanged personally. Experience
shows that both options complement each other. It is advisable to
document knowledge that can be standardised, needs less explanation, is
reusable and has a long period of validity. Individual, specific and
complex solutions that are also based on personal relations or
experiences should be transferred personally. According to Hansen,
Nohria and Tierney (1999) you need to start by identifying what kind of
organisation you have and what your information needs are, and then
primarily focus either on a «personalisation» strategy (putting up
infrastructure such as Communities of Practice to help people find each
other and tap rich contextual information from other people) or a
«codification» strategy, where information is identified, codified, and
stored for later retrieval in some kind of effective information store.
– Knowledge has a market value: If knowledge is a valuable resource, it is
bound to build a market for itself. There are knowledge sellers and
knowledge buyers who operate through market balancing mechanisms
under certain conditions. In a traditional hierarchical company or a
bureaucratic organisation, it is often decided as to who knows what and
who is responsible for a certain task. However, in a market-oriented
control, the competences and service offers are built in the interplay of
supply and demand. This is ensured through inevitable use of
knowledge/information in the workflow.
5.1.2 Knowledge Management as Response to Tactical and

Strategic Changes
According to Bukowitz and Williams (1999), KM initiatives are the result
of the response to tactical and strategic changes and needs. Their model
provides an overview of the strategy behind KM and depicts the process
that defines the management strategy in order to build, sustain, divest and
enhance assets. The model is based on the tactical processes of get, use,
learn and contribute. It is a model that emphasises the «why» and «when»
aspects. The strength of this model rests on its strategic focus based on the
tactical processes, which essentially puts knowledge management action
into context. The model is depicted in ◘ Fig. 5.2.
Fig. 5.2 The KM process framework by Bukowitz and Williams (1999) (Source: ► http://www.
knowledge-management-tools.net/three-km-models.html)
Knowledge is useful for a company and can be used by individuals or

groups only if it is present in an explicit form. Thus, from this point of
view, it is the task of the knowledge management team to arrange and direct
a process of generating organisational knowledge. As discussed in ►
Chap. 2, Nonaka and Takeuchi have defined organisational knowledge
creation as the capability of a company as a whole to create new
knowledge, distribute it throughout the organisation and embed it in
products, services and systems. Their Spiral Model SECI demonstrates how
tacit knowledge gets converted to explicit and then back again to tacit.
Strategies should therefore revolve around the tactical processes which
focus on capturing and converting individual knowledge for achieving
organisational goals.
5.2 Developing a Knowledge Management
Strategy: Five Questions
The strategic objective of knowledge management is to convert knowledge
into competitive advantages that can be measured as business success.
Considering the content of the objectives, we can express them as
normative, strategic and operative knowledge objectives that vary in
significance in different phases of business development.
Normative knowledge objectives (know-why) refer to the desired values
and behaviour that are relevant for a long-term and lasting competitiveness.
Strategic knowledge objectives (know-what) shape the manner in which
we can convert our existing knowledge into success of the business and
help identify knowledge required for producing new strategic options in
order to get the desired growth.
Operative knowledge objectives (know-how) refer to «daily business»,
i.e. control over processes and project. Mobilising operative knowledge to
create value and satisfy customers.
Implementing knowledge management firstly means making oneself
aware of the importance of knowledge as a competitive resource. In order to
develop a knowledge management strategy the following five questions can
provide guidance:
– Question 1: Are our stakeholders (especially management, employees
and investors) sensitive to the importance of knowledge as resource for
our business success?
– Question 2: Which strategies do we want to support by mobilising
knowledge?
– Question 3: Which knowledge do we have today and which knowledge
do we need in the future to sustain competitiveness?
– Question 4: How do we handle our knowledge resources, which factors
promote creation and use of knowledge and what are the barriers to it?
– Question 5: How should we organise and develop our knowledge to
cope with present and future knowledge competition?
Let us look at each question.
Question 1: Are our stakeholders sensitive to the importance of
knowledge as resource for the business success?
We will start by coming back to the analysis presented in ► Chap. 1
considering markets, solutions for customer problems and investors. It is
recommended to reflect on the role of specific knowledge and competences
to strengthen unique selling propositions of products and services and how
to inhibit imitation and create sustainable competitive advantage based on
our knowledge.
Another way of identifying «knowledge sensitivity» of an organisation
is to ask the employees and management to identify specific instances
relating to timely access to relevant information and knowledge. It would
be interesting to find some answers to the following questions:
– Have we lost orders because we could not mobilise the right information
about customer requirements and because of the solutions we offered?
– Have we put ourselves in an embarrassing situation in front of customers
because we have no information about what we had offered 2 years
back?
– Was the profit margin low because we did not use our experience?
– Have we hired a consultant in the company because we do not know that
similar competence is present in our company?
– Are best practices in terms of knowledge documentation, transfer and
learning from each other documented?
– Are investors evaluing intellectual capital before taking investment
decisions or lending capital?
Based on the responses to these questions, if we come to a conclusion
that managing knowledge resources systematically contributes largely to
business success, we should move to the next step:
Question 2: Which strategies do we want to support by mobilising
knowledge?
Successful organisations concentrate their efforts on a particular area
and excel at it, rather than trying to offer everything to everyone and failing
to excel at anything. According to Traecy and Wiersema (1993), there are
three higher-level strategic company objectives: Product Leadership,
Customer Intimacy and Operational Excellence
This suggests that there are three primary elements to any competitive
business: the business itself, its product(s) and its customers – see ◘ Fig.
5.3. Each of these components represents the focus of attention for one of
the value disciplines. The focus is on the product(s) when pursuing
«Product Leadership»; the focus is on the customers and their requirements
when pursuing «Customer Intimacy»; and the focus is on the organisation
itself and its delivery processes, when pursuing «Operational Excellence».
Depending on the organisation’s focus KM strategies are developed.
Focus area Objective of KM strategy

Products Constantly developing new ideas and launching them in the market
quickly
Relationship with their Increase customer satisfaction and retention by better understanding the
customers customer’s needs and preferences
Internal processes Sharing best practices between different units, reducing costs and
improving efficiency
Fig. 5.3 Strategic objectives according to Traecy and Wiersema
Product leadership strives at capturing and creating market shares with

new and innovative products. Ideally, product leadership means being the
first company to bring a new product in the market and create market
potential for it. Product leadership is achieved by continuous technological
innovations, their conversion into product innovations and consequent
formation of new business fields.
From the knowledge viewpoint, product leadership requires high
renewal power from within, a process of knowledge creation in which new
knowledge is created continuously using existing knowledge (according to
principles described by Nonaka and Takeuchi). Early identification or
anticipation of market trends as well as basic technological developments is
necessary for achieving product leadership.
The second strategic objective is called «Customer Intimacy» which is
not the same as closeness to the customer or the term «customer as partner»
(Wiersema 1996). Customer Intimacy means knowing more about the
requirements and preferences of customers than the competitors, guiding
customer individually and building trust in order to learn and grow together.
The Individual Inc. Clipping-Service (see case study) is a good example of
this customer intimacy. Knowledge is built keeping the customer in mind
which benefits the customer because of more focused supply of information
and therefore the customer feels better served and is bonded to the
company. From knowledge viewpoint, the learning process here is
structured by and with the customers. Customer order processes are
redesigned from the knowledge perspectives. Customer intimacy also
means customer-related information management and offering complete
solutions under the «one face to the customer» motto.
Productivity and quality (Operational Excellence) is the third strategic
objective of a company. This includes learning quickly using intelligent
processes, not repeating mistakes, avoiding double work and transferring
best practices efficiently. Fast learning processes in and across the company
are vital to survive, especially in markets with high price deterioration and
short product lifecycles. If an electronics manufacturing company is
expected to register a price fall of 10–20% every year, it should be
compensated widely by more efficient processes.
All the three objectives can be achieved only if necessary financial and
knowledge resources are available. Therefore, fulfilment of strategic goals
is supported by sensitising the stakeholders to the importance of knowledge
for achieving company’s objectives. A transparent presentation of
Intellectual Capital can be the first step in this direction.
Question 3: What knowledge do we have today and what knowledge
will we need in the future to sustain competitiveness?
While we can describe and evaluate our present knowledge, there are
limits on determining which knowledge we need in future in a turbulent
market environment. However, there are certain approaches which help in
foreseeing the future. Using the concept of «Technology Road Maps» which
describe the development of future technologies and build specific,
definable competences, we can create knowledge Road Maps to identify
future needs.
As core competences (we have discussed the concept in ► Chap. 2)
are of particular importance for sustaining competitive advantage think
about the knowledge and competences (i.e. the ability to apply your
knowledge to take the right actions in the right moment) you have and you
will need to support your core competences. Think in terms of which
knowledge we need to mobilise and to develop to support the criteria of
relevance, difficulty of imitation and breadth of application:
1.
Relevance: Firstly, the competence must give your customer something
that strongly influences him or her to choose your product or service. If
it does not, then it has no effect on your competitive position and is not
a core competence.
2.
Difficulty of Imitation: Secondly, the core competence should be
difficult to imitate. This allows you to provide products that are better
than those of your competition. And because you’re continually
working to improve these skills, means that you can sustain its
competitive position.
3.
Breadth of Application: Thirdly, it should be something that opens up a
good number of potential markets. If it only opens up a few small,
niche markets, then success in these markets will not be enough to
sustain significant growth.
A simple approach to define knowledge and competence needs in the
future is to focus on customers, own strengths and competitors and develop
answers to the following questions of a strategic knowledge analysis (see
◘ Fig. 5.4). A workshop with employees across hierarchies and
departments helps to unify perceptions and create a joint vision where the
organisation stands and needs to go.
Fig. 5.4 Strategic knowledge analysis
While taking the step from strategic to operative knowledge

management, we should ask ourselves the following question.
Question 4: How do we handle our knowledge resources, which
factors promote creation and use of knowledge and what are the
barriers to it?
As in the earlier sections, we here invite you to assess your actual
situation in this short analysis of «knowledge and learning» (see ◘ Fig.
5.5).
Fig. 5.5 Assessment of knowledge management situation
If one does not want to be oriented to a pre-structured questionnaire,
one has other options like the fishbone diagram (also called Ishikawa
diagram), well-known in quality management, mind-mapping or a strength-
weakness analysis in order to compile problem areas of knowledge
management and their correlation. This compilation takes place in a
structured manner in a research group. The method suggested here helps the
company develop objectives for knowledge-oriented management in a
structured manner. They can then be included in the overall concept. For
this purpose, it is necessary to answer question 5.
Empirical surveys of knowledge management

In numerous empirical surveys, organizations were asked which benefits
they expect from KM and which factors promote or prevent creation and
transfer of knowledge. The result of the selected surveys is summed up in
the following table. It becomes clear that the company culture, incentive
systems and management support are more important than the technical
systems.
Expectation from Prevents creation and Promotes creation and transfer of

knowledge transfer of knowledge knowledge
management
Increasing product Lack of time Company culture
quality
Increasing innovative Lack of awareness Support by/responsibility of the upper level
ability management
Improving customer Inadequate incentive Push and pull of information and knowledge
proximity systems
Using resources Incomplete and user- Contributions to knowledge management are
efficiently unfriendly IT important for career development
Safeguarding the Inner values create IT as integrator and catalyst for exchange of
capacity to compete barriers knowledge
Asserting/creating Fear of change Organised exchange options
market position
Increasing performance Lack of management Increasing freedom of action, autonomy of
support the smallest unit
Transparency in knowledge requirements
Question 5: How should we organise to cope with current and future

knowledge competition?
In order to answer this question it is necessary to decide on the approach
which we want to take towards a knowledge organisation.
Development of knowledge, generation of new business fields, internal
development as well as learning from external knowledge resources
requires the cultivation of knowledge ecologies, i.e. contexts favourable for
developing knowledge and motivating employees to create, share and use
knowledge across business units and the entire company. The knowledge
ecology emphasises the process character of knowledge and the elements of
self-organisation in order to function in a fast changing environment.
Organisations are recognised as dynamically learning systems that revolve
in a continuous process by examining their own surroundings and
themselves (the autopoietic systems).
In this sense Nonaka and Konno (1998) applied the Japanese concept of
«Ba» to organisational theory. Ba (equivalent to «place» in English) is a
shared space for emerging relationships. It can be a physical, virtual, or
mental space. Knowledge, in contrast to information, cannot be separated
from the context – it is embedded in Ba. To support the process of
knowledge creation, a foundation in Ba is required.
Efforts to understand the complex dynamics of self-creating
organisation through rigid regulations and control fail in the light of
complexity and speed of the change. A company that has open culture,
provides space and offers incentives for entrepreneurial initiative as well as
teamwork forms the basis of knowledge ecology. Development and
utilisation of knowledge cannot always be planned. Instead, this process is
ad hoc, intuitive and left to coincidence to some extent.
In practice, we find a wide variety of approaches to knowledge-based
management depending on the characteristics of firms, sectors and
countries.1 We will first quote some examples of KM initiatives of different
firms and subsequently take a deeper look into knowledge management
approaches.
For Chevron, knowledge management is largely identical to effective
transfer of knowledge within and into the company. Knowledge transfer is
connected to the Total Quality Management of a company. «ShareNet» and
best-practice processes are some of the ways used by Siemens to design its
knowledge transfer. It also encourages «knowledge networking» in sales
and creates communities of practice. A team at the company level
coordinates numerous initiatives of the departments (Davenport and Probst
2000). At MindTree, communities of practice plays an important role while
at Eureka Forbes, the Senate helps to capture organisational learning.
Learning from the projects is considered of great importance particularly in
consulting firms.
Some companies incorporate knowledge management in the functional
areas, especially research and development. The benchmarking survey of
the American Productivity and Quality Centre (APQC 1996) showed that
US companies have varying perceptions and approaches towards
knowledge management. Majority of the 11 best practice companies that
were compared consider knowledge management synonymous to
knowledge transfer.
Other companies see knowledge management from the aspect of
management of the intellectual capital. The Swiss hearing aid manufacturer,
Phonak, encourages open communication beyond the hierarchical and
professional boundaries thus turning a canteen into a market place of ideas.
An environment is created to encourage exchange of information and
teamwork. General Electric sets ambitious objectives and value systems
supported by an incentive system that promotes teamwork beyond the
boundaries of business units and encourages openness to learn from outside.
An insurance company relies on international synergy management in order
to make expert knowledge available to its groups. Even the small and
medium enterprises are increasingly recognising the importance of
knowledge management.
All the aforementioned companies attribute their success to the fact that
they used knowledge to gain competitive advantage. In other words, the
investors get good returns through nurturing and exploitation of
«intellectual capital». Analyses of the case studies published about
knowledge-based management reveal a lot of emphasis on better use of the
available knowledge («Economies of re-use») by disseminating «Best
Practices», making knowledge available in processes or learning from past
project experience. The ability to act in turbulent and fast changing
environments requires merging innovation and knowledge management.
New knowledge is generated at the boundary of the existing knowledge.
In the following we will look deeper at four typical KM strategies or
approaches which are not exclusive but can be combined.
5.3 Focused Strategies: Innovation, Process and
Project Perspectives
5.3.1 Innovation-Oriented KM Strategy
Innovation means systematically combining knowledge afresh to generate
value for the customer. Successful innovation management is thus based on
a conscious handling of knowledge as a resource. On the other hand,
innovation problems are knowledge problems. Let us look at the most
important reasons for the failure of innovation projects: The inability to
align technological innovations to the needs of the market and of the
customers is rooted in a lack of knowledge transparency across markets and
customers and an inefficient knowledge transfer across functional
boundaries. Strategy, Marketing and R&D fail to share their knowledge.
Innovations do not materialise or they fail, because the entire Know-How
available in the organisation is not applied in the product. Innovations also
fail because organisations do not learn systematically from successful
projects or from the failed ones. Experts are not encouraged and fostered in
a focused manner, and knowledge is lost.
Organisations and employees are rarely short of knowledge and ideas.
The implementation of these ideas and knowledge in new or improved
products, processes and business areas is the main problem.
An innovation oriented KM strategy should put particular emphasis in
the cultivation of knowledge ecologies, i.e. contexts favourable for
developing knowledge and motivating employees to create, share and use
knowledge across business units and the entire company. In the following
we will some important elements of an innovation oriented KM strategy:
– Setting knowledge goals: Based on the organisational goals and
innovation strategy, it should be determined which knowledge (e.g. core
technologies) represents a relevant resource from the strategic point of
view, and which capabilities need to be worked upon. These goals could
be normative, strategic and/or operative in nature.
– Identifying knowledge: To start with, transparency has to be established
as to which knowledge and competence is available internally and
externally with regard to experts, capabilities and experiences.
Knowledge maps, knowledge brokers and scouts, etc. make their way
into the organisations only gradually.
– Acquiring knowledge: Concerted external procurement of knowledge by
taking over innovative companies, forming alliances or recruiting experts
etc. helps build future competencies faster than may be possible through
own resources and efforts. «Shopping» in international knowledge
markets is an important part of innovation processes. Crowd sourcing
and innovation jams tap resources of employees and their families,
clients and the interested public at large.
Mini case ► www.innocentive.com – A Platform to Tap External

Knowledge2
InnoCentive was launched by the pharmaceutical company Eli Lilly to
connect with people who could help develop drugs and speed them to
market by inviting other organisations to join. It has since become a major
platform to draw upon outside expertise. The process works in the
following way:
1.
Open a project room. When you find a challenge summary of interest,
log in and the challenge agreement in order to open a project room. A
project room is a secure space where you can view the confidential
detailed description, see technical requirements, ask the Seeker
questions, and submit solutions.
2.
Let your creative juices flow! If you get stuck, consider finding a
teammate, reviewing the solver resources, or messaging the seeker
from within your project room.
3.
Submit a solution. You can modify or replace your solutions up until
the deadline.
The companies – or seekers – pay solvers anywhere from $5000 to
$1,000,000 per solution. (They also pay InnoCentive a fee to participate.)
Some of the most prolific solvers have even quit their day jobs to focus on
finding the answers to problems full-time.
– Developing knowledge: New forms of development processes in

networks and teams, better idea generation and evaluation and more
efficient processes are central to this element of knowledge. The analysis
of knowledge development – e.g. using the Nonaka and Takeuchi model
of knowledge spiral – forms the basis for understanding innovation
processes.
– Sharing knowledge: In order to make isolated knowledge in the
organisation of use for the whole organisation, «Knowledge sharing» is
an imperative prerequisite. The key question is: Who needs to know or
do what and to what extent, and how can I facilitate knowledge sharing?
– Utilising knowledge: The willingness to share knowledge must be
accompanied by the willingness of employees to put this knowledge to
use. Through appropriate motivation, Organisations should ensure that
knowledge created with great efforts and identified as strategically
important is also applied in the day to day activities, and that such
knowledge does not fall prey to the general reluctance of the
organisation.
– Retaining knowledge: To avoid loosing valuable expertise easily, know-
how risks must be managed; i.e. the processes of selecting the know-how
that is worthy of protection, storing it appropriately and of its regular
update must be designed consciously. Also, measures and instruments for
protecting the know-how must be implemented on time.
– Evaluating knowledge: In accordance with the formulated knowledge
goals, methods for measuring normative, strategic and operative
knowledge goals are necessary. The quality of the formulated goals is
revealed latest at the time of evaluation. Abstract goal formulations such
as «We want to become a learning organisation», can have negative
consequences in this case. Knowledge-oriented cultural analyses,
intensifying of methods of training control as well as the comprehensive
concept of Balanced Scorecard are the steps in the right direction. Only
by measuring the central variables of the knowledge management
process, the management loop can be closed.
These core processes of knowledge management will be successful, if
they are embedded in environments conducive for fostering knowledge.
They are based on one vision «Adding value through knowledge – The
basis of our success». This vision should be implemented by practicing
values such as trust, openness for innovations, fault tolerance, authenticity,
just to name a few. The desired behaviour of executives and of employees
on the basis of these values should be described, and the actual behaviour
should be measured. Reward systems should honour cooperation and
collective knowledge development based on the overall performance of the
organisation. A culture of innovation and knowledge rests on people and
their motivation to build knowledge. A project manager of an innovation
project summarises his experiences thus: «Perhaps, right from the
beginning, one should have addressed the human aspect of the issue instead
of prioritising information and communications technology».
Case Study
«Sense» Increases Innovation Performance
A rather unusual knowledge management was established in the
pharmaceutical development unit of a major drug firm. The unit had 50
employees (chemists, pharmacists, biologists, chemical engineers,
laboratory assistants) responsible for developing generic dosage form into
product form ready for the market. Thus, the concerned employees take a
centre stage apparently linked to the targeted results. To improve
performance and reduce stress the «Sense» initiative was launched by
middle management.
Sense by being human is based on the following three elements:

building trust, creating space and giving time. A monthly orientation
meeting was arranged in order to build trust. The members of management
speak openly and frankly about how they are handling things they like and
things that disturb them. This increased the estimation of trust enormously.
Extremely high common goals were set, thus demanding strong trust.
Successes were celebrated spontaneously and conspicuously.
In order to create space, a recreation room was converted into a creative
kitchen (physical space) wherein the employees could meet each other and
share knowledge. Four completely integrated development teams were
created with experts from all the departments (physical space). Each of
these teams was assigned a clearly defined number of projects to be
handled. Furthermore, three IT communication platforms were arranged
(virtual space) that enable fast exchange of information (laboratory results,
project advancement etc.).
In order to give time, the overhead presentations were skipped to a large
extent in the monthly meetings so that one could explain the team results in
form of stories (story telling) and hold discussions accordingly. Posters
highlighting the mottos «You explain, I will listen, I will ask questions» and
«operative rush does not replace mental calm» were displayed in all
laboratories and offices.
Knowledge can come into being, grow, be shared and used by building
trust, creating space and giving time. The following results were achieved
based on the criteria of speed, innovation and networking: development
time was brought down by 25–50% (speed). The number of patent
applications increased threefold (innovation). The cooperation projects with
universities and other external specialised institutions were enhanced
significantly (networking).
Source: Adapted from Krischker and Raneburger. Presentation for the
competition «the 10 most effective KM tools».
5.3.2 Process-Oriented KM Strategy

The late 1980s and early 1990s saw a widespread focus on business process
reengineering, peaking at the time that Hammer & Champy published in
(1993) «Reengineering the Corporation», along with an increased
recognition of the importance of business processes as a primary means of
adding value. A number of authors (cf. Davenport & Prusak 1998; Maier
and Remus 2002; Kohl et al. 2015) discuss the issues relevant to applying
process models to knowledge work while differentiating between processes
that apply knowledge and processes intended to create knowledge. Business
processes are both knowledge demanding and knowledge generating (see
◘ Fig. 5.6). Process-oriented knowledge management initiatives are
designed to provide employees with task-related knowledge in the
organisation’s operative business processes.
Fig. 5.6 Information and knowledge analyses of business processes
A process-oriented KM strategy should therefore begin with an

information and knowledge analysis of business processes as shown in ◘
Fig. 5.6. Based on this, expertise and knowledge sources should be made
transparent for every stage of the process. Knowledge supply should be
integrated in the work process so that using knowledge becomes inevitable.
There are a number of software solutions available for this purpose.
Apart from transferring knowledge within the business processes,
knowledge should also be exchanged beyond processes. The significance of
the integration process with three components – value-based integration,
operative integration and knowledge-based integration – was emphasised
for the organisational concept of Entrepreneurial Corporation.
«Knowledge integration processes» in a company can be designed
analogous to its business processes. Take for example three typical
processes of a manufacturing company – product engineering process, order
process and purchasing process. These similar processes largely take place
independent of each other in different business areas or units of a company.
The knowledge integration process superimposes the business processes by
interweaving the otherwise loose threads of business processes. Knowledge
integration processes can aim at optimising the purchasing processes
throughout the divisions of a company. The product engineering processes,
order processes and buying processes can also be harmonised better within
and across business units. For this competence centres, teams or
Communities of Practice should be established (p.e purchasing competence
centre, global purchasing team, Purchasing CoP).
From Best Practices to Standardisation

A typical knowledge integration process is the «Best Practice process» with
the goal to improve business processes by learning from others. A Best
Practice process can be structured within and across organisations.
A Best Practice process can be structured within and across
organisations.
Best Practices in organisations generally comprise of methods,
procedures and ways of working which lead to higher productivity, quality,
added value and higher customer benefits. Best Practices change
continuously with our learning processes. The potential earnings of transfer
from Best Practices are usually very high (see ◘ Fig. 5.7).
Fig. 5.7 How best practices emerge (Source: Thomas Rieger)
Definition Best practices are those practices that have been shown to
produce superior results; selected by a systematic process; and judged as
exemplary, good, or successfully demonstrated. «Best Practices» are a
moving target as they change with experience and innovation.
From «Good Practices» to Standards3

In the following five steps, we describe how, based on (intuitively) realised
good practices, an understanding process for standardisation gradually
results in a specialised community or in a professional field.
Step 1: Identification and exchange of Good Practices Collection of

«Success Stories», of narrations of what, as perceived by the practitioners,
«worked». Here intuition plays a big role.
Step 2: Understanding of indicators for Good Practices The
«Community» of practitioners works out criteria which indicate a «Good
Practice». For instance, such criteria could be effectiveness, productivity
and social effects. This step is a «start» of systematisation. Resistance may
result from the apprehension that individually reported Good Practices may
not suffice the indicators or criteria.
Step 3: Benchmarking Ideally, benchmarking is formalised, although

often it takes the form of sum of specific interactions such as conferences,
congresses, discussions in scientific publications for instance (refer remarks
on benchmarking given below). Possible sources of resistance are rooted in
problems of trust and the tendency to avoid the high effort involved in the
benchmarking procedure, or the fear of not being «good» or «the first».
Step 4: Understanding of «Best Practices» Based on the benchmarking,

evaluation criteria are refined and Best Practices are described in detail.
From this level onwards, a significant pressure for standardisation begins;
these «tricks of the trade» can also be used as standard for executing work
in a professional manner. Resistance may arise from the fear for the
pressure to change, if (among others due to Benchmarking) it is assumed
that one’s practices are not accepted as Best Practices.
Step 5: Standardisation In this step, the defined «Best Practices» are

described in detail. They are stipulated in a work instruction, a standard,
and a regulation or in some other form as a recommendation or mandatory
procedure. This level is the most «politicised»: Deviations may have
immediate economic and legal consequences (non-saleability of goods and
services, liability claims etc.). The significance of trade and commercial
instrumentalisation increases. Source of resistance: Is the same as in case of
transition to Best Practices; although now driven by significantly stronger
conflicts of interests, since deviations from standards have consequences.
Benchmarking and Benchlearning to Improve Processes

Benchmarking, the structured comparison of processes and activities is an
indispensable part of knowledge transfer, learning and «negotiation» what
is Best Practice. First of all, benchmarking makes us aware of what we are
doing. Benchmarking often turns implicit knowledge into explicit.
Processes are questioned and success criteria are made transparent. We can
accelerate our learning processes and create pressure to change through
comparison with other business units or companies (Camp 1989).
A related approach more focused on mutual learning is
«Benchlearning». It is a process, in which a systematic and integrated
connection of performance comparisons and measures of mutual learning
are created in order to identify good practices by indicator based,
comparative learning systems. «Benchlearning is the implementation of an
evidence-based learning process in which a systematic connection between
performance comparisons and measures of mutual learning is created.»
(► http://www.pesboard.eu/EN/pesboard/Benchlearning/benchlearning_
node.html).
There are several suggestions of benchmarking and benchlearning steps,
which all include the following elements4
1.
Demarcate area of analysis: Because benchmarking can be applied to
any business process or function, an exploratory research might be
useful to know better on which aspects to concentrate in order to have a
high return in relation to the effort.
2.
Identify other organisations that have similar processes or
activities: For instance, if one were interested in improving hand-offs
in addiction treatment one would identify other fields that also have
hand-off challenges. These could include air traffic control, cell phone
switching between towers, transfer of patients from surgery to recovery
rooms.
3.
Identify organisations that are leaders in these areas: Look for the
very best units within an organisation, in any industry or in any
country. Consult customers, suppliers, financial analysts, trade
associations, and magazines to determine which companies are worthy
of study.
4.
Develop metrics for practices and survey: Develop detailed surveys
of measures and practices used to identify business process alternatives
and leading companies. Surveys are typically masked to protect
confidential data by neutral associations and consultants.
5. Exchange detailed information and learn jointly, identify leading
5. Exchange detailed information and learn jointly, identify leading
edge practices: Companies typically agree to mutually exchange
information beneficial to all parties in a benchmarking group and share
the results within the group. This might include company visits, experts
rounds and practitioner workshops
6.
Implement new and improved business practices: Take the leading
edge practices and develop implementation plans which include
identification of specific opportunities, funding the project and selling
the ideas to the organisation for the purpose of gaining demonstrated
value from the process.
Benchmarking results should be accessible to the interested employees.
In this process, similar business units, plants and projects think together
about ways of making improvements. However, benchmarking is restricted
by the fact that it is based on the actual situation. It is not directed at «what
would have been possible» or to «next practice».
Benchmarking should be conducted on a regularly basis. Thus, the
criterion is improved, development becomes visible and learning process is
accelerated. From a «best-practices database», it should be possible to pull
out information on which methods and processes were used, what were the
experiences with new methods etc. Hence, creation and maintenance of
best-practices databases is an important component of knowledge
management.
Mini case
Lighthouse Principle: The «Best in Class» Programme
A French industrial enterprise optimises its production with the «best
in class» programme, i.e. with a competition of production centres of its
subsidiaries in France, Thailand, Philippines, Brazil, Mexico and USA.
Every month, the manufacturing plants compare their data pertaining to
productivity, quality and effectiveness. What do the better plants do?
Everyone is allowed to copy. In a quarterly newsletter, the best
subsidiaries express their views yet again in detail. The managers meet
all 6 months for intensive exchange of information and knowledge.
Source: Seifert (1996), p. 134.
Case Study
Learning to Improve Processes – Two Examples
Electronics manufacturer Through knowledge transfer, an electronics

manufacturer was in a position to create the capacity equivalent to an
entirely new chip factory from the existing fabrication plant, thereby
avoiding approximately $ 500 million investment. The impetus for
improvement came from benchmarking of 12 wafer fabrications of the
company that were distributed in several business areas. The firm
supported knowledge transfer that motivated exchange process, updated
a best practices database continuously and created Best Practices
Facilitator Network. These facilitators are employees who collect best
practices under the framework of their functions of quality management
and transfer them in a systematic form.
An Oil and Gas company has introduced a best practice process under
its total quality management and communicates this process in its «Best
Practice Resource Map.» This «knowledge map» that is available
electronically as well as in paper form contains a list of experts classified
as per the topics of quality management (criteria of American Baldrich
Quality Award). The company’s vision states «create an organization that
learns faster and better than competitors through benchmarking, sharing
and implementing best practices, learning from experience and continual
individual learning and personal growth.» There are two reasons for the
success of this approach. Transfer of knowledge is integrated in the total
quality management and is therefore not an additional independent
approach in the company. The course of knowledge transfer is visualised
in comprehensive form, knowledge sellers are identified so that
knowledge buyers can orient themselves quickly from the «who knows
what» perspective.
5.3.3 Project-Oriented KM Strategy

In project-based organisations like consulting or construction firms
knowledge management has to support the project cycle. A knowledge
organisation encourages and supports learning from projects and ensures an
efficient and effective progress right from initiation of the project up to the
final processing of project results (cf. Yeong and Lim 2010). ◘ Figure 5.8
describes how knowledge can be used or processed at every step of a
project cycle.
Fig. 5.8 Knowledge organisation in project cycles
In the project initiation phase, it is possible to resort to organisational

knowledge about customers, processes or methods by means of process
documentations, customer relationship management (CRM) systems or
databases on project experiences. While preparing an offer, templates,
profiles, support of reference projects and lessons learnt from similar
projects provide guidance. Experts and project personnel can be identified
by means of competence pools, yellow pages or networks. While executing
the project, it is possible to resort to organisational knowledge sources
such as methods handbook, manuals, help desks, competence centres, CoPs
and project databases in order to ensure that existing knowledge is used and
learning speed increases. The knowledge organisation keeps instruments
like supervision and in-flight review ready in order to identify and solve
the problems in the ongoing process.
At the end of a project cycle, it is necessary to transfer the knowledge
that is generated in the organisation by means like systematic project
documentation or lessons learnt reports or a debriefing or in the form of
consolidation and transfer of experiences through the network.
In every project, the members of the team get experiences that could be
of great significance to the future teams with similar problems. Often, these
experiences are not raised systematically at the end of a project and are
therefore available as a whole for the organisation.
«Lessons learnt» represent the essence of experiences collected in a
project or in a position. In order to gain suitable benefits from lessons
learnt, it is first necessary to have a suitable context for its safety. Lack of
time, different priorities and lack of readiness of the participants often
hinders systematic regeneration of organisational activities. However,
subsequent benefit is not possible unless experiences are safeguarded. (see
KM-Tool «after action review» at the end of ► Chap. 3).
Debriefing
Debriefing is a method for simple, systematic collection and
documentation of know-how obtained from an experience. By means of
interviews and workshops, a trained «third person» collects knowledge
of an individual employee (in an interview) or a team (in a workshop).
The documentation of this knowledge is likewise undertaken by the
«third person» who is also called «debriefer». He puts the collected
know-how in an agreed form that enables future users to see the content
quickly without any expert support.
Debriefers should be adequately trained to be able to conduct a
workshop or an interview systematically even on difficult, conflict-laden
subjects. Even for documentation, one requires an equally huge know-
how. In order to be accepted as competent dialog partners, the debriefers
should have at least their own basic know-how in subjects handled by
them. They should take a neutral position and should not be involved
directly in the topic to be handled or in the project being considered.
The subject to be handled in an interview or a workshop should be
selected in such a way that the interview does not last more than 2–3 h.
Even a workshop for collecting the knowledge of a team should remain
restricted to half or one day. Longer debriefings neither cater to the scope
of the information to be recorded nor to its documentation. If the subjects
are comprehensive, it is better to conduct more debriefings restricted to
each topic.
5.4 Organisations as Knowledge Markets

5.4.1 The Knowledge Market Concept
In organisations continuously new knowledge is created, people gain
experiences, thus creating a wide ranging offer of knowledge. On the other
hand people are continuously seeking information and knowledge in order
to solve specific problems. Knowledge moves through organisations, it is
exchanged, bought, found, generated and applied to work. We can therefore
describe organisations using the metaphor of knowledge markets. The
market metaphor helps to understand the driving forces and barriers of
managing knowledge and to develop effective enabling conditions and
market mechanisms for the generation and exchange of knowledge.
Markets have multiple functions and like markets for physical goods or
financial markets there are knowledge markets.
Why go to a market?
… I have something to sell,
… I need to buy a specific good,
… I have no specific need, but want to be seduced by an attractive
offer,
… I want to get the news,
… markets inspire me.
Following this metaphor in an organisation, we have knowledge sellers and

knowledge buyers and intermediaries such as knowledge brokers and
market places and (virtual) spaces which allow knowledge sellers and
buyers to interact. In order to create knowledge markets and make them
work we have to define enabling conditions as well as principles and rules
and develop the supporting knowledge media and infrastructure. In the
following we will deal with each of these aspects.
A market-oriented concept of knowledge management establishes an
internal social market economy, in other words, internal knowledge-based
market economy5 (◘ Fig. 5.9).
Fig. 5.9 Governance concept of knowledge markets as «internal social market economy» (Source:
Wunderer 1996, p. 7)
The knowledge market concept was developed by North (1998) based

on many action research projects. This concept should encourage
entrepreneurial action and cooperation by directing it towards objectives
and values of the entire company so as to ensure short-term success of
business units and long-term competence creation of entire company.
In order to achieve this, it is necessary to fulfil three conditions for
effective creation and transfer of knowledge in a company (see ◘ Fig.
5.10):
– Enabling framework conditions: Create attractive market conditions.
Corporate mission statements, management principles and incentive
systems should connect the success of business units and contribution to
development of the entire company. Individual competence creation as
well as their contributions to the organisational knowledge base should
be rewarded.
– Players and rules of game: Rules for knowledge markets should be
defined. The manner of articulating supply and demand of knowledge,
bringing sellers and buyers in contact and exchanging knowledge should
be decided using these rules of the game. They should also be used to set
rules for exchanging knowledge.
– Instruments, processes and structures for interaction on the knowledge
market: For the creation and transfer of knowledge, it is necessary to
develop efficient instruments and media that implement rules in their
knowledge game. What does this actually mean? Firstly, it is necessary
to achieve transparency with regards to who knows what in the
company. For this purpose, companies have developed various
instruments and approaches such as “yellow pages” or “knowledge
maps” often linked to telephone directories, instant messaging to internal
facebook-like applications (p.e. Yammer)
Fig. 5.10 The knowledge market concept
Once knowledge supply is made transparent, it is time to bring sellers

and buyers in contact with each other. There are many ways of establishing
an exchange: Formal and informal, personal interaction or via electronic
platforms. The informal and formal networks, often called as Knowledge
can be exchanged and developed for example by networks, collaborative
projects consisting of cross-functional employee groups, exchange of
manuals, process descriptions and customer information.
Checklist for knowledge sellers and buyers

«Sellers» should ask themselves:
– To whom am I «selling» my knowledge, what are their needs, level of
understanding, and their motivation to seek my knowledge?
– Is my knowledge well structured and presented in an attractive form,
ready for use?
– What can I learn from the interaction with knowledge buyers?
– How can I create a demand for my knowledge and increase my
«mindshare»
Buyers should ask themselves:
– Am I able to articulate well my demand?
– Where can my demand for knowledge be best satisfied? Inside or outside
the firm?
– How can increase my attractiveness as knowledge buyer so that sellers
are eager to transfer their knowledge
We shall now describe these elements with the help of corporate examples.
The knowledge market concept is also a reference model using which
companies can measure the development stage of its knowledge
management. We will start with the question how corporations can create a
demand for interaction.
5.4.2 Creating a Knowledge Market

Apart from organising the behaviour-oriented and motivational framework
conditions, it is necessary to organise contextual framework conditions, i.e.
formulate goals, which create a demand for knowledge flows. For example,
demanding environmental standards formulated by public administration
trigger innovations in this area. Alternatively, new solutions are developed
because of ambitious corporate objectives («we want to be the leaders in a
new technological field»). For example, 3 M’s business objective is to
achieve 25% of turnover from the products that have been around for less
than 5 years. Another firm has started a company-wide increase in
productivity and quality with its Six-Sigma program. The objectives of Six-
Sigma are applicable to the entire company but they are formulated in such
a way that every business unit can use them as per their requirement. This
encourages exchange of knowledge, a common improvement culture and
transfer of best practices. The resulting behaviour was called as boundary-
less behaviour by General Electric. How demanding can the goals be?
General Electric formulated «stretched goals» that were impossible to
achieve. They could be achieved only by the utmost effort, mobilising all
resources, avoiding double work, cooperation and by learning quickly from
others.
Thompson et al. (1997) emphasise that setting ambitious goals makes
sense only when supported by a corresponding organisation culture, as we
have seen before. Setting ambitious goal does not make sense if
management and organisational structure deter employees from fulfilling
them. ◘ Figure 5.11 invites you assess the rules.
Fig. 5.11 Extract from the short analysis of knowledge-oriented company
A knowledge market is formed by the interplay of knowledge buyers

and knowledge sellers that should be brought in contact with each other. For
this purpose, there are knowledge brokers that act as internal service
providers. They create contacts systematically or randomly, transfer best
practices, provide information, etc. (see ◘ Fig. 5.12).
Fig. 5.12 Actors of knowledge market
In knowledge management, successful companies have shown that

structuring the processes of creating and transferring knowledge alone does
not help accomplish goals. Knowledge sellers and knowledge buyers should
be motivated to work together. They should live and observe the rules of
knowledge market.
Knowledge markets function well in an «Entrepreneurial
Corporation»6 (see ► Sect. 3.4).
Upper level management formulate and control goals and provide
enabling contexts for knowledge markets conditions.
The front line entrepreneurs are responsible for operative business.
They motivate coaches for cooperation, harmonise interests, identify best
practices and support future competence development of the company.
Coaches play a central role in the concept of knowledge market. They
promote relationships that keep the knowledge spiral going. Coaching
functions are not restricted to one person. They can be observed by
organisational entities such as competence networks, lead factories or lead
functions as well as by training and development.
5.4.3 Roles of Knowledge Managers and Coaches

A range of leading companies have entrusted top-ranking management with
the task of leaders and coaches of knowledge markets. The more diverse the
titles, the more diverse are the functions and settlement of this management.
A part of the company sets up motivation for knowledge management in the
personnel department. Knowledge management and organisational learning
are widely considered as synonymous. Dow Chemical has appointed a
Global Director to look after Intellectual Asset and Capital Management
especially for better use and marketing of patents. At ABB, knowledge
management is strongly linked with the «Customer Focus». At General
Electric, the vice-president of Leadership and Development is responsible
for tapping new best practices and for promoting them (◘ Fig. 5.13).
Fig. 5.13 Coaches = catalysts of knowledge management
Special training units, strategic participation in projects as well as

networking in a community of practice equips the designated knowledge
brokers with competencies required to fulfil their functions. According to
Earl and Scott (1999), the Chief Knowledge Officers (CKOs) should fulfil
the following four roles: Start new and even venturous initiatives as an
entrepreneur, harmonise new ideas with necessities of business as a
consultant, be familiar with the latest facilities in information and
communication technology as an IT technologist and establish knowledge-
promoting framework conditions and processes as an «environmentalist.»
Skills of a knowledge manager

Communications: Ability to get consensus and collaboration across many
business units; ability to explain complex concepts in layman’s language;
ability to generate enthusiasm; ability to communicate with all levels of
management and staff. Establishing straightforward, productive
relationships; treating all individuals with fairness and respect,
demonstrating sensitivity for cultural and gender differences; showing great
drive and commitment to the organisation’s mission; inspires others:
Maintaining high standards of personal integrity; coaching experience
would be helpful.
Client Orientation: Understands clients’ needs and concerns; responds
promptly and effectively to client needs; Customises services and products
as appropriate.
Drive for Results: Makes things happen; Is proactive; balances
«analysis» with «doing»; sets high standards for self; Commits to
organisational goals.
Teamwork: Collaborates with others in own unit and across
boundaries; acknowledges others’ contributions; works effectively with
individuals of different culture and gender; willing to seek help as needed.
Influencing and resolving differences across organisational boundaries:
Gaining support and commitment from others even without formal
authority; resolving differences by determining needs and forging solutions
that benefit all parties; promoting collaboration and facilitating teamwork
across organisational boundaries.
Learning and knowledge sharing: open to new ideas; shares own
knowledge; applies knowledge in daily work; builds partnerships for
learning and knowledge sharing.
Analytical Thinking and Decisive Judgment – analysing issues and
problems systematically, gathering broad and balanced input, drawing
sound conclusions and translating conclusions into timely decisions and
actions.
Source: Adapted from: ► http://www.stevedenning.com/Knowledge-
Management/KM-job-description.aspx
Companies that practise knowledge management, however, often lack
structured information about the effectiveness of such coaches. As
mentioned earlier, coaches can be successful only if they operate under
knowledge-promoting conditions. They do not have a fig-leaf function.
They are not the only ones responsible for knowledge management. They
are most successful when they become redundant.
We will come back to the role of knowledge mangers as coaches and
brokers in ► Chap. 9, when we discuss the implementation of knowledge
management initiatives.
Example
Job Description of a Knowledge Manager
The main function of a knowledge manager would be to help
champion organisation-wide knowledge sharing, so that the
organisation’s know-how, information and experience is shared inside
and (as appropriate) outside the organisation with clients, partners and
stakeholders. Key responsibilities include:
– Promote knowledge sharing through the organisation’s operational
business processes and systems by, among others, strengthening links
between knowledge sharing and the information systems, and
improving integration among information systems in the organisation,
to facilitate seamless exchange of information across systems;
– Promote collaborative tools such as activity rooms to facilitate
sharing of ideas and work among internal teams and external partners;
– Provide support for the establishment and nurturing of communities
of practice, including workshops, one-on-one guidance and
troubleshooting;
– Share experiences across communities of practice, business units,
and networks on innovative approaches in knowledge sharing,
including preparation of case studies;
– Help monitor and evaluate the knowledge sharing program,
including external benchmarking and evaluation
programs/opportunities;
– Help disseminate information about the organisation’s knowledge
sharing program to internal and external audiences, including
organising knowledge sharing events (such as knowledge fairs, site
visits, interviews), maintaining communications on knowledge
sharing across the organisation, participation in orientation and
training sessions, and preparation of brochures/presentations.
5.4.4 Defining Principles of the Knowledge Market
With the principles of knowledge market we define how the actors,
knowledge seller, knowledge buyers and knowledge brokers cooperate
under the given conditions.
Our «knowledge game» has four principles:
– The common interest principle helps us find common interests.
– The lighthouse principle supports in achieving knowledge transparency
and highlighting best practices and leading competence.
– The push and pull principle makes knowledge available according to use.
– The give and take principle ensures reciprocity of knowledge exchange.
Let us have a look at the three principles one by one.
The Common Interest Principle This principle states that collective

creation and transfer of knowledge will be successful only if the
participants have common interests. If the benefit is one-sided, the
displayed cooperation will function as coming together of employees who
have just a few common interests. Often employees, who do not have
common interests otherwise, are brought together according to
technological criteria. They meet for the sake of meeting without achieving
anything concrete. However, if one uses the common interest principle, one
succeeds in bringing together persons, units, and business areas etc. that
have similar development or improvement interests. Target groups of
similar characteristics can be grouped under multiple criteria. The common
interest principle is used while structuring networks, introducing discussion
forums on intranet of the company or conceptualising training and
development courses. We suggest configuring «clusters» of common
interest. The word cluster is taken from statistical analysis wherein objects
are grouped as per multiple criteria. Clusters are groups of persons or
objects that feature similar characteristics considering various criteria.
For instance, in order to encourage exchange of best practices in

manufacturing, the experience exchange should not be selected simply from
technological perspective. By grouping for example electronics
manufacturing plants as per criteria of production volumes, complexity of
integrated circuit, lifecycle of product, range of services and development
of components, it was possible to bring together plants and production lines
that have common interests pertaining to business divisions.
The interest-cluster principle helps to answer the main question «do the
people working there together have common interests?»
The Lighthouse Principle Lighthouses stand high and emit light far and
wide. They clearly indicate the source of knowledge and highlight leading
competence or best practices of individual experts, units, competence
centres, practice groups, lead factories or networks. They lead in specific
processes or have role model or forerunner functions. For instance, we can
identify lighthouses by benchmarking inside or outside the company. We
can locate lighthouses in a sales organisation by measuring customer
satisfaction. In short, lighthouses are competent and contribute to business
success. Emphasising leading competence through friendly competition,
letting factories compete against each other, assigning challenge cup to the
best process, highest quality or best expertise in a field has become quite
common. However, in companies, there is a frequent argument that the
emphasis on competence and excellence devaluates the other business units.
Then, very soon, a defensive position is created which tries to explain
benchmarking criteria as irrelevant or argues that, «everything is entirely
different in our unit».
In contrast to this, a knowledge firm creates a culture of exchange.

Lighthouses are tapped as knowledge sources. On behalf of the emphasised
units, in the traditional companies it is argued that answering all the
questions is an additional load. The mindset «we are paid to do our work
and not to help others.» has to be overcome. Even here, there are many
options to encourage this readiness to a certain extent in knowledge firms.
Hence, teamwork and sharing knowledge is rewarded in appraisal and
incentive system. Furthermore, the lighthouse function, for example of a
plant, can be accompanied with employees being financed as «knowledge
brokers» who then undertake the function of transferring knowledge.
A lighthouse function can also be converted into cash in the market as
shown by many consulting units created out of internal department offering
their Know-How to external clients. Leading competence can be
emphasised, e.g. in company’s yellow pages which lists information on
«who knows what». Employees can present themselves in the Intranet of the
company and offer their competence, showcase their knowledge maps that
state which knowledge is available at which position.
The Push and Pull Principle Traditionally, following the push principle,
information and knowledge was often circulated in the company in form of
reports. However, knowledge firms are increasingly switching over to the
pull principle by letting users retrieve information or knowledge required
by them.
Push principle is supply-oriented. The know-how provider is dominant with

his knowledge, often causes high transaction costs, has low accuracy (if
feedback loops are not incorporated) and often encounters implementation
resistances from users. The push principle was typically used by central
departments that designed production processes and transferred them in
standardised manner to the plants for implementation. This often resulted in
resistance because the centrally designed production processes did not meet
different requirements of the plants. The result was poor performance
against very high expenditure.
According to the pull principle, units decide on their own with whom
they develop new production processes/products/services and from where
they pull relevant knowledge. The central control should maintain itself as a
service provider and prove its competence. This process brings about an
increase in accuracy. Generally, better performance can be achieved with
lesser expenditure if the right information is given to the right users at the
right time. However, this requires the knowledge user to have special
competence to select suitable collaborators and pull the right actionable
information.
In its benchmarking survey on knowledge management, the American
Productivity and Quality Center discovered that it is necessary to combine
the pull and push principle:
Push approaches are characterized by a desire to capture knowledge

in central repositories than «push» it out onto the organisation.
«Pull» approaches, in contrast, expect people to seek the knowledge
they need. Neither seems to work well by itself. (APQC 1996, p. 8)
An information push by management creates a pressure of change by

publishing best practices and benchmarking results. The same applies to
information on market tendencies, losing market shares, winning huge
projects through competition and also positive news about market
development of one’s own company. This information should motivate the
employees to think about changes and improvements. This «information
push» is supplemented by «knowledge pull», i.e. the users decide
themselves which knowledge is transferred and who they want to work with
etc.
The Give and Take Principle Knowledge will only flow in an organisation
if people adopt a give and take philosophy. Davenport and Prusak (1998)
call this reciprocity: «A knowledge seller will stand the time and effort
needed to share knowledge effectively if he/she expects the buyers to be
willing sellers when he/she is in the market for their knowledge.»
Reciprocity may be achieved less directly than by getting knowledge back
from others as payment for providing it to them. Knowledge sharing that
improves profitability will return a benefit to the sharer now and in the
future. Whether or not a knowledge seller expects to be paid with equally
valuable knowledge from the buyer, he/she may believe that being known
for sharing knowledge will make others in the company more willing to
share with him/her. To promote the give and take principle, a number of
companies have established «miles for knowledge» programs. In such
programs professionals get a number of credit points which they can
distribute to those colleagues which have helped them particularly in the
solution of problems, have provided valuable knowledge for a project and
so on. (see case «Sharing knowledge earns you miles» on p. 140).
The four principles of interest-cluster, lighthouse, pull and push and give
and take are reflected in the processes and structures of knowledge
management. Monitoring the adherence to these rules, implementation of
these rules, and supporting employees and business units in implementing
them are tasks of the knowledge managers.
Case Study
Transferring Knowledge Through a «Listeners Program» at TCL,
India
Established in 1939, Tata Chemicals Limited (TCL) is the world’s
second largest producer of soda ash, with manufacturing facilities in India,
the UK, Kenya and the US – but the company’s products cover a huge
range of chemicals, from fertilisers to branded, iodised salt.
At TCL, it was recognised that every employee has much more to
contribute than simply their specialised knowledge in a particular domain.
For example: An experienced soda ash kiln operator will notice the colour
of the kiln stack when he enters the plant, and based on his observations,
he’s able to make predictions about the success of a particular job and the
general health of the kiln. This shows that there are useful «knowledge
nuggets» across the workforce, regardless of hierarchy. Such important
observations, heuristics and learning must be captured and refined,
systematically and continuously – but in addition, they should also be
shared and disseminated across the organisation.
In order to do that, a KM initiative called «TITLI» was launched at TCL
in 2005. The project name TITLI (the Hindi word for butterfly) was chosen
because the diversity of colours of the butterfly and its role in cross-
pollination was seen to embody TCL’s KM ambitions. The TITLI program
is intended to facilitate the cross-pollination of ideas, experiences and
learning and to embrace the varied hues of each individual’s perceptions in
the form of «anubhav», or stories, as its core inputs. TCL’s KM team
launched a «Listeners Program» as part of TITLI.
The aim of the listeners program is to create involvement, engagement
and participation throughout TCL and make all aspects of capturing,
sharing and seeking knowledge effective. As employees have come to
realise that the tacit knowledge captured really makes a difference in terms
of solving day-to-day problems and enhancing productivity, their
engagement and participation has increased. Likewise, both contributors
and listeners are recognised by TCL for their insights and inputs
(Kruthiventi, Gajjar & Awasthi 2009).
Source: Knowledge Management Review, June Edition, 2009. ►
http://www.melcrum.com/kmreview/kmreview_0609.shtml
5.4.5 Knowledge Culture: An Enabling Framework

«Knowledge culture is a form of organizational culture that combines
elements of individualistic, group and macro management of the entire
knowledge management process» (Travica 2013, p. 95). Chang and Lin
(2015) classify organizational cultures into results-oriented, tightly
controlled, job-oriented, closed system and professional-oriented cultures.
In their study they conclude that rResults- and job-oriented cultures have
positive effects on employee intention in the KM process (creation, storage,
transfer and application), whereas a tightly controlled culture has negative
effects.
Corporate mission statements, management principles and incentive
systems should reflect company’s values. They must ensure that success of
a segment (business unit) and contribution to the development of the entire
company gets enough attention. Incentive systems should not just reward
creation and transfer of knowledge but also conversion of this knowledge
into success of the business (see ◘ Fig. 5.14).
Fig. 5.14 Extract from the short analysis of knowledge-oriented company
This would help in evaluating the framework conditions in the
company. Later on, using a range of examples, we shall show how the
described criteria of a knowledge company can be put to practice. We shall
describe the formulation and control of the framework conditions with a
universal example of the company General Electric7 and add further
selective examples.
As we have already seen in the earlier chapters, the main feature of a
knowledge firm is that it creates strong shared values. Values are more
important than structures. Structures can be defined but values enable
teamwork of employees in different projects, represent tacit knowledge and
ease the association with each other. From the knowledge perspectives, we
had mentioned trust, openness to innovations and authenticity as
particularly important. Take for example Koziol, a gift article manufacturer
with 180 employees, the most innovative company in its industry. At
Koziol, the corporate mission statement incorporates teamwork and
autonomy according to the motto «instruct yourself, organise yourself,
motivate yourself and control yourself». One also experiences a regular
exchange in product development teams across departments. For the
management it is important that all the employees participate actively in the
«company project».
However, having these values somewhere on the paper is not important.
They should be lived. They should be lived at all the levels – including
management. Formulating such values is less problematic than living them
in day-to-day life. In this sense Michailova and Minbaeva (2013) argue that
knowledge sharing behavior is not influenced by organizational values per
se but by the degree of their internalization by organizational members.
In order to implement the values of a company in daily life, it is
advisable to describe explicitly the behaviour expected from employees and
management and compare their present behaviour with expected behaviour
in e.g. periodic employee appraisals.
Case Study Restructuring General Electric Towards a Boundary-

Less Organisation 8
During restructuring, General Electric experienced how difficult it was
to change behaviour of management and employees. «During the workout
sessions, it was clear that creating presentation techniques at management
level including employees, enthusiasm and free space did not match with
the reality of business units. The problem was that some of our members of
management were unwilling or incapable of leaving the «autocracy of
large-scale enterprise» and take in values that we wished to build.
Therefore, we defined our management style or types and how they either
blocked or encouraged our values. We then acted accordingly.»
General Electric defines four types of management behaviour:
– Type 1 not only guarantees its performance but also believes and
develops the enterprise values of General Electric. The way to this group
is «onward and upward». Men and women who embody these values
will take our company to the next millennium.
– Type 2 neither guarantees its performance nor does it share our values
and will not stay very long in General Electric.
– Type 3 believes in values of the company but is not capable of fulfilling
the received commitments. They are encouraged to change, resulting in
type 3 typically getting an additional chance.
– Type 4 is the most difficult. One is always tempted not to take action
because the fourth management type has short-term success. This group
takes actions without considering the values. Some of them learnt to
change themselves while most of them did not. The decision of removing
the fourth management type from the company was a «turning point»
and proved that the company was serious about its values.
At General Electric, employees and management are constantly
evaluated to find out whether they uphold the values of the company.
Evaluation takes place as per the expected behaviour.
Values are reinforced or destructed by leadership practices and incentive

systems.
In the following we have summarized Leadership practices conducive
to knowledge sharing:9
– Leaders highlight to their team (s) the links between knowledge to
develop and the objectives of the organization.
– Knowledge sharing and mutual learning are explicit values that are
practiced regularly.
– Leaders behave as role models to promote the values of knowledge
sharing and mutual learning.
– Senior executives are actively involved in projects to improve knowledge
management.
– Superiors value the contribution of individuals and teams to develop
relevant knowledge.
– Organizational structures, functions and responsibilities to manage
knowledge are set and practiced.
Reward and incentive systems directed towards the performance of an
individual or individual units are considered as significant barriers to the
creation and transfer of knowledge. However, as we have seen in ►
Chap. 4, there are a number of options for encouraging teamwork oriented
towards overall interest of a company. However, incentive systems cannot
be ignored as they play an important role in getting started.
All the described framework conditions should together form an optimal
«organisational mix» that encourages creation and transfer of knowledge.
Individual elements of these conditions alone cannot guarantee success.
Interaction of all these conditions is yet again clear from the example of
General Electric. The value system, behaviour of the top level management,
promotion and selection of managers according to their behaviour,
practising teamwork by training and development and evaluating in the
incentive system that rewards the overall success of the company lead to a
culture of openness (boundary-less behaviour) which allows setting of
«stretched goals» in an environment of trust (see ◘ Fig. 5.15).
Fig. 5.15 The framework conditions at General Electric encourage creation and transfer of
knowledge
5.5 Spaces for Interaction: The Physical Layout

With virtual interaction one might think that office architecture and design
of social zones is of less importance. Employees increasingly use the option
of working from home or work at the customers’ premises and rarely meet
their colleagues. On the other hand, researches show10 that innovative
thoughts arise through personal communication and often through
unplanned meetings in the case of informal information exchange.
Designing Space to Support Knowledge Work remains an import task (cf.
Peponis et al. 2007; Waber et al. 2014).
If you view for example about Google’s office in Zurich you will be
puzzled about such an innovative office design to foster innovation. The
Swiss hearing aid manufacturer, Phonak, allows for this fact by turning the
staff canteen into a common meeting place. In some major enterprises, the
management board does not have independent offices. Instead, they have a
vast open board room which facilitates inevitable interaction among them.
Some companies go to such lengths that the members of the management
board have only one working and meeting room wherein they are meant to
work and take decisions together. In new plants, such as those in the
automobile industry, it has already become standard for operations
engineers and production engineers sit close to each other, often in offices
that are separated from the production division simply with a glass window.
This encourages the ability to solve problems quickly and the feeling
togetherness through the architecture. The same applies in designing the
office premises.
Knowledge-oriented companies should therefore design offices, break
rooms and circulation areas in such a way that they support function-based
cooperation, employees meet each other randomly and can communicate
with each other. The Munich based architecture firm, Henn, has developed
a concept for the offices called as knowledge stock exchange.11
While the physical material flow is visible inside a building and
inadequacies are noticed, the flow of intellectual material is not visible in an
organisation. Incomplete thoughts and solutions are often concealed
because they do not pile up in boxes. Though they also block the ways to
solutions, they do not stand out directly. Based on this thought, Henn
developed or adapted a process to capture the communication in the
building. The result was visualised in a «netgraph». Office concepts that
encouraged communication were developed based on this. ◘ Figure 5.16
shows three different types of offices – traditional office cubicles, group
space and combi-office with communication zone – under the criteria of
concentration and communication.
Fig. 5.16 Types of offices (Source: Henn Architects)
A suitable interior decoration encourages teamwork and symbolises,

through the type of design, trust and openness to innovation. Some
companies have created employee lounges, based on the concept of airport
waiting rooms, for employees who come to the office randomly. The
employees can work, meet or relax in these employee lounges. One requires
variable work places like a room in a hotel.
If knowledge is not visible directly, it is possible to present process
intelligence and product intelligence symbolically through a suitable
architectural design.
– The business environment is rampant with situations that require
information about products, about activities done in the past and their
result, about effective ways of executing a process and interpretations of
various outcomes. The question therefore is: how can organisations
leverage experiences to be able to cope with today’s and tomorrow’s
dynamic business environment?
– The approaches of company practice can be described with a basic
concept of a knowledge ecology, which creates enabling conditions for
creativity, innovation and knowledge flows.
– Normative, strategic and operational knowledge objectives are starting
points for interventions in organisational knowledge base in order to
convert knowledge into competitive advantages.
– Organisations can be regarded as knowledge markets. The following are
the three elements of the knowledge market concept
1.
Framework conditions,
2.
Players and rules of game
3.
Processes/Structures,
– According to Traecy and Wiersema, there are three higher-level strategic

company objectives. The fulfilment of these objectives is supported by
respective creation and transfer of knowledge. The three areas are:
1.
Product Leadership
2.
Customer Intimacy
3. Operational Excellence
– The model defined by Bukowitz and Williams (1999) rests on the
premise that KM initiatives are the result of the response to tactical and
strategic changes and needs. The strength of this model is the strategic
focus based on the tactical processes, which essentially puts knowledge
management action into context.
– The main feature of a knowledge firm is that it creates common moral
concepts of employees. Values are more important than structures.
Structures can be defined but values enable teamwork of employees in
different projects, represent tacit knowledge and ease the association
with each other.
– The successful implementation of knowledge management often rests on
two aspects: firstly, on the ability and readiness of employees to share
knowledge with other employees and secondly, on the focus on
technology as an enabler.
5.7 Questions
1.
How can an organisation align its knowledge management strategy to
the business strategy? How can effective knowledge management
provide the competitive edge?
2.
How do you identify the strategic positions of the company in terms of
the knowledge assets so as to determine the areas where the knowledge
management efforts need to be enhanced?
3.
How can knowledge management enhance operational effectiveness?
4.
How can a knowledge management strategy contribute to improved
innovativeness? What would be concrete measures to be implemented?
5.
In an organisation following the knowledge market metaphor, how can
you create demand for knowledge (and the consequent sharing of it)?
5.8 Assignments
1.
Improve customer response
Atul Corporation is a large corporate, manufacturing and
supplying engineering goods to the industry. It has four divisional
offices. A customer survey showed that clients of two divisions were
not happy with its ability to deliver orders on time, in proper condition
and at the proper location.
How can a knowledge management solution help the company
address this problem? Identify the knowledge assets and the
implementation challenges?
2.
Star bakery
You’re a new manager of a chain of 10 bakeries located in a
region of 50 miles. Sales performance, customer satisfaction and
profitability of the bakeries vary substantially.
Apply the four principles of a knowledge market (common-interest,
lighthouse, push-pull, give and take) to improve performance. Which
concrete measures would you take?
5.9 KM-Tool: Knowledge Market

What is a knowledge market?
A knowledge market relates offer and demand of information and
knowledge and enables contacts and transfer between buyers and sellers.
Knowledge markets operate over the internet or an intranet or on a
physical knowledge marketplace (buyers and sellers are in a room). A
knowledge market can be organised within units, across units and also
open up a firm to the outside (e.g. knowledge market with customers or
suppliers). It provides a different way of experience exchange than the
traditional slide presentation and discussions.
Why use a knowledge market

– The knowledge market helps resolve problems using the «wisdom of
the crowd»
– Good practices are made public
– Colleagues find that they are working on similar problems and have
similar interests. A knowledge market can be a start of a community, a
form to organise experience exchange-group form
– Market participants learn to present their knowledge and to ask
precisely.
In the following we will present ways of organising a knowledge
market:
The prearranged market stand version
This version is similar to an «open space» meeting.
1.
In participatory process (usually some weeks or days before the
market session) decide on priority topics of interest or define a
problem to be solved/questions to be discussed
2.
Set up a number of market stands/tables in a large foyer. Each stand
presents a topic, a solution, a good practice related to the market
topic. Each table/theme is «hosted» by two resource persons who
moderate the discussions.
3.
Participants go from stand to stand according to their interests and
interact.
4. The contents of the market and discussions might be summed up by
a short video, which might be made available
5.
Market discussions might be continued in an intranet discussion
form or in community meetings.
The spontaneous market

1.
The «market master» (facilitator) prepares presentation two boards
or wall paper on two sides of a room. Write on one the title «I
offer,» the other «I’m looking for.»
2.
Participants write their offers and requests on paper cards or «post-
it», and add their name/nickname. The number of cards may be
limited, for example, three offer and three demand cards per
participant.
3.
Participant put their cards on demand or offer side.
4.
If no categories were predetermined, the market master may
arrange the cards thematically.
5.
Participants have time to become familiar with supply and demand
(about 15 min).
6.
Market Master asks buyers to contact vendors: Those participants
who have found an answer (offer) to their query take their question
cards from the «search» wall and attach it to the appropriate offer
(15–20 min).
7.
Buyers and suppliers get into contact personally and
discuss/resolve the issue. If necessary, the market master calls out
the names of seller and buyer. The issues might be deepened in
small groups or appointments for follow-up can be made (20–30
min).
8. If there are still unanswered questions on the «I’m looking for»
board: The market masters may read them out individually or
bundled together thematically and asks who can contribute to the
solution if necessary who could answer the question outside the
solution, if necessary, who could answer the question outside the
present group. If the question is not answered, or it includes a more
complex problem, the market master decides with the participants,
whether the question is so important that it should be pursued. The
market master takes the unanswered questions and contacts
relevant experts to provide the answers. For example, answers to
questions will be posted under the heading «knowledge market» on
the intranet.
9.
If there are offers which did not find a «buyer» the market-master
asks briefly the «seller» provider to explain and clarify their
respective offer and ask participants if they are interested in the
offer.
10.
The market concludes with a summary of the transactions and asks
participants to evaluate the quality of the exchange.
References
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benchmarking study. Final report. APQC, Houston.
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http://www.eknowledgecentre.com/articles/1010/1010.htm
Bukowitz, W., & Williams, R. L. (1999). The knowledge management framework. London: Financial
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Camp, R. C. (1989). Benchmarking – The search for industry best practices that lead to superior
performance. Milwaukee: APQC Quality Press.
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[Crossref]
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paradigm. Oxford: Oxford University Press.
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Wiley.
Davenport, T. H., & Prusak, L. (1998). Working knowledge – How organizations manage what they
know. Boston: Harvard Business School Press.
Earl, M. J., & Scott, I. A. (1999). The role of the Chief Knowledge Officer; Financial Times
Supplement “Mastering Information Management”, 8 Mar 1999, pp. 7–8.
Hammer, M., & Champy, J. (1993). Reengineering the corporation. London: Nicholas Brealey.
Hansen, M. T., Nohria, N., & Tierney, T. (1999). What’s your strategy for managing knowledge?
Harvard Business Review, 106–116. http://www.think-differently.org/2007/02/how-do-you-start-
your-km-strategy.html
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wired/archive/14.06/crowds.html
Kohl, H., Orth, R., & Steinhöfel, E. (2015). A Practical Approach to Process-Oriented Knowledge
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[Crossref]
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kmreview/kmreview_0609.shtml
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Knowledge and Process Management, 9(2), 103–118.
[Crossref]
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multinational corporations: The Danisco case. International Business Review, 21(1), 59–70.
[Crossref]
Nonaka, I., & Konno, N. (1998). The concept of «Ba» – Building a foundation for knowledge
creation. California Management Review, 40(3), 40–53.
[Crossref]
North, K. (1998). Wissensorientierte Unternehmensführung (6th ed. 2016). Wiesbaden: Springer

Gabler.
Peponis, et al. (2007). Designing Space to Support Knowledge Work. Environment and Behavior,
39(6), 815–840.
[Crossref]
Seifert, H. (1996). Gewußt wie. Manager Magazin, 132–134.
Thompson, K. R., et al. (1997). Stretch targets: What makes them effective? The Academy of
Management Executive, 11(3), 48–60.
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Travica, B. (2013). Conceptualizing knowledge culture. Online Journal of Applied Knowledge
Management., 1(2), 85–104.
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10/workspaces-that-move-people#
Wiersema, F. (1996). Customer intimacy. Santa Monica: Knowledge Exchange.
Wunderer, R. (1996). Besonderheiten des “Human-Kapitals”. Folgerungen für die

Unternehmensführung und die Steuerung des Personalmanagements. In: SGO-Jahresbericht, (pp. 4–
9).
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1(2), 8–19.
Footnotes
1 There is no comprehensive and up-to date overview, for summarising statements refer to 7 http://
www.kbos.net/uploadfiles/Knowledge%20Management%20implementation%20trends.pdf or see the
annual results of the «MAKE»-award.
2 For more information on crowdsourcing see Howe (2006); Chesbrough et al. (2006).
3 This section was authored by Dr. Thomas Rieger, ComoConsult.
4 Adapted from Camp (1989) and 7 http://en.wikipedia.org/wiki/Benchmarking
5 General Electric, Annual Reports 1994, 1995, 1996.
6 See also v. Krogh et al. (1997).

9 Source: Adapted from the Knowledge Management Self-Assessment guide of the Federal
Personnel Service of Belgium 7 <ExternalRef>
<RefSource>http://www.fedweb.belgium.be/fr/binaries/broch_km_managers_fr_tcm119-3359.pdf
10 Allen (no year).
11 The text widely follows Henn (1995).

https://doi.org/10.1007/978-3-319-59978-6_6
6. Context Specific Knowledge

Management Strategies

Germany
“Sannin yoreba monju no chie” (a gathering of three people will

result in wisdom equivalent to that of Monju Bodhisattva)Japanese
Proverb (APO 2010)
Learning Outcomes
– You will know the challenges of knowledge transfer across cultures,
– You will be able to develop KM activities based on the projection,
orchestration and integration approaches;
– You will know how international service organisations design their
KM activities;
– You will be aware of KM solutions for small businesses
– You will have an idea how to organise KM at regional and country
level
– You will be able to apply storytelling in your own context.
6.1 Knowledge Management in International
Contexts
6.1.1 Challenges of Knowing Across Cultures
Cross-cultural knowledge management is becoming an increasingly
essential factor in organizational practice and policy in the era of
globalization (Del Giudice et al. 2012).
Knowledge management in an international context poses specific
challenges in addition to those mentioned until now.
Integration of geographically scattered knowledge that is of no value
without context or that is integrated in different cultural contexts:
Transferring it detached from these contexts is not possible. Cross-cultural
management (cf. Hampden-Turner and Trompenaars 2000) taught us that
tacit knowledge developed in long socialisation processes of countries and
regions goes along with different beliefs and behaviour. This leads in
particular to variations in relations between people, motivational orientation
and attitudes toward time. Thus, when the American parent company
Disney transferred its amusement park concept to Euro Disney close to
Paris, it discovered that the concept did not match with European customs
of recreational activities. Another example is the transfer of total quality
management approaches beyond the boundaries of countries which is
successful only if an equally encouraging company culture is either present
in context or is established (North 1997).
Complexity in acquiring, developing, transferring, using and
safeguarding knowledge in the international context: With their network of
«international sensors», companies should manage to find out early where
new knowledge is created, safeguard knowledge sources from the
competitors, make knowledge within the company useable worldwide and
enhance it further. In doing so, companies should combine local
differentiation and global standardisation. Thus, worldwide standardised
products are developed in information and communication technology,
produced using local cost advantages and sold over locally differentiated
distribution channels. This involves setting up the function of research and
development in a place where best talent is available, undertaking
production where the labour is inexpensive and qualified, transferring best
practices quickly across the world and finding efficient local partner for
distribution.
Products in the automobile industry are adapted to the local market
requirements based on common platforms and components, thus reducing
the complexity of required knowledge. Platforms and components are
increasingly being developed centrally and specific market requirements are
introduced locally. However, this may give rise to experiences that could be
of global interests, e.g. experiences of renewable raw material in Brazil
were transferred to an automobile manufacturer in South Africa.
Del Giudice et al. (2012) note that in order to enable organizations to
transfer knowledge effectively, mechanisms for dispute settlement,
mediation of cultural conflict, and enforcing agreements need to be in place.
How can the principle «being local worldwide» be implemented from a
viewpoint of learning and sharing knowledge across cultures? For this
purpose, Doz et al. (1997) described three approaches viz. projection,
integration and orchestration.
How to exploit the benefits of home base knowledge leadership in a
way that is sufficiently sensitive to the deeper differences between their
home environment and the new international environments in which they
are attempting to operate?
Mini case Study

Knowledge Work Across the World
An automobile manufacturer works on building up a global
development network. The largest vehicle manufacturer of Europe is
thinking seriously about developing parts such as transmission, engines
or chassis not just predominantly in the German locations but also in
other continents via computers in order to develop the entire product.
Accordingly, a developer in Germany starts working on a plan for a new
brake in the morning. By evening, he transfers the design for further
processing to his colleague in America, where the working day has just
begun. By evening, the colleague in USA sends his work, his developed
plans, to the operations in Asia. From there, the design plan comes back
to Germany. The design time can be reduced to its one-third if this
networking idea is implemented successfully. It will then be possible to
work on the plans round the clock.
6.1.2 The Projection Approach
The basic question of projection is how knowledge advantage that is
available in the home country and that is to be incorporated in products,
service packages and related logistics in foreign markets, be transferred
considering its characteristics. From the projection viewpoint, it is the
function of management to find a balance between blind transfer of
experience from the home country and over-conformity to the local
conditions. This balance can rarely be determined beforehand. That’s how
McDonalds established its US concept worldwide in a standardised form,
yet varied the local taste through specific local products. Coca Cola tastes
the same throughout the world. However, the selection of distribution
channels and logistics varies significantly. Product knowledge is projected
internationally by the centre while local partners undertake distribution
based on their market knowledge. Projection requires an efficient
knowledge transfer from the centre to the branches throughout the world. It
also requires an efficient feedback system so that it is possible to distribute
commonly relevant local experiences through the centre. International
management and identifying the distinction between the culture of local
company and that of the homeland, simplifies the process of
internationalisation.
The advantage of the projection approach is that knowledge and
standards can be «pushed-out» quickly to subsidiaries. Disadvantages are
related to a mind-set «we are headquarters and know what needs to be
done» and consequently an inefficient learning between centre and branches
(see ◘ Fig. 6.1).
Fig. 6.1 Projection: push-out knowledge to subsidiaries
6.1.3 The Integration Approach

Integration goes a step ahead of projection. It not only involves learning
from one’s own company worldwide but also from outside. Similar to the
inverted organisation, knowledge resides in the branches across the world,
centres of excellence or alliance partners. The centre integrates a part of this
knowledge without representing the leading competence. Detachment of
knowledge from specific contexts can be problematic in this case.
A range of worldwide operational consultancies and auditing firms
work according to the principle of integration. Decentralised networks
develop core services that can be implemented locally. Quality guidelines
and routines for executing orders apply to all the branches overall. The
centre itself has less knowledge than the external nodes in case of
integration. This gives rise to the question whether partial management
without the centre is possible under knowledge viewpoint. This results in
orchestration. The box below shows how these different concepts are
applied to organising international research and development (see ◘ Fig.
6.2).
Fig. 6.2 Different organisational models of international research and development. Research and
development is increasingly internationalised and carried-out distributed over several locations
worldwide. From an analysis of 25 huge companies with headquarters in Europe, Japan and US five
trends can be identified: Trend 1: Many companies with a centralised R&D are strongly oriented to
their international surroundings. Trend 2: Build technological listening posts in the technological
centres of excellence of trade. Trend 3: Companies with centrally regulated foreign R&D locations
enhance their competency. Trend 4: Companies grown through acquisitions and having widely
autonomous subsidiaries recognise the integration potentials and link their R&D activities more
intensively. There is a trend towards an integrated R&D network. Trend 5: However, one can also
notice a trend within the integrated networks. There is an increased focus on fewer centres of
excellence and centralisation of decision processes in fewer competence centres. A lot of importance
is being given again to focus on cost reduction. Consolidation aims at better use of economies of
scale by increasing the coordination between R&D activities worldwide and reducing double
developments if there is simultaneous intensification of international transfers within the company
(Source: Based on Grassmann (1997))
6.1.4 The Orchestration Approach

Orchestration brings together and fuses multiple capabilities and insights
from different environments. In an extreme case, orchestration means
collaboration of units of a company, alliance partners, customers and
suppliers in a global network without a centre or headquarters. Units of a
company work together in different coalitions in order to convert new
knowledge into market solutions (see ◘ Fig. 6.3).
Fig. 6.3 Orchestration fuses multiple capabilities
Specialised units build knowledge alliances in order to offer complete

solutions to the customers. Research and development centres pursue the
know-how. Intensively decentralised international companies, such as ABB,
work according to this principle. In an orchestrated company subsidiaries
are empowered by taking global responsibilities for competence areas,
business units, product groups or services.
Doz et al. describe three pre-requisites for effective implementation of
orchestration, which they also term a «meta-national strategy»1:
– Effective Sensors: Presence of effective sensors in important markets
and regions with critical knowledge. These sensors can come into effect
through linkages to leading research institutes that develop knowledge in
new areas by relocating critical functions- for example research functions
from homeland can be linked to the leading regions by establishing
branch offices, development centres and manufacturing plants in critical
locations. The entities could be central functions at the headquarters,
customer or product management structures, global platforms,
comprehensive projects, logistics systems and global centre of
excellence.
– Attractors: Establishing attractors, i.e. leading competence that focuses,
gathers and provides distributed market knowledge, product knowledge
and technological knowledge.
– Exchange of knowledge : Ensuring effective and efficient knowledge
transfer between the nodes of a network. In order to encourage common
creation and transfer of knowledge between the nodes of the
«orchestrated network» it is first necessary to control the behaviour of
the employee. Common ideals, common interests, common language and
terminology are very important for creating and transferring knowledge
in network structures. Companies with a distinctive company culture,
such as Hewlett Packard or Motorola, move knowledge largely
independent of the country culture (North 1997). International managers,
who are committed to their company, are guarantors of such worldwide
company culture (Doz et al. 1997).
– Local employees: Thorough selection of local employees and their
intensive introduction to the values and work methods of the organisation
are important measures to achieve same ideals and shared tacit
knowledge.
– International incentive systems: Yet another requirement for the
orchestrated company is internationally oriented incentive systems.
These could exist in shares options for the entire organisation as found in
General Electric or be oriented towards the worldwide results of
company units. That is how Texas Instruments promotes knowledge
exchange between their factories by determining a global responsibility
for wafer fabrication (APQC 1996).
– Intensity of communication: The orchestration is further supported by
the intensity of communication, especially the scope of information. It is
not enough to provide information only through Intranet. This should be
supplemented by personal meetings, video conferences, emails,
discussion forums, etc.
Even in the international context, it is apparent that company culture,
incentive systems as well as information and communication become
central components for creation and transfer of knowledge.
It becomes more and more difficult to achieve global competitive
advantages by dominating one domestic market. In the knowledge
competition, the competitive advantages are achieved increasingly by
«global orchestration».
Case Study
Giz: From Worldwide Project Experience to Service Products
The services delivered by the GIZ, the German International co-
operation agency, draw on a wealth of regional and technical expertise and
tried and tested management know-how. As a federal enterprise, GIZ
supports the German Government in achieving its objectives in the field of
international cooperation for sustainable development. GIZ operates in
more than 130 countries worldwide with more than 17,000 staff members
across the globe – some 70% of whom are employed locally as national
personnel.
GIZ starts hundreds of projects every year throughout the world for
improving the living and working conditions of people across the globe.
GIZ is increasingly starting projects even for non-government entities.
How can the experiences of one project be used again for a new project?
How can the organisation learn systematically from the projects?
For this purpose, GIZ introduced a «product-based knowledge
management» concept. The core of the initiative is the classification of the
GIZ services in about 100 product groups, such as «clean air in cities», each
with a product manager who operates like a knowledge broker. This gives
rise to systematisation because different repeatable service packages are
available which should be adapted only in rare cases. The respective
product team works worldwide and mostly meets virtually. The product
knowledge that originates from such interaction is made accessible to all the
GIZ employees through a product database and virtual product teams. A
knowledge manager coordinates further development of the «knowledge
organisation» which results in the following benefits:
– Availability of information at a faster rate
– A more efficient use of human resources
– Safeguarding of strategically important knowledge and reduced in loss of
knowledge due to employee turnover.
– Better communication within the GIZ
– The objectives of development policies can be achieved more efficiently
by faster access to knowledge available worldwide.
Bundling the available knowledge helps in optimum utilisation of
synergies from the worldwide projects. Thus, development projects become
more effectively as per the benefit of the giver and receiver. With the
introduction of product-based knowledge management, GIZ has increased
market and customer orientation and has thus improved its lasting
competitiveness even further. For this, GIZ won the special price of public
companies – «Knowledge manager of the year 2005».
Source: ► www.wissensmanager-des-jahres.de
6.1.5 Knowledge-Oriented Project Planning2

Opening new markets, developing global products, planning new factories
or technical cooperation in development require knowledge-oriented project
management that harmonises different ideals, experiences and interests.
Traditional concepts of projection of knowledge are always less suitable for
setting up operations that are efficient, fast-learning and connected
worldwide.
New approaches should be found in order to consider the socio-cultural
environment of a country, integrate international best practices in new
manufacturing plants and transfer know-how efficiently in a network of
globally operating manufacturing plants. We shall now discuss different
approaches of dealing with planning of an overseas factory.
In the «state of the art» approach towards planning, the project
management team undertakes a key role as a generalist with high autonomy
of decision making while handling a plan. The management coordinates
team specialists of different divisions of the company. Recruiting key
personnel from other leading local companies as early as possible can be
very helpful while setting up operations in a foreign country. It is equally
important to review the allocation of roles while working in a team with a
local partner.
«Twinning» of management of both the partners in all the important
divisions of a company as well as in planning teams helps to integrate
different views. Even when it takes long at the beginning to make such
double allocations or mixed teams, it accelerates the overall planning and
implementation.
Traditionally, while planning a factory the subsequent operator replaces
the planner and finds himself in such an environment that it is either
difficult or impossible for him to participate if he has not been a part of the
planning process. The planners of the overseas factory should be aware of
the local environment and the involvement of local operators increases
motivation and ensures a plan that is feasible as the project team knows that
later on it is responsible for the execution of the plan.
Push versus Pull approach: It is important to abandon the know-how
provider’s «push system» (normally that of the parent company) under
which turn-key factories are centrally planned. Such a system does not
allow a person who is ultimately responsible for the operations enough
freedom in planning his work environment. On the contrary, in a pull
principle, the subsequent operators are also the ones who have to decide
which technology is best suitable under which circumstances. An important
advantage of the pull of know-how by the on-site project team is that the
transferred know-how is accepted locally and knowledge that is really
necessary is requested. The use of this principle creates advantages not only
while transferring knowledge to subsequent operators but also while
bringing the local employees together with their management. It is
necessary to structure an intensive exchange between the planning teams
and competencies linked worldwide during and after the planning phase in
order to transfer knowledge throughout the project.
Selection and training of employees is one of the most important
planning functions. The employees recruited during the planning process
should take up the role of pioneers who are in a position to pass on their
knowledge to their colleagues after undergoing a separate training for this
purpose. Therefore, it is necessary to send them to the country of the know-
how provider before starting subsequent operations in order to see and
understand the new company philosophy. Thus, as planners they can learn
new production system and works, for example by creating documentation
necessary for production in the language of their country/company. The
documents can thus be processed by those who are supposed to use their
own perceptions later in the operation. It is also customary that employees
in the production are able to practise a true-to-life imitation of all the
production processes of a vehicle in the simulators in training centres before
they start with the production. Thus, the necessary controls can be practised
without any time pressure.
One can also support the production process by producing the first
products in cooperation with experts of the know-how provider. This
ensures establishment of the «We» feeling right from the beginning and
those participating can identify with the product in a better way. The
arrogance of the know-how providers in doing everything better than the
local employees should be avoided. Perhaps it is easier to repair the defects
occurring in a vehicle rather than changing an unhealthy company culture.
In a nutshell, planning a manufacturing plant should involve a process
that integrates important elements of socio-cultural environment of the
country where the plant is located with the company philosophy and
production philosophy of the know-how provider.
Twinning and shadowing

Experts, colleagues or managers working in different contexts, countries,
subsidiaries, branches can learn from each other by carrying out work
together as «twins». For example, staff of the Cairo underground worked
together as twins with their Paris homologues in Paris and in Cairo. Thus
common understanding (tacit knowledge) about contexts was created and
advanced practices were transferred in close interaction.
In twinning the twins together take responsibility for their actions,
while in «shadowing» one partner follows the other like a shadow and
learns, reflects and discusses without taking responsibility.
6.1.6 Bridging the «Knowing-Doing» Gap in International

Service Organisations: Three Cases
Knowledge for Global Health: World Health Organisation
The increasing resources for international health aid and growing demand
to improve health systems offer an opportunity to foster health equity in
countries that need it the most. Many solutions are available to tackle the
health problems of the poor but these are not implemented, leading to what
is called the «know-do» gap: the gap between what is known and what is
done in practice. The mission of World Health Organisation (WHO)
Knowledge Management (KM) is to help by fostering an environment that
encourages the creation, sharing, and effective application of knowledge to
improve health.3
The KM strategy of WHO (shown in ◘ Fig. 6.4) focuses on national
policymakers, WHO programmes, and health professionals. The objectives
of the strategy cover three main areas:
– Strengthening health systems in different countries through better
knowledge management,
– Establishing KM in public health, and
– Enabling WHO to become a better learning organisation.
Fig. 6.4 Knowledge management strategy at WHO
In order to achieve these objectives WHO has defined the following

KM core functions:
Improving access to the world’s health information
1.
Support for WHO publishing. Publish, market and disseminate in
priority languages, relevant and high-quality information products
reaching a widespread, targeted readership in both print and electronic
formats. Establish publishing policies and guidelines to ensure
efficiency and quality of WHO publications.
2.
WHO flagship publications. Publish WHO global and regional flagship
products to communicate key issues and effective practices in the field
of public health. Major products include the World Health Report,
Bulletin of the WHO, regional medical journals, and regional director
reports.
3.
WHO network of libraries. Provide access for key audiences to
scientific and health information in print and electronic media via the
WHO library and initiatives such as, such as the Global Health Library
and HINARI.
4.
WHO Web communications. Provide multi-lingual access for millions
of users worldwide to WHO health information via WHO websites at
global, regional and country level. Provide guidance to health
authorities and other institutions on effective use of the internet and
web technologies.
Translating knowledge into policy and action
5.
Good practice and guidance on knowledge translation and scale-up.
Following on the recommendations of the Mexico Summit for Health
Research in 2004, identify and disseminate good practice in
translating health knowledge into policy and action.
6.
Build capability in KM methods in public health practice. Assist
public health communities to develop the capacity to translate
knowledge into policy and action in their local context.
7. Promote evidence for policy and decision making tailored for key
audiences, through programmes such as EURO’s Health Evidence
Network. Sharing and applying experiential knowledge
8.
Improve ability to share knowledge in public health through KM
processes. Employ KM techniques, including communities of
practice, to assist countries and technical programmes to manage and
use knowledge.
9.
WHO and Global Health Histories. Document and analyse significant
public health developments, milestones, trends and perspectives.
Develop expertise in extracting and applying the lessons learned in
public health.
10.
WHO Collaborating Centres. Improve the use of the knowledge held
by WHO Collaborating Centres through peer networks.
Leveraging e-Health in countries
11.
e-Health frameworks, guidelines and tools. Make available evidence-
based e-Health frameworks, guidelines and tools to support policy and
practice in health systems and technical programmes.
12.
e-Health services in countries. Provide technical assistance for
governance, monitoring and improvement of e-Health services in
countries.
13.
Country capacity building via ICT. Utilise ICT tools to build capacity
in the health sector in countries.
14.
Public-private partnerships in ICT. Develop and utilise public-private
partnerships in ICT to address priority issues in health systems and
technical programmes.
Fostering an enabling environment
15.
Foster a knowledge management culture. Promote a culture at WHO
and the public health sector that encourages the routine capturing,
sharing and application of knowledge to better deliver expected
results.
16. Develop and deliver KM training programmes to build WHO and
country capacity with emphasis on innovation, knowledge sharing and
country capacity with emphasis on innovation, knowledge sharing and
translation, and managing the reapplication and scaling-up of
successful interventions.
17.
Support countries, technical programmes and partners with KM
approaches. Work directly with countries, technical programmes, and
partner organisations to identify knowledge needs and opportunities,
to develop and implement KM plans.
Asian Development Bank (ADB): A Pragmatic KM Approach

At the 42nd Annual Meeting of the Board of Governors, ADB President
Haruhiko Kuroda stressed the importance of knowledge for an organisation:
«To be fully effective, we must also consciously and actively blend
knowledge with financing. We will focus on developing, capturing, and
sharing knowledge in all our work, ensuring that ADB serves an
intermediary role for both financing and knowledge».4
ADB’s plan of action for knowledge management connotes a pragmatic,
step-by-step approach. With the objective of enhancing Knowledge
Management under Strategy 2020, in July 2009 President Kuroda approved
actions/outputs to advance the knowledge management agenda for Asian
Development Bank. The strategy focused on four pillars:
– Sharpening the knowledge focus in all ADB operations,
– Promoting and empowering communities of practice for knowledge
generation and sharing,
– Strengthening external knowledge partnerships to develop and
disseminate knowledge, and
– Enhancing staff development programs to improve technical skills and
manage knowledge.
The Knowledge Management Results Framework is an important
instrument at ADB to assess and improve performance and help identify
problems and their solutions. It was prepared after extensive internal
consultations and is the basis for reporting. The highlights of the framework
are:
– Enhanced appreciation for ADB’s flagship knowledge products, such as
the Asian Development Outlook, Key Indicators for Asia and the Pacific,
and Asia Economic Monitor among many others.
– Launch of communities of practice and the establishment of regional
knowledge hubs, both adding to ADB’s growing array of knowledge
partnerships.
– Improved coordination mechanisms that govern cooperation between the
knowledge and operations departments, and encouraged development of
approaches such as the Technical Assistance Strategic Forum.
– Nomination of focal persons for knowledge management in the
operations departments, and establishment of knowledge management
units in several departments.
– New information technology solutions for improved knowledge sharing
in ADB, such as C-Cube and e-Star.
– Corporate-level recognition of knowledge management and learning by
inclusion of chapters on sector and thematic highlights, generating and
sharing knowledge, and independent evaluation in ADB’s annual reports.
– Transformation of the ADB library into a knowledge hub to encourage
knowledge networking.
The framework created the following structure to ensure smooth
implementation:
– Technical Assistance Strategic Forum at the regional level, to
coordinate the medium-term research and sector work among the
knowledge and operations departments.
– Country Partnership Strategies (CPS) will explicitly reflect
knowledge management as part of CPS formulation and implementation
at the country level.
– Teams at project level were created to identify how the project can be
designed to support rigorous impact evaluation, forge knowledge
partnerships, harness sector and thematic know-how, and encourage
learning and knowledge sharing.
World Bank «Knowledge Services»5

In the document «State of World bank Knowledge Services» the President
of the World Bank describes the rationale of the bank for engaging in KM
activities «The value the World Bank Group brings to our clients, and to the
world, is grounded in developing and sharing knowledge. Our financial
resources are significant—but they are finite. By contrast, knowledge is
potentially unlimited: the more it is shared, the more new ideas develop,
and the more improvement is possible. When strands of knowledge are
connected, the possibilities for increased prosperity and improvements in
human welfare multiply.
The more people know, the more they can expect, and the more they can
do. As we consider the ways the Bank Group will support development in
the twenty-first century, we understand that change and reform are dynamic
processes involving the active participation of all segments of societies. My
vision is for a World Bank Group that plays a catalytic role in linking up
data, information, and ideas with those in search of development solutions
—in ensuring that knowledge for development is readily available to
citizens, civil society, opinion makers, researchers, and government policy
makers at all levels. My aim is to sponsor a Bank Group that reaches out to
better encompass the experiences of successful developing countries— not
with ordered templates, blueprints, or prescriptions—but with inquiry,
innovation, cooperation, and openness.»
The Bank’s Knowledge Services
As the bank adapts its knowledge services to current demands, all three of
the bank’s knowledge roles are changing. As a knowledge producer, the
bank is doing less economic and sector work and more technical assistance.
Its research activities are becoming more open and collaborative, and
independent researchers worldwide are being empowered by access to the
bank’s open data and robust tools. As a knowledge customiser, the bank is
fostering more collaboration between and among bank teams, government
teams, civil society, and academia to apply global knowledge to pressing
development challenges. As a knowledge connector, the bank links
practitioners and development professionals across the globe. Increasingly,
the focus is on empowering non-state actors to press for greater
accountability through their engagement in public debate and policy
formulation (in the past the focus was primarily on state actors). Knowledge
activities exist not only as standalone services; they are also integrated with
the bank’s operations and underpin its lending activities.
Following the 2010 Knowledge Strategy and the bank-wide effort in
preparing this first Knowledge Report, the extent of the bank’s knowledge
activities is becoming clearer. But the bank has only one lens through which
to view its knowledge work – the management information system and the
defined knowledge «products» it captures. That system has its roots in
enterprise software developed to manage discrete or industrialised
processes, built on the notion that individual products have defined starting
and finishing points. This report deals mostly with the defined knowledge
products and how they are produced. But that presents an incomplete
picture of the bank’s knowledge activities. And even as we speak about
«knowledge products» and «product lines,» it is important to situate the
discussion in a broader universe of World Bank–sponsored knowledge
activities. These are as follows:
– Core knowledge activities funded by the bank’s budget or by trust funds
and subjected to one or another type of bank process for quality
assurance;
– Noncore knowledge activities prepared for other bank management
purposes (for example, country and sector strategies);
– Noncore knowledge activities for which the bank works within the
organisational goals of a partnership, but for which the partnership itself
retains responsibility for quality;
– Knowledge activities embedded in lending operations as part of project
preparation and implementation
6.2 Knowledge Management in SMEs

6.2.1 Coping with Turbulent Environments
Knowledge management is often associated with firms operating in multi-
locations with thousands of employees working on the same or similar
projects who need to share information in order to be responsive and
competitive in the market. But also SMEs need to manage their knowledge.
Small and medium-sized enterprises (SMEs) are part of a heterogeneous
universe of extremely diverse economic agents, whose characteristics vary
depending on the business sector they operate in, the markets they serve,
the products they produce and how involved and connected they are to the
macroeconomic context and support institutions (Latameconomy 2013).
Emphazing the social dimension we define a SME as «a small social
collectivity whose participants share a common interest in its survival and
engage in collective activities to secure this end» (Scott 1987 p. 23). North
and Varvakis (2016) argue that SMEs need to develop towards «Dynamic
SMEs» to cope with turbulent environments using their knowledge and
other resource. A «Dynamic SME» is characterised by five capacities:
1. It recognizes or anticipates changes in the environment and (re)acts to
them with high efficiency and speed,
2.
It actively exploits market opportunities,
3.
It develops a management approach of empowerment of employees and
fosters the entrepreneurial spirit of employees,
4.
It develops a high capacity for learning and innovation and integrates
learning on the job in to daily business
5.
It cultivates emotional intelligence which results in a culture attitudes
and behaviors of trust and collaboration.
To sustain competitiveness in turbulent environments, SMEs face major
challenges due to their limited human, organizational and financial
resources and capabilities. On the other hand SMEs are more flexible to
react to changing situations than big enterprises (Detarsio et al. 2016) but
they are also more vulnerable. Even if one employee separates, a significant
part of business expertise and experience is lost (for a review of KM in
SMEs see Durst and Edvardsson 2012; Massaro et al. 2016).
The small and medium enterprises (SMEs) focus on running the
business on a day-to-day basis and find no time to manage knowledge.
Formal «knowledge management» is therefore not a common terminology
that one hears in SMEs who perceive it as an «overhead». This could be due
to several reasons, some of which are listed below:
– SMEs are too busy with running the business on a day-to-day basis and
perhaps find little time to analyse it and retain the learning.
– SMEs already have a large enough informal network to enable people to
get the job done which also makes them more flexible. It is generally felt
that knowledge management is required only when there are a large
number of employees.
– Risk of separation of key employees is not perceived as a big threat due
to the informal network and the embedding of knowledge in the products
and services (Kumta 2008).
Awazu and Desouza have identified five peculiarities of knowledge
management at SMEs (Awazu and Desouza 2004) as:
– Dominance of socialisation in the SECI Cycle:
– Common knowledge: In SMEs, there is a prominence of common
knowledge in terms of both depth and breadth.
– Knowledge loss is not a problem: Some of the mature SMEs in our
sample had deliberate mechanisms in place to prevent knowledge loss
from becoming a problem.
– Exploitation of external sources of knowledge: SMEs have a knack for
exploiting foreign sources of knowledge.
– People centred Knowledge Management: SMEs knowingly or
unknowingly, manage knowledge the right way – the humanistic way.
Technology is never made part of the knowledge management equation.
Knowledge is created, shared, transferred through people based
mechanisms and immediately put into practice.
Significant research is the one undertaken by the West Midlands
Knowledge Management Centre in the UK. This centre is a regional
partnership between a university, local city council, and business support
agencies, which identifies and addresses the business support needs for
SMEs in developing their knowledge management practices. Based on
analysis of patterns in more than 100 small businesses that have used the
centre’s business education and support services, its research director John
Sparrow describes four aspects of knowledge management that feature
strongly in small firm knowledge projects (Sparrow 2001):
– Appreciation of personal and shared understanding: This is reflected in
management based on «management by perception». There is an ongoing
recognition of the meaning and interpretation of events by others. There
is strong evidence that businesses/owners do not act until there is
compelling reason or a fear of difficulties.
– Effective knowledge bases and knowledge systems: Typically small
firms are more ready to embrace technology when they have a good
grasp of the importance of information management.
– Integrated and contextualised action: The knowledge approach is
grounded in the way the small firm operates and is more strategic in its
view of knowledge. An important element here is capturing and utilising
intellectual property rights, with intellectual capital valuation being a
consideration at times of succession.
– Effective learning processes: Small firms are very social organisations,
yet owner managers may deliberately restrict diffusion of their core
knowledge to protect their firm’s competitiveness.
SME case studies from Australia (Hall 2003) suggest a relatively strong
level of interest and sophistication in KM strategies and in the practices
pursued by some SMEs. In general, the issues reported were no different
than those encountered by larger organisations. It was found that different
SMEs found different kinds and forms of knowledge valuable as compiled
in ◘ Table 6.1:
Table 6.1 Specific knowledge in different types of firms
Type of firm Most valuable form of knowledge

Accounting firm Expertise of senior staff and partners
Specialised and technical knowledge in procedures and manuals
Partnership style relationships with clients
Analytical knowledge, gained through experience
Risk management service Developmental and procedural
firm
Tacit knowledge of its employees
Market intelligence
Customer knowledge
Manufacturing firm Product knowledge, since a lot of knowledge is already a part of the
product
Process innovation knowledge
Technology upgrade has a dynamic rather than a static conception of
knowledge
SMEs need to use knowledge at two levels: (a) in day-to-day operations

and (b) at strategic level to define organisational goals.
SMEs need to broaden their customer base, add new products/services,
penetrate the domestic market, and strive for overseas expansion in order to
grow to the next stage of the lifecycle.
As a vibrant and increasingly competitive part of any economy, SMEs
are forced to innovate to remain competitive. This means constantly
searching for ways to improve products and services, develop new products
and introduce improved working methods.
6.2.2 Need for Harnessing Organisational Learning in SMEs
Most knowledge in a company is forgotten in relatively short time after it is
invented or discovered. In an SME the core knowledge is normally with
only one person who is the owner who deliberately or unconsciously retains
all the knowledge with him due to lack of time or fear of «theft» of idea.
Furthermore, SMEs cannot retain talent in a highly competitive market, as
they cannot match the salary «packages» of large corporate: «An
organization’s knowledge walks out of the door every night – and it might
never come back».
Organisational learning and personnel training are important activities
of a modern company. In larger companies these procedures are well
defined and thoroughly designed. In small and medium-sized enterprises
the learning is far less supported and explored. The experience people gain
during their employment is stored in their minds rather than in published
documents.
Succession planning and preserving organisational memory in the
event of attrition/death are two critical requirements for SMEs to survive in
a competitive and dynamic market (cf. Durst and Wilhelm 2012). SMEs
that don’t plan knowledge management measures to preserve organisational
memory are therefore taking the risk of decline/elimination.
All is fine when the enterprise is small and an informal network
provides all the knowledge required to execute tasks and evolve a business
strategy. But what happens when these enterprises see a dip in their sales
and yet want to move into global markets? They need to know how their
products/services evolved, what was the marketing strategy that succeeded
or the strategy that failed, the reasons for its failure, what are the global
challenges, what are the risks involved, and so on.
With a relatively low effort in KM these enterprises will be able to
manage risk (cf. Durst and Ferenhof 2016) and to innovate and constantly
search for ways by which they can improve products and services, develop
new products and improve work processes. It will be interesting to study
two distinct but interconnected knowledge cycles (Skyrme 2002).
Knowledge sharing cycle shows the processes associated with
gathering and disseminating existing knowledge, having a knowledge
repository as its focal point. This forms the basis of any knowledge
management strategy.
Innovation cycle represents a progression from idea creation, i.e.
progression of unstructured knowledge into more structured and
reproducible knowledge, embedded within processes, products or services.
If one views knowledge management in its broader context of exploiting
knowledge for the development and growth of a business, then the
innovation perspective is likely to be a more fruitful one in the small
business context.
KM in the SME Lifecycle SMEs experience a rapid rate of change as
they move through their organisational lifecycles. Each stage in the
lifecycle requires a different approach and emphasis on managing
knowledge. These unique characteristics determine how these enterprises
strategically manage knowledge. Researchers have defined a lifecycle stage
as a unique configuration of variables related to organisational context and
structure. A lifecycle stage can be defined as a loose set of organisational
activities and structures, (Dodge et al. 1994; Hanks et al. 1993; Quinn and
Cameron 1983).
SMEs are normally started through entrepreneurship which is a process
of creating value by bringing together a unique combination of resources to
exploit an opportunity. These organisations have a typical lifecycle starting
from a start-up phase to a maturity phase. Firms, however, do not go
through their lifecycle in a vacuum. Environmental context plays a large
part in determining the challenges faced by growing firms (Quinn and
Cameron 1983). Enterprises in various stages of organisational lifecycle
need different knowledge processes. We could broadly look at three main
stages initially to evolve a feasible KM strategy.
The birth stage marks the beginning of organisational development. The
focus is on viability. Decision-making and ownership are in the hands of
one, or a few who share the same vision. The organisational structure is
very simple with hardly any barriers for communication and knowledge
sharing.
After the initial stage the organisation sees an explosive growth where
each person is trying to bring in more business with no formal
organisational structure. It now becomes difficult to get all the employees
together and share knowledge. The focus is on growth and faster decision-
making. More skilled jobs are required, roles become more specialised and
decision-making needs to be delegated. This is where a change starts
happening in SMEs. Here, the knowledge no longer flows easily as neither
the owner nor the start-up group has time to discuss and create a knowledge
repository that can be used by others.
As the enterprise moves further ahead, the focus is on effective
management and efficient delivery of products and services. Job
descriptions, policies and procedures, and hierarchical reporting
relationships need to be much more formal. Formal organisational
structures are defined to serve wider markets. At this stage it becomes
imperative to create formalised structures and exploit its organisational
knowledge by converting ideas into productive services. Lack of a formal
structure at this stage can trigger the «demise» of the SME.
Diagnosis of problems facing an enterprise can be effective when the
analysis is based on the stage at which the enterprise is. This helps them
plan what will be required as the firm progresses from one stage to the next
in the lifecycle (Kazanjian and Drazin 1990). Each stage in the firm’s
lifecycle requires emphasis on different knowledge managing practices. The
need for a formal knowledge management programme does not come until
quite late in the overall evolution.
6.2.3 Knowledge Management Strategies of SMEs

The success of any KM initiative is determined by its impact on the
organisation’s performance (Handzic and Hasan 2003). It is often said that
one should not take a «one size fits all» approach to knowledge
management. A critical starting point for a successful KM initiative is a
clear KM vision, which is aligned with the overall business strategy of each
organisation. KM tends to be driven by business strategy – innovation and
succession planning. It is built on efficient business processes and
supported by people, organisational structures and information technology.
A KM strategy should seamlessly intertwine people, processes and
technology. Though it is difficult to evaluate the return on investments in
knowledge management most organisations, including SMEs feel that there
are significant payoffs associated with KM initiatives (see ◘ Fig. 6.5).
Fig. 6.5 Knowledge management framework (Source: Kumta and Mukherjee 2010)
The Asian Productivity Organisation (APO, see box below) defines and
provides guidance for using simple and practical means of KM to support
the SMEs.
– To satisfy Existing Customers and Attract More Customers.
– To Improve Productivity and Quality of Products, Services, Processes.
– To Develop New Products and Services (Accelerate Innovation).
– To Develop Skills/Motivation/Teamwork among Employees.
– Regardless of sector, size, structure or maturity, organisations need to
establish an appropriate management system to be successful.
Within such a management a «Knowledge Management process» needs
to assess three major components (Kumta 2008):
– Business processes– do these help or hinder knowledge management;
– Infrastructure – the support required putting in place the «process»
element to make knowledge management happen. This includes an
organisational structure, an enabling technology and a content
management strategy.
– Environment – A sharing culture and an environment that facilitates
sharing.
In addition to the internal processes, knowledge in terms of
environmental updates is required to support the development of SMEs.
Being small in nature they need to know the environment in terms of
government policies, standards, subsidies, development schemes, growing
market space, avenues for financial help and procedures that would save
time and eliminate reinventing the wheel.
KM supports and enhances the way the business operates. It does not
replace one’s strategy setting, but the strategy itself will be flavoured
differently if one adopts a KM mindset. «KM will simply become M, a way
of managing the business» (Bhatt 2000).
However, compared to large organisations, the successful SMEs were
distinctive in the sense that they tended to be relatively agile, well
integrated into international, national, professional and industrial
associations and networks, and ready to learn from customers, clients,
competitors, suppliers and providers (Handzic 2006). Knowledge was seen
as information that could be used to act. It had to be in the form that is
accessible, relevant and ready to use.
KM resources for SMEs

To support knowledge Management in SMEs the Asian Productivity
Organisation (APO) has developed a series of three very useful
publications:
– The Practical KM guide for SME owners and managers
– Knowledge Management Tools and Techniques Manual. This manual
is also available on a website, as an example of a «living knowledge
base», in other words, as a wiki, for you to input and share your
experiences, and to receive your feedback and comments at ► http://
sites.google.com/site/apokmtools/home/.
– Knowledge Management Case studies for SMEs
Download the manuals from: ► http://www.apo-tokyo.org/00e-
books/IS-44_Practical-KM-Guide-for-SME-OwnerManager.htm
Videos on KM tools for SMEs can be found in the YouTube Channel
«Dynamic SME»: ► https://www.youtube.com/channel/UCiBV_
MUbzW1zDNdqBFlXbUQ
(for a review of KM Tools for SMEs see also North and Babakhanlou
2016)
6.2.4 Framework for Effective Implementation of KM in
SMEs
Many SMEs have always regarded knowledge as the lifeblood of their
organisation and have managed it effectively, often just through the usual
sharing of knowledge that occurs naturally in small organisations where
structures are flat and communication is part and parcel of daily operations.
Empirical studies have shown that while the SMEs use a similar range of
techniques and strategies for KM as those employed by larger firms (e.g.
mentoring, maintaining databases for lessons learnt, standardising business
processes), these are organised on a less formal basis.
Implementing a knowledge management strategy can initially appear to
be a daunting and overwhelming task. The initiator often has some basic
questions in his mind, more specifically in the SMEs.
– Where do I begin?
– How do I ensure the process is managed correctly?
– Should I use sophisticated technology?
– How do I measure the effectiveness of my knowledge management
solution?
In recent times, there have been a number of efforts at developing KM
frameworks to understand KM phenomena. In order to make sense of the
variety of existing KM frameworks they have been categorised into
descriptive and prescriptive frameworks. Descriptive frameworks attempt to
characterise the nature of KM phenomena, while prescriptive frameworks
attempt to direct methods to be followed in conducting KM (Standards
Australia 2003).
David J Skyrme states, «In my own experience there are other
determinants that guide when it makes sense to embark on a formal
programme in an SME»:
– The overall size of the business – If the personnel strength is less than 50,
most staff will probably know each other fairly well; it probably
therefore does not make sense to implement KM formally.
– Degree of dispersion – if the organisation is based at several locations,
even when there are less than 50 employees, there are benefits achieved
by putting key information into a shared repository.
– Number of distinct core documents – The repository may be able to
handle only around 1500 documents efficiently. Beyond that, the
retrieval of documents becomes time-consuming and ineffective.
– Knowledge-intensity of business – In organisations like legal firms,
consultancies, engineering, that blend high degree of internal expertise
with outside knowledge, the benefits of knowledge management are
more immediately obvious (Kogut and Zander 1992).
The following are three key phases in developing and implementing
KM as suggested by Standards Australia (2003):
– Understanding the context (Vision, business strategy and the lifecycle
stage) for knowledge management,
– Conducting a knowledge gap analysis with reference to the business
strategy,
– Facilitating «knowledge in action» plan to explore and exploit
knowledge to achieve the business strategy.
Most organisations develop their strategy around a well-recognised
business model and it is therefore logical to map KM issues to a recognised
business model. In order to be successful, organisations need to establish an
appropriate management framework regardless of sector, size, structure or
maturity.
The EFQM Excellence Model is a non-prescriptive framework based on
nine criteria. Five of these are «Enablers» and four are «Results». The
«Enabler» criteria cover what an organisation does. The «Results» criteria
cover what an organisation achieves. «Enablers» cause «Results» and
«Enablers» are improved using feedback from «Results».
Based on findings from SME case studies and related research one
could conclude that knowledge management frameworks for SMEs should
focus on key imperatives such as (Kumta 2008).
– Translation of individual knowledge held by key personnel into
organisational knowledge through:
– Embedding routine process and procedural knowledge into standard
operating procedures,
– Codifying implicit knowledge through «lessons-learnt» programmes,
– Drawing on deep tacit knowledge through mentoring programmes,
and
– Using case studies as a means of knowledge transfer (Hall 2003).
– Generation of new knowledge and ideas leading to innovation which
when exploited result in proposals for new products or services, new
clients and improved business processes. This is a more free-flowing
approach and is encouraged by the culture in the organisation.
– Creation of an eternal learning environment from concepts to practice to
cope with new business processes, new products, the ever-changing
business environment, and an increasingly dispersed workforce. E-
learning will facilitate this process by drawing training content from
frontline business applications in addition to providing modules on
concepts.
– Providing access to external portals giving information about standards,
regulations, statutory requirements, procedures and best practices. This
will help build partnerships and networks that will support the business
(Kumta 2008).
The relationships are summarized in ◘ Fig. 6.6.
Fig. 6.6 Knowledge repository (Source: Knowledge Management Integrated: Concepts and
Practice, Heidelberg Press)
A key point that results from research is that the more «formal»
knowledge management approaches of large firms should not be imposed
on small businesses. Sparrow reports that in contrast to large firms, small
firms benefit from the perspective of understanding their business in
knowledge terms, i.e. the emphasis on the development of knowledge as a
lens (as opposed to a knowledge management system) together with the
emphasis on knowledge system principles (as opposed to ICT knowledge
system elements). Many of the high value-added SMEs are likely to be
knowledge intensive, either in the processes they deploy or the products and
services they produce and sell.
Both internal and external sources of knowledge are important to
entrepreneurs Internal knowledge comes from reorganising, accidents,
experiments, and inventiveness. External knowledge comes from new
people, acquisitions, joint ventures and social networks (Kogut and Zander
1992).
In developing the KM strategy, the focus should be on three key points
to ensure its success:
– Map a knowledge management strategy to the business strategy based on
a Business Excellence model.
– Similar to six-sigma concept, KM initiatives should be treated as projects
and designed to help solve business issues, such as improving customer,
employee, or partner relationship management, accelerating innovation,
or improving a process to reduce cost and turn-around time.
– KM systems should start from people processes and use technology only
to enable them.
Establishing a KM strategy can be much less daunting if one looks at
KM as organising, locating and reusing actionable information. The KM
initiative will depend on the lifecycle stage in which the organisation is and
its future growth plans. The need for formal knowledge management comes
in quite late in the overall evolution of the firm (Kumta and Mukherjee
2010).
Through the KM strategy of personalisation, SMEs will able to leverage
upon its tangible and intangible assets, to learn from past experiences,
whether successful or unsuccessful, and to create new knowledge (Hussain
et al. 2010). The KM strategy needs to be implemented at three different
levels in SMEs,
– People level: KM needs to emphasise on the competencies, education
and learning abilities of organisational members to create KM awareness
and make them more creative and innovative.
– Organisational level: KM is related to the development of a visionary
leadership and a sound organisational culture to ensure maximum
sharing of innovative and creative knowledge (Chan and Mauborgne
2003). Chan and Mauborgne also suggested constructive leadership
behaviour and development of a healthy organisational culture as
important enabler of KM.
– Technology level: Effective KM requires the efficient organisation of a
suitable communication and information infrastructure based on suitable
and relevant taxonomies and knowledge repositories.
Though commercialising knowledge is an important role of
entrepreneurship, there are many challenges in doing it effectively (Bird et
al. 1993).
6.3 Knowledge Management in the Public Sector

6.3.1 New Public Management
Knowledge management is increasingly gaining attention in the public
sector. This is due to an ever-increasing pressure to improve efficiency and
effectiveness, together with a growing awareness for the importance of
sharing knowledge across government organisations in maintaining a
government overview perspective on policy making and service delivery
(c.f. O’Riordan 2005; McEvoy et al. 2015; Massaro et al. 2015).
In general terms, the public sector consists of governments and all
publicly controlled or publicly funded agencies, enterprises, and other
entities that deliver public programs, goods, or services (► www.
globaliia.org/standards-guidance, p. 3). Boundaries between «public» and
«private», however, are becoming increasingly blurred. Privatization,
delegation of public power, the joint public-private provision of services,
usually regarded as «public», as well as institutional rearrangements, are
making the identification of the public sector difficult (APO 2013). Follow
the approach of «New Public Management» many public organisations
have implemented managerial processes and metrics from the private
sector.
Administration, health care, education, security, ministries and
parliaments are naturally incentivised to turn to knowledge management:
Every citizen should have access to information, consultancy services and
competent contact persons. Labour administrations would like to make their
knowledge regarding job markets, training and advanced training as widely
accessible as possible. Public services are often relying on standardised
processes, which ease exchange of experience and transfer of «best
practices». The findings of the Program for International Student
Assessment (Pisa Study) show how important this is in the educational
sector too, as the exchange of successful pedagogic concepts across
schools, didactic preparation of specific contents, supervision and tutorials
on new technical developments are required in all faculties.
Cooperation between various service providers, advanced training of
doctors and specialists in health care, insights into the effectiveness of
medicines, and online counselling of patients are just some of the topics
which highlight the significance of a systematic management of knowledge
in the health care sector (see Nicolini et al. 2008).
Under the key term «New Public Management», we find a wide range
of initiatives for adopting the management methods of the private sector in
the public sector, to achieve an increased customer orientation and
efficiency. Knowledge management is an important element for informing
responsible citizens in a transparent way and providing high quality and
effective services.
Take the example of Taphanhin Crown Prince Hospital in Thailand,
which adopted KM in response to pressing needs to improve productivity
and to maintain service quality as the average workload of doctors reached
65 patients per day. The hospital has significantly decreased customer
complaints and error rates through the KM initiatives that utilized high-
contact methods such as communities of practices, after-action review,
storytelling, and capturing of lessons learned (APO 2013, p. 7).
6.3.2 KM Challenges in the Public Sector

The OECD (2003a, b) emphasises, in their study on knowledge
management practices in the central governments of member states, that
government organisations have different strengths and weaknesses
compared to private companies in relation to the management of
knowledge. The pressure of competitiveness and the incentives to lower
costs traditionally have been less important. In addition, outcomes are
typically less clear and less measurable. In addition, management structures
tend to be more hierarchical which provide fewer incentives for innovation
and teamwork. It is also argued that in many countries motivation and
reward systems within the civil service do not encourage knowledge
sharing (cf. Syed-Ikhsan and Rowland 2004). In their study on the role of
KM in enhancing government service delivery in Kenya, Ondari-Okemwa
and Smith (2009) identify the culture of «secrecy» in most African
governments as one of the challenges of KM in the public sector. They
claim that this culture of secrecy is exemplified by the Swahili word for
government «serekali», which means top secret.
Some further challenges for practicing KM in the public sector are
rooted in a rule-based culture that seeks compliance rather than
entrepreneurship, innovation and improvement (c.f. Taylor and Wright
2004). As changes emanate predominantly from government policies, they
are perceived to be imposed, and consequently received as an increase of
workload in an environment of scarce resources.
Some of the common challenges that affect public sectors worldwide
include enhancing efficiencies across all public agencies, improving
accountability, making informed decisions, enhancing collaboration and
strategic partnerships with stakeholders, capturing knowledge of an aging
workforce, as well as, improving operational excellence. (APO 2013, p 3.)
The loss of professionals and in turn their experience and expert knowledge
is progressively becoming a relevant problem for all organisations
particularly in cases where there is large-scale retirement.
Knowledge management also plays an imperative role in providing
strategies and techniques to manage e-government content to make
knowledge more usable and accessible.
However, the greatest challenge to public-sector organizations lies in
their natural inheritance of a mindset of compliance in administration.
Furthermore, organizations must bear the periodic discontinuity of
leadership in public-sector term appointments (APO 2013, p.1).
In ◘ Table 6.2 challenges and implications for managing knowledge in
the public sector are summarized (North 2017).
Table 6.2 Challenges and implications for managing knowledge in the public sector
Challenge Implications for managing knowledge in public

sector
Public-private partnerships and new Adoption of private sector management and knowledge
public management sharing practices
Hierarchical leadership and few Knowledge sharing is not valued in the organization
incentives to transfer knowledge
Waves of massive retirement Loss of knowledge, opportunity to «forget» obsolete
knowledge
New officials «Facebook generation» Different ways of learning and working, opportunity for
enter new ideas and change
Vacant posts for longer periods Impossibility of direct transfer of knowledge between
predecessor and successor
Challenge Implications for managing knowledge in public
sector
Shortage of personnel and resources Shortage of time for documentation and knowledge
sharing
Many new topics to master «Partial ignorance» on many topics
Information and communication systems Lack of availability and easy access to up-to-date and
outdated and underused well-prepared information for users
6.3.3 KM Practices in the Public Sector

Integration of KM in Public Sector Management Systems As «New Public
Management» and e-government gain acceptance around the globe, KM
practices increasingly take root in public sector organizations. In this
context KM is integrated into business excellence models adopted by public
agencies. A case in point is the Common Assessment Framework (CAF). It
is a total quality management tool developed by the public sector for the
public sector, inspired by the Excellence Model of the European Foundation
for Quality Management (EFQM®). It is based on the premise that excellent
results in organisational performance, citizens/customers, people and
society are achieved through leadership driving strategy and planning,
people, partnerships, resources and processes. The CAF aims to be a
catalyst for a full improvement process within the organization and also
facilitates bench learning between public sector organisations (CAF 2013).
CAF sub-criterion 4.4 «Manage information and knowledge» defines a

number of practices which organizations are asked to evaluate and improve:
1.
Developing systems for managing, storing and assessing information
and knowledgein the organisation in accordance with strategic and
operational objectives.
2.
Ensuring that externally available relevant information is acquired,
processed, used effectively and stored.
3.
Constantly monitoring the organisation’s information and knowledge,
ensuring its current and future needs of stakeholders.
4. Developing internal channels which cascade information throughout
the organisation to ensure that all employees have access to the
information and knowledge relevant totheir tasks and objectives
o at o a d ow edge e eva t tot e tas s a d object ves
(intranet, newsletter, house magazine, etc.).
5.
Ensuring a permanent transfer of knowledge between staff in the

organisation (e.g. mentorship, coaching, written manuals).
6.
Ensuring access to and exchange of relevant information and data with
all stakeholders in a systematic and user-friendly way, taking into
account the specific needs of all members of society such as elderly
people, disabled people, etc.
7.
Ensuring that key information and knowledge of employees is retained
within the organisation in the event of their leaving the organisation.
In addition to overarching Organizational Excellence Frameworks (such
as CAF) management standards provide guidance on the integration of
KM in management systems. ISO 9001:2015 quality standard integrates
quality, risk, and knowledge management. ISO 9001:2015 now follows the
same overall structure as other ISO management system standards, making
it easier for anyone using multiple management systems (for more detail on
the standard see ► Sect. 9.2.2)
Organizational Culture and Leadership Practices Riege and Lindsay

(2006) argue that a main driver for the adoption of KM initiatives in public
services is the change of organizational culture which is closely related to
leadership and human resource management practices. Based on their study
on the food security and nutrition industry in Cambodia, Vong et al. (2016)
conclude that information quality, organizational commitment, and top
management support influence knowledge sharing within the public sector.
A study from Ghana Boateng and Agyemang (2016) found that mutual
trust, respect and care for one another, the quest for organizational success
as well as education and experience level of employees are the significant
factors influencing knowledge sharing in the Afigya Kwabre District
Assembly. Jain and Jeppesen (2013) conducted an empirical study about the
relationship between cognitive styles of leaders and knowledge
management practices in the Indian work context. The results show the
relevance of the «adaptor style» of thinking versus an «innovative-
collaborator» style, in promoting knowledge management practices, which
is consistent with the prevailing public sector work norms in India, which
do not support any radical changes in their ways of working and solving
problems.
Process standardization and service platforms Managing knowledge is

directly related to service delivery based on well-defined and standardized
processes oriented towards internal or external customers. Many countries
have developed activities to make information and knowledge available to
citizens. Processes are being re-engineered to put in place improved, value-
for-money processes that will reduce waste and duplication, producing an
effective «customer experience» (PWC 2007). In 2001, the Canadian
government developed a one-stop shop website: a single centralized point
of entry for citizens to most federal websites . In 2005, this was extended to
the whole of government to become the Government of Canada portal and
became a part of a larger, cohesive strategy for a knowledge-based
economy and society. At the same time, Service Canada introduced their
portal to provide citizens access to a wide range of government programs
and services (Dalkir 2016). In Europe Personal Service Numbers (PSN)
such as the «115» in Germany are established in 13 EU Countries. The PSN
offers the citizen of a country, region or city a single access number to
enquire about public services or apply for them. The implementation of
PSN requires the harmonisation of terms used for public services and the
standardization of processes in the public administration (Heisig 2016).
Best Practice Sharing and Learnig Activities to improve service delivery

are often accompanied by platforms and networks within and across
organizations and countries to learn, to identify and to share Best Practices.
There is, for example, the «Share-PSI» network. It is the pan European
network offering advice on implementation of the European Directive on
the Public Sector Information (PSI). It comprises many of the government
departments responsible for implementing the (revised) PSI Directive
across Europe along with standards bodies, academic institutions,
commercial organisations, trade associations and interest groups (►
https://www.w3.org/2013/share-psi/). In order to understand, compare and,
learn across agencies «benchmarking» and «benchlearning» initiatives have
been launched. Learning is not limited to the above organizational
arrangements. Initiatives such as «colleagues learn from colleagues»,
exchange forums, lessons learned exercises and after action reviews are
further effective means of knowledge sharing, learning and reflecting.
Knowledge Transfer across Generations As many public organizations

face massive retirement of experienced officials, on an operational level
KM practices to retain experiences and knowledge of leaving officials are
becoming popular. International Enterprise Singapore, for example, have
successfully retained knowledge of officers who moved to another
department, or left, or retired through the method that they called RACK
(retention of all critical knowledge) within the organization. These resulted
in maintaining and improving the quality of their knowledge- delivered to
Singapore-based companies to promote international trade. (APO 2013, p.
7). The Welsh Government (United Kingdom) has taken a similar approach
with their «Headstart» initiative (see case study below).
KM practices result in an improvement of accountability and mitigation of

risk by making informed decisions and resolve issues faster, supported by
access to integrated, transparent information across all organizational
boundaries. Fourth, KM contributes to deliver better and more cost-
effective constituent services such as enhancing partnerships with, and
responsiveness to, the public, thereby clearly demonstrating a higher return
on taxpayers’ money. Partnerships with stakeholders such as private
industry and community organizations are critical to developing effective
public policy (cf. Riege and Lindsay 2006).
Case Study
«Headstart» – Transferring Valuable Knowledge in the Welsh
Government
When staff leave a team they take with them the valuable knowledge,
experience and contacts they have built up during their time there. The
team, and organisation, suffers if this knowledge is not shared before they
leave. Estimates suggest it takes up to six months before staff taking on
additional duties, or a new recruit, contributes effectively to the
organisation.
Headstart is a process line managers are encouraged to use (if
appropriate) to capture the knowledge held by an individual within their
team who is leaving (either to another department or the organisation as a
whole). The focus is on capturing the less tangible elements of how an
individual does their job, i.e. through their experience and know-how,
therefore not necessarily easily written down within more traditional
methods, such as desk instructions or handover notes. Headstart doesn’t aim
to replace these traditional methods of capturing information but to
supplement them.
Should I Conduct a Headstart Discussion?

There are a few simple questions that you can ask yourself to determine if
going through the Headstart process is optional, recommended or important.
The decision tree below can be used by managers to determine if going
through with a Headstart discussion is optional, recommended or important:
What do I Need to do Next?

If it has been decided advantageous to conduct a Headstart discussion, there
are three steps it is recommended that are followed in order to complete the
process. These are:
1. Early preparation: Start planning the Headstart discussion as soon as
you know a staff member is leaving. Identify who in the organisation
might benefit from the staff members knowledge and what they will
need to know. It’s not only you, as line manager, that would benefit
from capturing a staff member’s knowledge, maybe other team
members or stakeholders have questions for the leaver also.
2.
The discussion: Prepare for the discussion by reviewing the key tasks
the individual undertakes, use the job description or PMR. This will
help you structure the discussion around how the individual goes about
those tasks, what knowledge and skills are needed, any problems or
pitfalls to be aware of and so on. It is recommended you go through the
Headstart process face-to-face, but don’t spring it on the leaving staff
member. Share the process (and questions) with them, so that they can
adequately prepare.
3.
Using the knowledge gathered: Be clear who will make use of the
knowledge collected and how it will be used, before you begin to
gather it. The purpose of the discussion is not to capture all knowledge,
but to gather knowledge that will be used. Consider the value – some
topics will be of greater value than others. For the process to be
worthwhile, something active needs to be done with the outcomes.
Some of it, for example key contacts, can be easily exploited. Other
information can be used to populate an induction pack, handover notes,
or other documents. However, making use of the intangible knowledge
around problem solving and lessons learnt also need to be considered.
Source: Headstart guide, Welsh Government, Murphy (2017)
6.4 Managing Knowledge at a Country or

Regional Level
6.4.1 Tangible Versus Intangible Assets
The quality of society is largely determined by its capacity to generate
genuine learning and working together and to produce new visionary
knowledge. This being the case, our society imposes entirely new
requirements on work methods, work cultures, information validity, media
literacy, etc. (Markkula 2010). Further, digitalisation and globalisation have
changed business processes rapidly. Measuring this capacity is a
prerequisite for having the intellectual capital high on the political agenda
of the decision-making processes of nations.
The old paradigm of the Wealth of Nations which was focused on the
tangible assets is now moving towards a new economic landscape based on
intangibles, in terms of Knowledge. Today we see that the dimensions of
what nations spend on welfare, health, education, R&D, or security at
macroeconomic level are more and more intangible. Every innovation step
starts with a small spending on intangibles. Sometimes this is referred to as
«soft» dimension such us culture and values. In Japan they had coined this
in Soft Economics way back in the 1980s. Today METI in Japan is calling
this Intellectual Asset-based Management (Lin and Edvinsson 2011). But to
a large extent the mapping is still done based on the tangibles. The
knowledge gap or ignorance on the value of intangibles is still huge. So we
need both a new perspective and new metrics for the mapping.
Today we have a lot of data as well as contextual reports for a deeper
understanding of the role of Intellectual Capital of nations for future wealth
creation. It is starting to reveal an ecosystem of both, drivers for the Social
Capital as the larger holistic perspective, as well as new softer dimensions
of Mind set, Culture and Values of Nations. The ability of a nation to use
and create knowledge capital determines its capacity to empower and
enable its citizens by increasing human capabilities.
Investments in information technologies may not necessarily correlate
with increases in performance, (Strassmann 1997). Hence, in all such
contexts, the emphasis should not only be on investments in relevant
technologies, but effective utilisation of such technologies, keeping in
perspective the outcomes driven focus of intellectual capital. This shift in
perspective would certainly bring the focus closer to performance.
A study of the Skandia model for measuring Intellectual capital would
help in evolving a strategic KM framework for a country. The model
attempts to provide an integrated and comprehensive picture of both,
financial capital and intellectual capital. Generally, national economic
indicators supported by hard quantitative data are used for examining the
internal and external processes occurring in a country. In this model, there
are four components of intellectual capital: market capital (also denoted as
customer capital), process capital, human capital, and renewal and
development capital. In the context of the national intellectual capital
assessment:
– Financial capital reflects the nation’s history and achievements of the
past,
– Process capital and market capital are components upon which the
nation’s present operations are based,
– Process renewal and development capital determines how the nation
prepares for the future, and
– Human capital lies at the crux of intellectual capital. It is embedded in
capabilities, expertise and wisdom of the people and represents the
necessary lever that enables value creation from all other components.
The key determinants of hidden national value, or national intellectual
capital, are human and structural capital. The framework is depicted in the
following ◘ Fig. 6.7.
Fig. 6.7 Skandia framework for National Intellectual Capital (Adapted from the Skandia model for
measuring intellectual capital (Hess 2006))
It is therefore necessary for a nation to build its human and structural

capital to enhance its capacity and empower and enable its citizens.
Governments should begin to undertake information and knowledge audits
of the resources available and the ways in which they can be deployed to
achieve competitive advantage (Durrant 2001).
Case Study
The Manifesto of «The New Club of Paris» on the Knowledge Society
and its Economic Foundations Extract
Our society is undergoing a dramatic transition from the industrial &
amp; information age towards a new era of brainpower industries,
associated with upheavals in the global structure of the economy and
accompanied by far-reaching demographic shifts and a transformation of
social systems.
– A major challenge of such changes is that our economy is increasingly
transforming into an «intangible» economy which is described as a
«knowledge based economy».
– Indicators of this development at the time when this manifesto is issued
initially are:
1.
The new relation between material (e.g. manufacturing) and
nonmaterial (e.g. services) resources;
2.
The sharing of commonly available knowledge such as open source
information;
3.
The insight that global competition can lead to rapid relocation of
economic activities such as software, media creativity, healthcare
and «mind-intensive» industries;
4.
The radical change in work structure causing everyone to
continuously change profession and type of employment throughout
their working life, inducing lifelong learning and flexibility;
5.
The increasing «knowledge divide», within societies, as well as
among nations on a more global scale.
– Intellectual capital (comprising assets such as human abilities, structural,
relational and innovation capital, as well as social capital) founded on
clear, practiced values such as integrity, transparency, cooperation ability
and social responsibility, constitute the basic substance from which our
future society will nurture itself.
► http://new-club-of-paris.org/mission/
6.4.2 Attracting Talents to Regions

Regions with a high percentage of people employed in knowledge-intensive
occupations have a higher per capita Gross National Product (GNP) than
comparable regions (Lisbon Council policy brief: Ederer/Schuller/Wilms
2011). Knowledge work is becoming the growth engine of the region. The
«Creative Class» (Florida 2002) has high purchasing power, is mobile and
is well-informed. Regions worldwide have recognised this and are courting
the best talents. The lack of qualified personnel, predicted with the
demographic development, can be reduced in regions which manage to
attract knowledge workers. The motto is «Brain gain» instead of «Brain
drain». ◘ Figure 6.8 shows the factors which make a region attractive for
knowledge workers. The availability of well-educated qualified personnel
encourages the establishment of knowledge-based companies which in turn
adds value to the region thus leading to a virtuous circle. In order to use this
potential in a planned manner, metropolitan regions across the world have
started adopting strategies for developing into a knowledge region by
promoting research and development and training of skilled personnel, and
linking companies, research and educational institutions. Florida’s three
T’s: «Technology, Talent, Tolerance» form the characteristics of a creative
region.
Fig. 6.8 What makes a region attractive for knowledge workers (Source: Based on Florida (2002),
Montreal Knowledge City Advisory Committee (2003), Yigitcanlar et al. (2007))
Case Study
Indias National Knowledge Commission
For India to be globally competitive in the twenty-first century, a critical
factor would be the ability to harness the knowledge potential. To make the
best of the opportunities and respond to global challenges more strongly
than ever before, the National Knowledge Commission (NKC) was
constituted on 13th June 2005 as a high-level advisory body to the Prime
Minister of India, with a mandate to guide policy and direct reforms.
NKC’s overarching aim is to transform India into a vibrant knowledge-
based society. This entails a radical improvement in existing systems of
knowledge as well as the creation of avenues for generating new forms of
knowledge In view of this, NKC developed appropriate institutional
frameworks to strengthen the education system, promote domestic research
and innovation and facilitate knowledge application in sectors like health,
agriculture, and industry. It also highlighted the need to leverage
information and communication technologies to enhance governance and
connectivity. Its prime focus was on the on five key areas of the knowledge
paradigm:
– Access to knowledge: Enhancing access to knowledge
– Knowledge-concepts: Reinvigorating institutions where knowledge
concepts are imparted
– Knowledge-creation: Creating a world class environment for creation of
knowledge
– Knowledge application: Promoting applications of knowledge for
sustained and inclusive growth
– Development of better knowledge services: Using knowledge
applications in efficient delivery of public services
The methodology followed by the National Knowledge Commission
involved
– Identification of focus areas through wide consultation, within and
outside the government
– Identification of diverse stakeholders in these focus areas
– Constitution of Working Groups of specialists and practitioners to
deliberate and prepare a report.
– Organising workshops and seminars periodically along with informal
consultations with concerned entities and stakeholders to get as broad-
based a point of view as possible.
– Communication of key recommendations to the Prime Minister
– Widespread dissemination of NKC recommendations to state
governments, civil society and other stakeholders
– Implementation of the recommendations under the aegis of the Prime
Minister’s office along with coordination and follow up with various
implementing agencies.
6.4.3 Knowledge Management for Rural Development

C. G. Hess (2006) in his paper Knowledge Management and Knowledge
systems for Rural Development has brought out different perspectives for
the rural segment. This segment requires knowledge networks, forums that
facilitate exchange of learning, network of development agencies that can
provide advisory services and technical co-operation which facilitates
exchange of knowledge among various stakeholders in the value chain.
Here Hess identifies that social, linguistic and cultural barriers impede
effective communication between rural producers and outsiders which
results in the clash of knowledge systems in many rural technology co-
operation projects (Hess 2006). Agricultural experts acquire knowledge
which is generated in formal educational settings (schools, universities,
research institutes) and circulated through the global network of
professionals, institutions and publications (Warren and McKiernan 1995)
while farmers acquire knowledge by practice, trial-and-error and experience
and usually receive little formal education.
An analysis of the maladies afflicting rural areas has brought out the
need to develop an information and knowledge-led rural economy in order
to promote rural prosperity. It has been found that knowledge transfers
between and across rural communities, scientists, educators, administrators,
health care providers and access to information on matters such as farming
methods, health issues, rural credit and entrepreneurship opportunities
could play a crucial role in such a process. The ancestral knowledge
embedded in traditional crafts and agricultural methods needs to be
captured and shared as some of these cannot be replaced by technology.
Example
KM Toolkit for Local Government Organisations
The Knowledge Management Toolkit has been developed to help
local government organisations generate value from their intellectual and
knowledge based assets. This value is unlocked when knowledge is
shared across an organisation, among employees and departments and
even with other organisations. In most organisations there are two types
of knowledge assets:
– Information that the organisations hold and this can include business
plans, client lists and databases. As a good rule of thumb this
information can be stored either electronically or on paper.
– The more elusive asset is the knowledge, skills and experience that is
in the heads of employees, which is often the most valuable asset that
an organisation holds.
The major difficulty with unlocking this value is to work out an
effective methodology to recognise, generate, share and manage that
knowledge. This toolkit has been developed to assist organisations to
identify their knowledge based assets and suggests strategies for
sharing that knowledge across the organisation. This toolkit has been
designed in two parts.
– Part One offers key definitions and knowledge statements that will
help you to develop the skills necessary to undertake a knowledge
management project and to determine how well your organisation
manages its knowledge.
– Part Two contains six modules. By working through these you will
help your organisation to move from being knowledge blocked to
knowledge centred.
The how-to-guide comprises six modules and a number of
checklists. Each of these modules will help local organisations to
increase their capacity and success at harvesting the knowledge
within, and potentially available to, their organisation.
Source: Australian Local Government Association ALGA 2004.
► http://www.alga.asn.au/?ID=138
– Knowledge-based management of a company in the international
contexts poses two major challenges-integration of geographically
scattered knowledge and complexity in acquiring, developing,
transferring, using and safeguarding knowledge in the international
context.
– Doz et al. described three approaches viz. projection, integration and
orchestration. From the projection viewpoint, it is the function of
management to find a balance between blind transfer of experience from
the home country and over-conformity to the local conditions. This
balance can rarely be determined beforehand. Integration not only
involves learning from one’s own company worldwide but also from
outside. Orchestration, in extreme case, means teamwork of units of a
company, alliance partners, customers and suppliers in a global network
without a centre or headquarters.
– Opening new markets, developing global products, planning new
factories or technical cooperation in development require knowledge-
oriented project management the principles of which have been outlined.
ADB’s plan of action for knowledge management connotes a pragmatic,
step-by-step approach. The Knowledge Management Results Framework
is an important instrument at ADB to assess and improve performance
and help identify problems and their solutions.
– In an SME the core knowledge is normally only with the owner, who
deliberately or unconsciously has retained all the knowledge with him
due to lack of time or fear of «theft» of idea. When the enterprise is small
an informal network provides all the knowledge required to execute tasks
and evolve a business strategy. As the enterprise grows, it is imperative
for these enterprises to plan the management of knowledge effectively to
manage the risk and be able to innovate and constantly search for ways
by which they can improve products and services.
– The quality of society is largely determined by its capacity to generate
genuine learning and working together and to produce new visionary
knowledge. The old paradigm of the Wealth of Nations which was
focused on tangible assets is moving towards a new economic landscape
based on intangibles in terms of knowledge.
6.6 Questions
1.
What are the differences between the projection, integration and
orchestration approaches to international management?
2.
Managers, experts and organisations experience difficulties on learning
and sharing knowledge across cultures. What are the reasons for
misunderstanding and barriers to sharing/transferring knowledge?
3.
What are strengths and weaknesses of small businesses in managing
knowledge compared to big enterprises?
4.
The knowledge and success of SMEs very often depends nearly
exclusively on the owner. Which measures will allow this to change
and create a team which is able to run the firm also in absence of the
owner?
5.
How can knowledge management contribute to regional development?
6.7 Assignments
1. Exporting ornamental fish
Qian Hu Corporation Limited is a leading exporter of ornamental
fish, exporting to more than 70 countries worldwide; Qian Hu’s
mission is to create a premium lifestyle experience in ornamental fish-
keeping by providing a one-stop aquatic shop for both local and
international wholesalers, retailers, and consumers. It engages in the
full ornamental fish process: import and export; breeding and
quarantine; conditioning and farming; and distribution activities. Qian
Hu recognised the importance of knowledge in its early days, when the
entire stock of guppies and loaches was lost. Knowledge is integral to
improving the organisation’s operational efficiency, enterprise
planning, and decision-making, and to creating value for stakeholders.
Sketch a knowledge management strategy and respective measures
to be taken for this company.
The full story you will find under: APO, knowledge management
case studies for SMEs, p. 40 ► http://www.apo-tokyo.org/
publications/files/ind-40-km_smes-2010.pdf
2.
Transferring manufacturing know-how
A German company wants to open a new production line in India.
Qualified people have been hired.
In the project team you are responsible for training/know-how
transfer. You are asked to give a presentation about the steps to take
that the Indian associates will develop a deep understanding of the
German production philosophy and the systems in order to adapt it to
Indian circumstances.
6.8 KM-Tool: Storytelling

What is storytelling:
The act of telling a story is a deceptively simple and familiar process, a
way to evoke powerful emotions and insights. By contrast, working with
stories in organisational settings – to aid reflection, build communities,
transfer practical learning or capitalise on experiences – is more
complicated. Storytelling has been used as a powerful way to share and
transfer knowledge, especially experiential and tacit knowledge. For an
example of a story see also case study «The inspiring pot» in ► Sect.
2.2.
Why use storytelling?

Storytelling transfers the tacit part of knowledge: Because it conveys
much richer contexts through stories than other means of KM,
storytelling by a vastly-experienced person in any field has the power to
transfer his or her experiential knowledge.
Storytelling nurtures good human relationships: When someone
tells his/her story, the action also conveys significant volume of the
storyteller’s personal information through the story itself, facial
expressions, tone of voice, gesture, etc. This aspect nurtures trust
between the storyteller and audiences that often becomes a seedbed for a
community of the practice, which enables further sharing and creating of
knowledge.
Storytelling brings out the passion in audiences: A great part of
storytelling is that it is able to address the logical, as well as emotional,
part of the brain. As a result, good storytelling can change people’s
mindset and behaviour to share and create more knowledge than before.
In the following we describe a storytelling process that results in a

written story (or preparation as podcast) and therefore will be available
organisation-wide. These are the steps:
Planning phase: Problem areas that always create difficulties in the
company are identified (e.g. communication, team building or
teamwork) and are fixed to typical results.
Interview phase: The experiences of all the participants are recorded,
in order to get acquainted with different perspectives of one event by
combining narrative and half-structured interviews.
Extraction phase: This phase involves evaluation of the interviews
and extraction of important core statements. Statements that describe the
problem areas appropriately are searched.
Writing phase: Now the story of the experience is written. The story
begins with a provocative title that creates interest among the readers.
The story is built in two columns so that it is possible to differentiate
between the original excerpts in the right hand column from the
comments of the author in the left hand column. Comments are meant to
initiate the readers to think and reply.
Validation phase: The story is given to all the participants for reading
with the option to make changes. This binds the interviewed employees
in the process of creating the story.
Circulation phase: By circulating it one wants to achieve a company-
wide discussion pertaining to the experience document; for instance in
workshops (where the employees come together to develop methods of
solution and also practice teamwork). The purpose of this phase is to
trigger the learning and change processes in the entire company.
Example
Storytelling: The inspiring pot: The Difference Between a Report and a
Story
Version A:
In our evaluation of a project in Bangladesh we noted a wide variance in
the competence of individual villages to develop sustainable and
effective solutions to problems encountered, for example in replacing
broken parts or developing low cost products such as new latrines. The
lessons to be learned from this evaluation are that we should:
– 5 Work against over-dependence on donors;
– Note and encourage entrepreneurial approaches to problems;
– Identify existing and repeatable good practices;
– Build and strengthen communication between villages to assist cross-
fertilisation of ideas at the grassroots level.
Version B:
Bangladesh is a really impressive place… in a positive sense. I was in a
village last year working in water and sanitation. We were trying to
promote the use of improved latrines, but could not produce concrete
slabs and rings locally for a low cost. Somebody told me to visit the
latrines of a lady in the village, so I went along and said,
«Can I see your latrines?» She had made a latrine out of a clay pot with
the bottom cut off. Then with a potter from the area, she developed a
small local production of bottomless pots and they became the latrines.
Ingenious.
A few weeks later I was in another village and saw a hand pump; it
was broken, just a small piece missing. So I said to the villagers, «Why
don’t you repair your pump?» And they said, «Oh, we just wait for
another donor to bring a new pump.» So I said, «Why don’t you visit the
lady in the village over there? She finds ways of getting things done on
her own.»
Source: Swiss Agency for Development and Cooperation 2006:
Story Guide – Building bridges using narrative techniques.
5 Brown JS, Denning S, Groh K, Prusak L Storytelling in
organisations. ► www.amazon.com/dp/0750678208
5 Stephen Denning’s website at ► www.stevedenning.com/site/
Default.aspx
5 Sources/links: Erlach, Thier, Neubauer 2005; Swiss Agency for
Development and cooperation: Story Guide-Building bridges using
narrative techniques ► www.youtube.com/watch?v=UFC-
URW6wkU&feature=player_embedded
5 Wikipedia. «Storytelling». Available at ► http://en.wikipedia.
org/wiki/Storytelling
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Awazu, Y., & Desouza, K. C. (2004). Knowledge management at SMEs: five unique peculiarities.
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http://www.eknowledgecentre.com/articles/1010/1010.htm
Bird, B. J., Hayward, D. J., & Allen, D. N. (1993). Conflicts in the commercialization of knowledge:
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Footnotes
1 See also Bartlett and Ghoshal (1989) and the concept of the Transnational Corporation developed
by them.
2 Description according to North and Aukamm (1996).
3 World Health Organisation, Knowledge Management Strategy, WHO/EIP/KMS/2005.1.
4 Enhancing Knowledge Management under Strategy 2020- Plan of Action 2009–2011 7 http://
www.adb.org/documents/books/km-action-plan/enhancing-knowledge-management-under-strategy-
2020.pdf
5 The following text is based on World Bank (2011).

https://doi.org/10.1007/978-3-319-59978-6_7
7. Information and Communication

Technologies Supporting the Digital
Transformation of Knowledge Work

Germany
First generation KM was primarily IT driven Second generation KM

was primarily people focused and looked to create processes based
on Nonaka’s SECI model- how knowledge is generated, made
explicit and socialised in organizations. 3rd gen KM doesn’t discard
IT. On the contrary, it requires technology more than ever before. It
requires new forms of knowledge management technology that
understand, reason and learn helping people expand their
knowledge, improve their productivity and deepen their expertise.
These are changing the way KM is done. Carlos, Favero August 12,
2016
Learning Outcomes
– You will know what the specific information and communication
needs of knowledge workers are,
– You will be able to name the components and functionalities of a
high performance workplace;
– You will know what needs to be considered to implement ICT
successfully.
– You will be able to apply knowledge taxonomies and maps.
7.1 Changing Needs

The competitive necessities for companies today is to develop capabilities
that are deeply embedded into functions, operations and decision making
enabling quicker response to market demands and business decisions.
Developments in information and communication technologies and
applications support these needs (Gartner 2018).
Fig. 7.1 Social media – features, content, means, people and purpose (Jalonen 2014:1372)
In an organisation primarily there are two levels that use knowledge to
achieve their goal- the managerial and the operational. The managerial
activities are focused on decision making and require good analytics to
support their decisions. There is a need to pull together information from
multiple sources and draw conclusions as accurately as possible. It therefore
becomes necessary to filter relevant information from a large pool of data
from various sources.
The operational activities are characterised by capturing, processing and
disseminating relevant information as fast as possible to enable the value
chain to function efficiently and respond to customers, both internal and
external, more effectively. Such activities require good process support and
availability and accessibility of information through various ICT systems.
Productivity at workplace increases by using existing information rather
than reinventing the wheel. Basically there is a need for systems that
support the collaboration among the network of knowledge workers within
the company and externally with customers, suppliers and partner
companies. In day-to-day work we find a combination of several tasks
which help in defining communication and information exchange among
various stakeholders.
The challenge is getting relevant information from various processes
and sources to the point of action. Therefore people, processes and
technology form a closed system to create and utilize knowledge and
enhance productivity and efficiency. Each of these components have an
important role to play. ICT in the form of various systems therefore plays a
significant role in bridging the gap between different levels of knowledge
workers and the processes that support their work.
In early 2015, APQC surveyed more than 500 people about their firms’
immediate KM priorities and the trends they see impacting KM. Nearly half
the participants in APQC’s 2015 KM Priorities survey agree that machine
learning will be a big deal for managing knowledge (Trees 2015).
The responses to the survey were grouped into three broad categories:
– New technologies that impact how we work, learn, and interact with the
world.
– Changes in the habits of the workforce that impact KM’s purpose and
how it’s practiced.
– Structural forces related to globalization and complexity that may
increase KM’s relevance and strategic position in the enterprise.
John Bordeaux, associate partner in social knowledge management at
IBM Global Business Services, thinks that augmented cognition—human
cognition augmented by computers and smart technology—«will accelerate
as a trend affecting the KM profession over the next three years and will
continue to change how people and organizations incorporate technology
into the decision-making process» (Trees 2015).
Howard Cohen, vice president in strategy and operations, senior
knowledge management at Chubb Insurance, envisions a KM future with
more integrated content management systems that deliver a more seamless
user experience (Trees 2015).
7.2 Challenges for Designing ICT Systems

This puts high demands on those designing ICT systems; the art lies in
balancing individual user requirements and requirements from the
perspective of an organisation in the context of an intergrated and robust
system. The first challenge is intergrating various functions and making the
organizational data shareable. This required various systems to interact with
each other which resulted in an Enterprise Resource Planning system that
focused on transactional data and a common data repository to facilitate
data sharing. Data warehouse and mining supported the managerial level.
But now we also need to recognize that individuals and companies are
increasingly embracing social media for sharing. Particular emphasis is on
systems that enable knowledge sharing and use among the community that
works together using collaborative technology at anytime, anyplace and
anywhere (Abdullah et al. 2005).
At this point, the enormous potential of interaction of people by means
of digital platforms became clear (McAfee 2006). Given the greater focus
on the individual more emphasis needs to be given to developing «personal
knowledge management» skills of staff. Enterprise social networking
applications are becoming increasingly popular (Turban et al. 2011) and
along with the private use of facebook, Twitter and others changing
communicative behaviours in firms, Enterprise 2.0 emerged. The use of
emergent social software platforms within companies, or between
companies and their partners or customers became a necessity. The
challenge was therefore to integrate this as part of the organizational fabric
to enable fast and instantaneous interactions. Though social media allows a
lot more diversity of thinking and ability to respond to needs dynamically it
poses challenges for organizations as a lot of this is happening outside the
control or even the view of the organization (Thorpe 2013).
Vuori (2011) characterises social media by considering the extent to
which they support communication, collaboration, connecting, completing
and combining (5C) (Jalonen 2014).
– Communication social media provides new tools to share, store and
publish contents, discuss and opinions and influence: Blogs, Twitter,
YouTube, SlideShare, Skype.
– Collaboration social media enables collective content creation and
edition without location and time constraints: Wikipedia, GoogleDocs.
– Connecting social media offers new ways of networking with other
people, socialising oneself into the community: Social networking
services (e.g. Facebook, LinkedIn).
– Completing social media tools are used to complete content by
describing, adding or filtering information, tagging contents, and
showing a connection between contents: Visual bookmarking tool, News
aggregator.
– Combining social media tools are developed for mixing and matching
contents. Combination of pre-existing web services that allow a certain
user within a platform to use another application, in a specific window,
without the need to get out of the initial website (Bonson and Flores
2011): Mash-ups, Google Maps.
Social Media can also be viewed from the perspective of its purpose, the
means,the content, various features required and the people who would be
using it. This is depicted in ◘ Fig. 7.1.
In other research user-friendliness, interactiveness, openness and
uncontrollability, velocity, and real-timeness have been mentioned to be the
main characteristics of social media (Kaplan and Haenlain 2010; Denyer et
al. 2011; Kietzmann et al. 2011; Fournier and Avery 2011; Gaál et al. 2015).
Potential adopters of social networking sites within their organizations
must carefully consider the benefits to be gained against the risks that are
inherent. It is the imperative of the organization to facilitate efforts to
increase the benefits while mitigating the risks, but first an understanding of
why their employees are motivated to share is necessary (Harden 2015).
Digitization is now creating a second economy that’s vast, automatic,
and invisible. Something deep is going on with information technology,
something that goes well beyond the use of computers, social media, and
commerce on the Internet. Business processes that once took place among
human beings are now being executed electronically (Brian 2011).
Physical labor and transactional tasks have been widely automated over
the last three decades. Powerful productivity-enhancing technologies
already are taking root. Developments in how machines process language
and understand context are allowing computers to search for information
and find patterns of meaning at superhuman speed. What would have taken
a large team working several weeks takes only a few days. Machines also
are becoming adept at structuring basic content for reports, automatically
generating marketing and financial materials by scanning documents and
data (Bughin et al. 2013).
The biggest challenge today is managing the convergence of various
technologies that enable transcation processing, knowledge sharing, storage
of large volumes of information and searching the right information at the
right time for execution of the task.
The following criteria should be considered:
Individualisation and demand-orientation : Does the system design

suit the knowledge workers work/function requirements?
In many companies, the information and communication processes of
knowledge workers are geared towards technology (user requirements
follow the system). However, a premise for successful productive
knowledge work requires the ICT systems to be aimed completely at the
requirements of knowledge workers (system follows user requirements).
KM systems should be built around the way people work.
However, pronounced orientation towards demand involves a risk of

emergence of numerous individual software islands and approaches to
finding solutions. The heterogeneity of system and application landscapes
creates loss of productivity of interfaces. Users require a high degree of
individualisation. However, a company is often reluctant to use necessary
resources for individualisation. It wishes to retain its system landscape in a
standardised and supposedly cost-effective and efficient form. One of the
examples of individualisation is providing information to knowledge
workers. Productivity is increased not only by the optimum availability of
information in the systems, but also by filtering irrelevant information.
However, systematic identification and evaluation of knowledge and its
transformation in the systems is considered as increased resource
expenditure for personalisation by the company.
Integration: To what extent is the ICT system integrative in terms of

practical use?
Does the ICT system itself cause waiting times and productivity loss in
interfaces to other systems or activities? In a company which has to execute
a new project and the relevant data is spread across the company there will
be a aloss in productivity if the required data has to be fetched through
different systems. Employees who may have to operate a whole variety of
systems have to struggle to a certain extent with multiple logins,
heterogeneous structures and possibly even system crashes in interfaces.
The systems that are not used very often are neglected. Experience shows
that maximum two to three core systems are imposed on an employee.
When it comes to the level of integration of ICT’s working
environment, a user wishes to be at maximum ease with fewer interfaces.
For the company, this means considerable expenditure on integrating and
bridging interfaces. If the integrative character of systems is not considered
sufficiently, the users’ flexible productivity factors such as acceptance, user
know-how or motivation – that are controlled by the user himself – are
affected more intensely. The human factor influences the overall
productivity decisively in a direct interplay with the usability of the entire
system landscape.
Acceptance and use: How easy is it to use the ICT system?

What are the barriers in application? What are the implementation barriers
in changing processes during new installation of ICT systems?
Each of us has already heard of IT projects or has been closely associated

with such projects wherein person years are spent in the development of
individual software. In the end they were further developed for the user
according to the requirements and important acceptance factors. Knowledge
workers should be actively involved in all phases of development and
implementation. A knowledge worker today has to use technology
extensively. An objectively measured performance of the system can be a
clear performance indicator. This application efficiency can be evaluated
only through a definite result. It helps to consider acceptance factors and
implement incentive systems beforehand. Training and coaching is
neglected by the companies and even the employees demand fewer skills.
An «error-culture» of identifying and admitting mistakes is not particularly
popular.
Performance: How well does the ICT-system perform?

Performance and productivity of ICT systems is not an issue as long as
everything functions well. Things become critical only in the event of a
breakdown. Many IT managers should take this challenge. Often, clear
goals and measurable results also fail in achieving goals of the entire IT
department. As a result, in a «normal» working situation, information and
communication systems are rarely considered as productivity factors for a
knowledge worker. In the end, what exists is a latent conflict of interest (to
be optimised) between the requirements of knowledge workers and use of
resources for ICT systems.
Murray E. Jennex, professor at San Diego State University, thinks that in

the future, KM teams will need to work with security and legal to create
secure ways of sharing across the organization and across geographical
boundaries. Tanya Houseman—consultant at Tanya Houseman Consulting
—echoed Jennex’s sentiments, but notes that in the future, «Companies will
have to balance security against collaboration—not just in the digital
workspace, but who and what kinds of information we share with
colleagues in face-to-face collaboration» (Trees 2015).
Its not all about ICT, its about relationships. Arthur Shelley, founder and
CEO at Intelligent Answers feels that «Knowledge and intellectual property
are like cash—they need to flow to create value. This requires trusted
relationships, a willingness to constructively engage, and preparedness to
share the value created.» All of these aspects are «difficult things to define
in a legal contract,» he added (Trees 2015).
Some of these have already been used by companies which has brought
in a transformation in the way data is captured, stored and accessed.
However there seems to be a continuos change in the way people work,
learn and interact in an organisation.
7.3 High Performance Workplace
How can an entire system be designed for supporting knowledge workers to
optimise their performance and productivity?
Austin et al. (2005), analysts at Gartner Inc., coined the term «High
Performance Workplace» (HPW) for this purpose. He described a
productivity concept for knowledge workers. This concept sketched the
integrative and knowledge-oriented character accurately in an optimised
work environment:
High-performance workplaces augment the capabilities of their skilled
staff for activities such as exploring data, developing innovative processes
or products, and working with suppliers to respond to the requests for
proposals. This support helps workers locate the right people, find the right
content, support the right communication channels and focus on where to
create maximum returns. In some cases, combining automation and
augmentation may generate the highest returns – for example, adding
expertise location to call centre applications.
Austin et al. (2008) supplemented this with an overview of components
of a High Performance Workplace for supporting «non-routine work»; of
work that cannot be standardised – the main criterion for knowledge work
(See ◘ Table 7.1).
Table 7.1 Components of high performance workplace for supporting non-standardised work
(Austin et al. 2008)
Non- Example Technology’s role – augment, not automate

routine
behaviour
category
Discover Threats and Communications, search, predictive analytics, BI, business
opportunities activity monitoring, modelling tools (Excel), 3-D
visualisation tools, predictive markets
Pattern recognition
Competitive intelligence
Innovate New processes, products, Automatic contextual search, agents, professional
services, segments communities, open innovation sites
Team Find the right people, Expertise location, social network support, social network
brainstorm, norm, bond, analysis, brainstorming, idea tracking, informal project
orchestrate management, communication and collaboration in general
Non- Example Technology’s role – augment, not automate
routine
behaviour
category
Lead Execute change plan, Web conferencing, group project management, soft
manage unstructured corporate performance management
process, reward key
behaviours
Learn From experience E-learning suites, communities of expertise (and related
video, audio and other web technologies)
Relate Establish a working Explore interests, background, common activities to speed
relationship with other bonding, consensus building and trust
people
Such productive environments for knowledge workers are designed

individually on demand in the company and on demand of the users.
Therefore, they cannot be described in 100% standardised form. For the
benefit of knowledge workers, such environments supplement personal
workplace with personalised information, knowledge components and
communication tools. However, the system environment not only supports
knowledge transfer and sharing of common documents and information but
also supports flexible teamwork. The task is facilitated across distances
using web conference solutions and integrating all available means of
communication. This means knowledge transfer and mutual learning is
supplemented by a common work platform for synchronous teamwork.
The structure and the functioning of virtual supra-regional project
teams, competence teams and innovation teams or units in topic-based
networks and virtual project rooms can be enabled by the operative work
instrument of «High Performance Workplace».
However the social media and disruptive KM technologies are making
the workforce perform better by providing the required analysed
information as and when required. One could now view a «High
Performance Workplace» with the way machine learning is changing and
enabling sharing of knowledge at a faster pace. This will change the role of
the KM practitioner from being a facilitator to an interpretor or consultant.
The newer technologies would merge people and IT systems to quickly
understand, learn and analyse and pass on the experience across the
organisation.
Goals and results of introducing such work environment
– Optimisation of productivity by improvement of information flow,
communication and teamwork
– Increase in performance capability of employees
– Increase in efficiency of communication
– Extending workplace radius by enhancing mobile usage
– Reduction and substitution of travel activity with internal coordination
– Dynamic sampling of business processes (e.g. sales)
– Increase in productivity of employees
– Ideal effect and learning effect of best practices
– Efficient knowledge transfer and knowledge access through active
participation of team members.
– Analysis of large amount of data
– Speedy access to relevant information from anywhere
Case Study
A Normal Research Day at a Global Business Software Development
Company
Sven Kalberg is a project manager of a research project NextGenKM in
a research department of the globally positioned business software
developer, BusinessSoftware AG. BusinessSoftware AG is an international
concern with a strong presence in Germany, USA and India. Its research
department comprises of ten locations worldwide. Every location, also
called as a lab, has a research centre which is assigned different relevant
research projects.
For Sven, teamwork goes beyond the boundaries and time zones.
Cooperation partners are located in other time zones and some even have
different work culture. Sven’s tasks as a project manager of NextGenKM
comprise coordination and management of NextGenKM on behalf of
BusinessSoftware AG.
The project wishes to build a new generation of knowledge-based
systems that would be better at supporting knowledge workers in their work
with daily flood of tasks. In this process, Sven coordinates four employees
of BusinessSoftware AG in the NextGenKM project with regard to content
and leads the team. A closing report is to be generated in the project. Below,
we shall see how Sven managed to create the closing report of NextGenKM
with his colleagues in Bangalore. Sven has some supporting tools to
coordinate the teamwork effectively.
Shared calendar
Sven uses the shared calendar to organise the first discussion on the closing
report with his colleagues Brian and Ian. The shared calendar helps him
overcome the limitations posed by location and time. He has shared his
calendar with his colleagues for them to check his availability for any
discussion. Likewise, if Sven wants to initiate the discussion, he can check
his colleagues’ availability. While sending a discussion request he can
automatically attach a calendar entry for the selected appointment.
Telephone conference and communication infrastructure

Sven has to communicate a lot to complete his regular project work.
Regular phone calls are inevitable, especially to remain in sync with his
colleagues in Bangalore. Sven has allotted fixed time slots for this purpose
in the calendar of his colleagues. BusinessSoftware AG provides some
technical facilities with its communication infrastructure. Thus, Sven has
the option of either reserving a telephone conference service or making a
phone call through Skype (Voice-over IP, calling via the internet).
Application sharing
Yet another important aspect for Sven while preparing a closing report is
that he not only hears the voice of his colleagues but also sees the
presentation or the object being discussed. For instance, there are some
screenshots of the transferred prototypes. Here, Sven has the option to
select from number of Application Sharing Services. Using this option, he
can share the application on his desktop with the participants of a
conference.
Collaboration rooms
Sven’s team also has a collaboration room for exchanging documents,
bookmarks and opinions on a particular topic. This enables the invited
participants to exchange files and use the forum. Access to the collaboration
room is integrated directly in the portal of every participant. Sven can
comfortably share files using the collaboration room through his WebDAV
browser, a tool that makes the file located in the collaboration room
available in the file manager of his desktop. However, he generally finds it
relatively cumbersome to upload the files in such closed system through a
web interface.
Simultaneous creation of documents

Sven wishes to work closely with his colleague Brian in Bangalore in order
to create a closing report. He has already developed the outline from the
information of an old report and made suggestions for some chapters to
which even Brian can contribute. Sven and Brian have different options to
create the report together. One method that has been practiced by them very
often is the chapter-wise creation of the document in a document format
such as Microsoft Word or LaTex and sharing of chapters through a file
share or even a version control system. In the latter case, both can work
simultaneously on the chapters and have open document format version at
the same time. Sven has already tried creating collaborative documents with
a Web 2.0 application such as Google Docs. This application helps several
participants to work together on a document even in one section and the
software synchronises the individual sections.
Wikis
Sven can use wikis as yet another practised alternative. Wikis are available
not only in BusinessSoftware AG but also in NextGenKM. Wikis have
become particularly popular in the last 1.5 years. Therefore, there are
multiple relevant Wikis in Sven’s working environment. He visits at least
one of these wikis daily to get an update on different aspects. The research
project alone has two wikis. One of them contains information of the
developed components of the project and makes it freely accessible. The
other wiki is not for general public and serves in coordination and
knowledge exchange of members of the research project. For instance, the
weekly conference calls are documented or examinations of components are
discussed. At present new wikis are surfacing almost every week. Some
research locations have their own wiki and other development groups
operate their own respective wikis.
Many efforts were made to curtail the uncontrolled growth at least within
BusinessSoftware AG by specifying wiki technology. In order to create the
closing report on NextGenKM, Sven, Brian and Ian are working with wiki
sites and chapter-wise distributed documents. At first, Sven and Brian
created and discussed an outline of the content. After a week, they had a
stable structure of the contents and are now in a position to create the actual
content of the report. They create the actual content chapter-wise in
Microsoft Word documents and store it in a folder in the version control
system project.
For the participating researchers, the successful teamwork in this
exciting working environment essentially depends on the support provided.
With the help of an example of BusinessSoftware AG, the case study shows
different options for supporting knowledge work in the research project,
NextGenKM. Different problems pertaining to support – motivated by
technology or organisation – were explained in this case study.
Author: Olaf Grebner (shortened version).
7.4 ICT Applications for Knowledge Workers:

An Overview
The following is an overview of individual options for supporting a
knowledge worker. A clear differentiation between operational systems and
ICT for knowledge worker is not always possible or advisable because ICT
manufacturers try consistently to enhance functionalities and position these
in the overall company systems. Software vendors seized this opportunity to
introduce new tools termed as «KM tools» which can be integrated with the
existing systems to support the company’s productivity.
The SMAC (Social, Mobile, Analytics, Cloud) technologoies play an
important role in designing knowledge management systems; infact the
information systems and the KM systems converge as knowledge is created
and used at the point of action. New ways of inspiring and exploiting
knowledge sharing are forcing organizations to expand their knowledge
sharing technologies and practices (Mentzas et al. 2007).
Gartner (an IT research agency) identified Information and
Communication technology trends that can have a significant impact on
organizations in the coming years. Some of these are discussed below.
– Computing everywhere: Gartner predicts an increased emphasis on
serving the needs of the mobile user in diverse contexts and
environments, as opposed to focusing on devices alone.
There will be significant management challenges for organizations as
they will lose control of endpoint user devices and hence more attention
will have to be given to user experience design.
– The internet of things: The combination of data streams and services
created by digitization creates four basic usage models – manage,
monetize, operate and extend. This is not limited to only Internet of
Things (IoT) (assets and machines) has the potential to leverage these
four models. Organisations can leverage these four models through the
pay-per-use model as applied to assets (industrial equipment), services
(such as pay-as-you-use), people (who are on the move), places (such as
parking spots) and systems (such as cloud services).
John McQuary—vice president in work process optimization at Fluor
feels that the Internet of Things allows for greater connectivity among
individuals and organizations, and thus presents opportunities to «leverage
knowledge in new and innovative ways» (Trees 2015).
– 3D printing: 3D printing is a powerful tool for tacit knowledge transfer.
Virtual reality is also helping in this regard and with the recent advances
in the field we might experience learning in a whole new manner. Microsoft
combined virtual reality with hologram technology so that users can
actually interact with the objects they see. (HoloLens website) In this sense,
imagine what a knowledge transfer session would look like using this tech!
(Carlos and Favero 2016a).
– Advanced, pervasive and invisible analytics: Organizations will have to
find ways to manage how best to filter the huge amounts of data coming
from various sources such as operational systems, IoT, social media and
wearable devices, and deliver relevant information to the right person as
and when required using Big data analytics.
– Context-rich systems: Context-aware applications will emerge which will
understand the context of a user request and respond appropriately in
terms of content and delivery.
– Smart machines: The smart machine era will enhance the combination of
indepth analytics with context and use advanced algorithms that will
allow systems to understand their environment, learn for themselves, and
act accordingly.
– Cloud Computing: the focus for cloud computing will be on
synchronizing content and application across multiple devices with
application portability across devices.
– Software-defined applications and infrastructure: Though networking,
storage, data centers and security are defined and managed by software
and have matured, the rapidly changing demands of digital business
computing has to move away from static to dynamic models using
software configurable applications.
– Web-scale IT: This would mean that development and operations are
brought together in a coordinated way to drive continuous incremental
development of applications and services.
– Risk-based security and self-protection: The trend is to build security
directly into applications and therefore there will be no external security
intervention required. Every application needs to be self-sufficient in
terms of security festures.
The systems for knowledge workers are considered from the following
perspectives of productive knowledge work: individual efficiency,
teamwork, information supply, active information search, collaborative use
of knowledge and planning and control (cf. ◘ Table 7.2).
Table 7.2 Overview of system categories
Category Problem Solution

A. Individual Poor accessibility, repetition of work, idle power and A1. Mobile devices for
efficiency unused work time, loss by mobility increasing
communication ability
A2. Mobile solutions for
extending the workplace
radius
A3. PAT systems
(personal working
techniques)
A4. Adaptive
communication solutions
A5. Unified messaging
services
A6. Natural language
analysis
A7. Robotics
B. Teamwork Inadequate teamwork, too long planning times, too long B1. Shared workspaces
coordination periods, integration gaps, vulnerability to
B2. Conference solutions
errors
B3. Groupware
functionalities
B4. Teleworker
B5. Presence information
/instant messaging
B6. Workflow support
(ECM, ticketing, …)
B7. Cognitive
technologies
B8. Social networks
C. No information about caller, lack of availability of C1. Customer information
Information information with competitive advantages, quality system
supply assurance
C2. Enterprise resource
planning systems
C3. Portals (intranet,
extranet)
C4. Context information
on communication
partner (Xing)
C5. 3D printing
C6. Analytics
D. Active The wheel is reinvented. Knowledge from experience D1. Corporate directory
info search and expert know-how is not used efficiently
D2. List of experts
D3. Desktop and
enterprise search
D4. Archiving
D5. Cloud applications
E. Use of Knowledge of employees as the biggest capital of the E1. E-learning
cooperative company is not available explicitly and cannot be
E2. Company’s info
knowledge strengthened collectively
channel (TV, MA
magazine, newsletter)
E3. Business community
(WIKI, forum, …)
E4. Company’s blog
E5. Community
knowledge games
E6. Artificial intelligence
F. Planning Inadequate planning and control (incl. knowledge F1. Management
and control controlling) information system (MIS)
F2. Business intelligence
(data-warehouse)
F3. System knowledge
controlling
7.4.1 Individual Efficiency

Individual efficiency of an employee can be increased particularly by
enhancing his workplace radius in the work situation, communication
network and teamwork environment. Blackberry or smart phones with
Windows Mobile and push function for email and appointments enable
independent asynchronous communication. Simultaneously, the marginal
working time is extended and administrative activities such as setting up an
appointment are made easy.
For knowledge workers, the work structures shift in such a manner that
a full-fledged work environment that is independent of place always
becomes critical for success (especially for sales, consultants, management
or other specialised employees with high flexibility outside the company
location). A decisive factor here is a possible complete access to company’s
core systems, possibly through a safe connection in the company network
(virtual private network, VPN) and mobile internet access. A laptop comes
first as an end device. However, mobile applications for PDA are a suitable
productivity tool for selective groups in field work.
How do we support knowledge workers in conceptual activities? This
purpose is served by some individual software solutions that help us get
thoughts structured on paper or in a notebook (e.g. mind manager). Time
management is always decisive for distinguishing «urgent» from
«important» even for personal work organisation and personal working
techniques. Systems based on personal working techniques support
individual work by coordinating, handling and completing the tasks in a
team.
Efficiency can also be increased by ensuring that knowledge workers do
not have to act in accordance with their communication tools. Efforts must
be taken to ensure that the communication environment is structured to be
«adaptive» to individual changing work situations. Thus, in the age of IP
telephony with complete integration option of mobile telephones, it has
become easier to regulate appointment status in the calendar as basic
information for changing the defined availability profiles (forwarding,
representing, putting on silent mode or prioritising a call from a fixed group
of persons). Many random policies are predefined and the behaviour of the
communication environment in situations such as meeting in house,
appointment while travelling, travelling time, absence, vacation, illness,
«busy»’, «do not disturb», and many more, are embedded. There are many
possibilities. Considering the individual requirement situation of the
concerned work group, it is necessary to decide what can be used sensibly
and usefully.
Another challenge is integrating different medium/channels of receiving
messages. Unified Messaging is a method of bringing incoming or outgoing
messages of any form (e.g. voice-mail, email, fax, SMS, MMS, etc.) into a
single form and allowing the user to access them through different access-
clients (landline or mobile phone, email client, etc.).
Big data and advanced analytics have swiftly moved from the frontier of
our trends to a set of capabilities that need to be deeply embedded across
functions and operations, enabling managers to have a better basis for
understanding markets and making business decisions. Meanwhile, social
technologies are becoming a powerful social matrix—a key piece of
organizational infrastructure that links and engages employees, customers,
and suppliers as never before (Bughin et al. 2013).
As companies continue grow and turn borderless, a wise decision is to
provide workers with online tools where they can search for information,
collect advise from other members and even carry out their work
completely online. Strunga’s (Strunga 2015) affirmation suggests that
leveraging virtual communities will help achieve greater levels of efficiency
in terms of learning so it seems that companies around the globe are taking
a wise and natural decision when they opt to develop virtual learning spaces
(Carlos and Favero 2015).
A study by Sigalaa and Chalkiti 2015 investigates the relation between
social media use and employee creativity by adopting a knowledge
management approach in order to consider the influence of social networks
and interactions on individuals’ creativity. Their findings highlight the need
to shift focus from identifying and managing creative individuals (micro
level) and/or organisational contexts (macro level) to creating and
managing creative social networks (meso level). The use of social media for
externalising, disseminating and discussing information with others within
various social networks as well as for combining and generating shared
(new) knowledge can further trigger, enrich and expand the employees’
individual cognitive abilities and provide them with stimuli for generating
and (co)-creating more and newer ideas/knowledge.
Machne Learning is a powerful tool for knowledge management.Watson
is a system created by IBM that integrates natural language processing and
machine learning in order to reveal insights from various data sources. In
short, it is able to learn and provide solutions.
Case Study
Mini Case: Watson in Jeopardy
If you are fond of Jeopardy, a very popular american quiz show, then
you will probably remember the episode when Watson competed with
human participants and won! In order to win, Watson combined two
separate areas of artificial intelligence research with winning results.
Natural language understanding was merged with statistical analysis of vast,
unstructured piles of text to find the likely answers to cryptic Jeopardy
clues.How did supercomputer Watson beat Jeopardy champion Ken
Jennings? So Watson in some way is able to replicate the human thought
process in order to give meaning to the information it analyses. Powerful
stuff for KM. But Watson is like an artificial brain. But a brain wont
function unless it has a body and this is where advanced robotics comes in
(Carlos and Favero 2016a).
Watson is being used in medicine in order to provide expert advise to
doctors who would have to otherwise undertake many hours or weeks of
learning in order to correctly process information. For example there is a
specific Watson solution for oncology in which doctors get the assistance
they need to make more informed treatment decisions. Watson for
Oncology analyses a patient’s medical information against a vast array of
data and expertise to provide evidence-based treatment options (Carlos and
Favero 2016a).
Traditional IT applications in the form of Intranets, databases, wikis and
even social networks are being swept away and KM is moving into an
exciting phase with these new developments in what is called the cognitive
technologies. Hoewever Technology should not replace human processes,
intuition and experience, but rather, find a suitable source of exploitation so
that human judgment is multiplied (Carlos and Favero 2016a).
7.4.2 Teamwork
Supporting communication and teamwork is a topic that was developed by
well-known software and system houses under the key term
«collaboration». Burton (2005) defines Collaboration «as people working
together on non-routine cognitive work». Effective collaboration requires
the convergence of traditional communication tools like telephones, email,
fax, etc.
Groupware solutions with common mail-management, schedule-
management and task-management are constantly extended by platforms or
portals for cooperation. For example, Share Point Portal Services of
Microsoft, Quicktime of IBM or Oracle Collaboration Suite.
An important starting point is the type of filing structure. In reality,
filing structure ranges from «controlled chaos» to a common structure
(possibly with archiving) wherein knowledge is systematically evaluated in
documents and emails at the same time.
If a team uses a common workspace in the intranet or internet, it can go
a step further using common data filing and data organisation. This enables
the knowledge worker to even process the documents together. The criteria
for this are version control during asynchronous processing and
synchronous access to one and the same application or document. In this
process, a second processor – who might be sitting in some other location –
is invited to share a monitor screen with the document owner and discuss
simultaneously.
In most cases, the web conference solutions are compatible with shared
workspace and groupware solution can be combined for the purpose of
convergent and integrative development. There are many special providers
of services ranging from web conference to virtual meeting rooms wherein
camera, microphone and monitor are completely integrated. By now,
development and supply of collaboration tools is affected significantly by
Voice over IP internet services for private customers. These services are
also growing continuously in the business market. That is how Skype offers
a presence overview and simultaneous processing of documents for its
users. Google developed itself from being a search engine to becoming a
platform for communication and teamwork.
From many practical discussions, we notice that the subject of
availability gains importance to the extent of change in the workplace
radius of the knowledge worker. Maintaining «presence information» in a
company is a possible way of closing this information gap and giving
information quickly about «when is my business partner available for me
again?» Thus, one can avoid unnecessary and futile attempts to call or call-
back. An important point to be considered while using presence information
is to opt for a leading system in the entire company. Another success factor
is at the behavioural level; semi-automatic adjustment for availability of
suggested information should be possible. The knowledge worker can
choose when he wants to work undisturbed even if the system suggests
something else.
If one focuses on a process while considering communication and
teamwork, one can define not only the information flow and use of diverse
communication systems in every business process but also the document
flow. Systems that enable systematic relaying and automation of business
process reproduce workflows for processing and decisions in the company.
We notice that the higher the knowledge intensity in a process, the more
difficult the standardised implementation of a workflow. Yet structuring in
the form of a workflow system is a good parameter for knowledge work
processes and contributes significantly to safety and quality of process as
well as reduction and measurability of processing time.
In the organization, employees – especially those working in virtual
teams – that utilize social media technologies are changing the corporate
landscape by being able to engage in more dynamic and flexible
interactions than traditional face-to-face teams (Peters and Manz 2007).One
cannot ignore the power of social media that is being used by everyone for
their daily work. As people are familiar with social media, usage will not be
an issue in intergration and implementaion of a knowledge management
system.
Use of social media tools in Knowledge Mangement Systems will
support communication between employees to seek help in solving
problems and expert sdvice. As social media supports sharing, it is possible
to convert individual knowledge to organisational learning much faster than
the traditional method of meetings. Creation of communities of practices –
CoP to discuss professional issues is easier as one can discuss from any
location. Integrating social media in the office work flow will help in
reducing time and cost.
Case Study
The MITRE Social Business Platform
The MITRE Corporation is a not-for-profit organization chartered to
work in the public interest. MITRE manages six Federally Funded Research
and Development Centers in addition to its own independent technology
research and development. MITRE’s 7000+ employees are distributed
worldwide to support their sponsors’ needs in systems engineering,
information technology, operational concepts, and enterprise modernization.
Most of MITRE’s staff members are considered to be «knowledge
workers:» individuals who engage in «non-routine» problem solving
requiring convergent, divergent, and creative thinking (Reinhardt et al.
2011).
As part of normal business processes, staff members are expected to
seek out the expertise of technical and domain experts distributed across the
company. As a result, the corporation places a high value on sharing
knowledge across individuals, projects, and business units. Prior to 2009,
information was typically shared internally and persistently through email
and Listservs, internal wikis, internal blogs, communal disk space, and
Microsoft SharePoint– the corporate standard for information sharing.
Internal, non-persistent information sharing took the form of face-to-face
and video teleconference meetings, telephone, chat, and a screen-sharing
application. To collaborate with external partners, MITRE employees
traditionally relied on email, telephone, face-to-face meetings, a screen-
sharing application with password-protected sessions, and a separate
external instance of Microsoft SharePoint site.
MITRE has a knowledge management (KM) strategy and has adopted
SharePoint as an official repository of record. However, many employees
have found that SharePoint did not meet their needs. To improve
collaboration and knowledge management, a research team embarked upon
building a trusted environment for MITRE and its partners to connect,
collaborate, and share new information in a more integrated and social
fashion. The goals were to facilitate establishing and maintaining
relationships across organizational boundaries, to form communities and
facilitate multi-organizational collaboration around key topics, to leverage
expertise across MITRE and MITRE’s partners, and to bring broader
segments of the world to bear on important sponsor problems.
At the time the research team embarked upon this effort, there were no
commercially available systems satisfying all of these goals within a single
system; hence an in-house solution was implemented. An advantage of
building a «homegrown» system is that the team was able to instrument it
extensively for fine-grained data collection in order to study usage patterns
and assess what was working and what could be improved. In August 2009,
MITRE launched its social business platform called Handshake. Based on
the Elgg (2011) open source platform, Handshake was designed to enable
employees and their trusted partnersfrom outside the company to form
connections and create their own profiles. The platform was designed to
span MITRE’s firewall, allowing MITRE employees to engage with each
other internally and also interact with external partners – all within a single
system. MITRE users could establish groups and facilitate multi-
organizational collaboration around topics, projects, or communities of
interest. Group tools included a discussion forum, basic file repository,
wiki, blog, message board, activity feed, and tag clouds. Handshake was
also implemented to promote awareness of relationships, activities, topics,
and communities through the use of email notifications and both group and
individual activity streams. By June 2012, the Handshake user base had
grown to almost 8000 members who belonged to one or more of the 850
Handshake groups. It is worth noting that the use of Handshake was purely
optional to MITRE employees. Even after its transition from a research
prototype to a corporately-supported tool in September 2012, its use was
not mandated.
(Source: Holtzblatt et al. (2013)).
7.4.3 Information Supply

What is required for the success of a knowledge worker who interacts with
and responds to his customers and participates in partner networks?
He requires the minutest details about the activities of «his» customers.
In most cases, they are not just «his» customers. Many employees
communicate with these customers or render services to them. The success
of the work and the result depend directly on how well they are connected
and co-ordinated. This necessarily implies that they share the common up to
date information.
Restricting customer information to a limited sales area or allowing it to
flow along the customer contact points in the company is a challenge.
Directing the right information to the relevant people is a key to enhancing
efficiency. The Customer Relationship Management systems are used for
this purpose. In a sales cycle, the sales approach in campaign management
compiles plenty of customer information through lead management, supply
chain management, contract management and service management. This
information needs to get integrated with the business process so as to have a
decisive effect on the success of the campaign.
Apart from the information in company’s internal systems, even context
information in Web 2.0 platforms, such as Xing etc., is being resorted to
increasingly. The key question here is not «what is technically possible?»
but «what can be implemented at a behavioural level and adopted by
employees or users».
The requirement of a common base of customer information
necessitated the integration of various functions which hitherto worked in
silos. This led to the emergence of ERP – Enterprise Resource Planning
systems. At this point many will wonder, «How is ERP associated to
knowledge work? Isn’t ERP primarily process and function oriented?»
Today, ERP enjoys such a crucial place in a company that the
knowledge workers have to work with it. Supporting knowledge work
should be incorporated in core business and core functions of an employee.
Knowledge and relevant information should be systematically evaluated
and identified wherever there is action and not in newly devised separate
systems. In short, we incorporate requirements and specific work situations
of a knowledge worker in integrated company systems such as ERP along
the knowledge work process.
Last but not least, it is necessary to mention «portals» while talking
about systems for supplying information to knowledge workers. The term
«portal» has gone through many ups and downs in the last 10 years. In
different definitions, it was very difficult to distinguish whether a website
could be called a portal for external or internal use. From the perspective of
knowledge work, the following core capabilities are our concern:
1. The ability of processing content efficiently by decentralised use of
content management system and passing the processed content further
by categorising and evaluating it systematically.
2.
A user administration with authorisation system for write and read
access rights based on a central directory (Directory, e.g. LDAP)
3.
The technological ability to establish interfaces through portal
components (cf. portlet or webpart) for integrating external
applications, services and databank contents.
4.
The ability of supporting searching and finding information on
internet/intranet through personalisation.
7.4.4 Active Information Search

Knowledge workers like to control active information searches through
experts or other knowledge bearers. Tacit knowledge and knowledge from
experience is transferred in personal discussions. A business partner gets his
information quickly and in a processed form. But how do I identify and
reach a desired contact person and expert?
A common directory of employees not only enables display of contact
data right in the telephone book but also shows its availability status. What
counts against it is adding an overview of the contact information along
with competencies, experiences, personal publication and capabilities of the
mentioned person. Thus, networking of experts in a company not only takes
place in an informal way but also in a structured and systematic way. If the
already maintained employee information is available, it is easily possible
to link it with employees’ master data and authorisation data (LDAP
directory). The effect gets bigger when the directory also turns into a
contact network outside the company and employees share their personal
networks with their colleagues. However, even in this case it is true that
technical solution alone does not mean that half the battle is won. A lot
depends on inducing the employees to start an in-house network and give
away something to get something from others. This change in culture turns
out to be more difficult than what it sounds because knowledge or even
«my own» contacts supposedly represent job guarantee or desired power for
a lot of employees.
A common search: A search field wherein I enter the desired term and
the search finds the desired document – be it on the same PC, fileserver, in
the intranet or even in a document archive. In many companies, this vision
makes a few employees sweat. The very presence of information on the
availability of a document (e.g. with the name «staff reduction list») is cited
as an argument against the introduction of an intelligent company search.
Obviously, an authorisation system considers which results should be
shown on demand in an archive.
7.4.5 Cooperative Knowledge Use

With its pioneering changes pertaining to who produces content for whom,
Web 2.0 has initiated a radical upheaval of communication and teamwork
for knowledge workers.
This development has taken root in the internet and multiplied to a large
extent by now. However, the number of active users in a business
community has to be much higher because the user group is innately much
smaller. Presently, the demographic composition differs fundamentally thus
posing further challenges in implementing business community projects.
The real challenge in establishing knowledge systems for cooperative
use of knowledge does not lie in its technical implementation. It lies in
editing of the content. Content editing is counted among the most resource-
intensive activities and is generated optimally by number of individuals of a
community, i.e. by the users. ICT systems that focus on procurement of
learning content are increasingly moving together with the sections
«collaboration» and «social networks in Internet and Intranet».
E-Learning comprises all forms of learning that involve use of digital
media for presenting and distributing learning material and/or for
supporting interpersonal communication. E-learning is also synonymous to
online learning, tele-learning, computer-based training, multimedia-based
learning, open and distance e-learning, computer-aided learning etc. The
course and learning environment are organised using a separate LMS
(Learning Management Systems) that has been developed as Content
Management Systems for e-education.
Newspaper, TV and newsletter are used increasingly as convergent
media for getting targeted employee information. These information and
learning courses are tailored exactly for a target group. Furthermore,
business TV presents a very effective method of motivating a group
(employee, suppliers and customers) to learn.
Another form of knowledge-oriented Web 2.0 applications are weblogs
(blogs) that have take root since the beginning of 2002 as an indispensable
information and communication medium for knowledge workers.
Discussed different perspectives of weblogs:
– Weblogs as primarily private journals that give information about
personal sensitivities and activities of its author
– Weblogs as a new journalistic form of expression that perform control
function against established media
– Weblogs as marketing and communication instruments that enable the
company to enter new dealings with their customers and employees
– Weblogs as a new learning medium using which people can deal with a
certain topic systematically and thus make this process transparent to
themselves and others
7.4.6 Management Systems for Planning and Control

Management Information Systems (MIS) are information systems for
managerial planning and control of a company. In most cases, the database
for this model comes from a data warehouse.
Business Intelligence (BI) systems use the same database with an
additional focus on reporting. Thus, supporting tools that help the company
to optimise the business results or ensure the quality of results are also the
tools for knowledge workers. They make the following contributions to
achievement of defined company goals:
– Establishing a contextual basis for making decisions
– Structuring the decision-making processes
– Contributing to quality assurance of work results
– Even knowledge management itself is a management discipline that has
to be planned and controlled.
According to Deming’s PDCA-cycle (PDCA: Plan, Do, Check, Act), it
is possible to set knowledge controlling in a cycle oriented by key figures.
For knowledge goals operationalised by key figures, it is recommended to
incorporate quantifiable usage parameters of knowledge management
systems and contents in addition to structural, human and relation key
figures of an intellectual capital statement. How intensively is the ad hoc
communication used in teamwork? What is the level of integrity of
systematically classified storage of documents as knowledge sources?
Which proportion of users work can be incorporated into a company’s wiki?
All these questions can be answered only by a continuous evaluation and
accessing statistics in the ICT systems for knowledge workers.
7.5 Success Factors for ICT Implementation

Optimum interplay of user, structure (operational and organisational
structure) and ICT systems is a basic requirement for increasing the
efficiency of the knowledge worker. In the following presentation of
utilisation effects, quantitative usage dimensions are highlighted even if it is
not always possible to quantify the usage dimension effectively.
The following principles should be considered for productive and user-
friendly conception of ICT systems:
– Orientation to productivity: In knowledge work, we have to deal with
new, productivity-enhancing influential factors that should be organised.
I particular this includes the daily work environment of knowledge
workers with all the accompanying and supporting tools, knowing the
right knowledge sources, facilities to access knowledge of colleagues and
their readiness to share it, right equilibrium between concentrated
individual work and common work and last but not least, productive use
of knowledge (and knowledge-bearers in his working hours).
– Incorporation in business processes, working processes and
operational procedures: We have to deal with processes and systems
that are to be implemented permanently. Accordingly, it is possible to
create, store, distribute and use knowledge for the company. This is
accompanied by balanced organisational structures and working
environments. A one-time technology-oriented solution would go well in
this structure. These processes and operations cannot be planned and
simulated for individual persons as in case of productive work.
Accordingly, it is necessary to design them in such a way that a
knowledge worker follows them gladly because he knows the utility of
his work. He can provide knowledge in a simplified form and become
more capable of accessing experts and their knowledge based on
optimised communication processes.
– Strengths of knowledge culture and readiness of an individual: This
determines the inner satisfaction of the participants, their interest and
their motivation, and a company culture that stimulates and rewards the
corresponding behaviour positively. Setting of incentives will become
necessary here but not effective. However, knowledge management will
become a part of life when the knowledge workers recognise the direct
benefits of knowledge sharing and play a part in the system, for instance,
by providing their own knowledge. An individual should be ready to
share his knowledge and he should have the trust to rely on and use the
already available information in a productive way. The company culture
necessary for this has to be built for the long-term. This begins with
developing the readiness of knowledge-bearers by implementing
dedicated/focused measures. This readiness has to be developed
alongside the process of implementation.
– Establishing circular dependencies in implementation: Knowledge
management lives and get its benefits from knowledge that can be shared
and used. On the other hand, creation and storage can begin only when it
is present technically and organisationally. Thus, in knowledge
management processes it is necessary to overcome a «dry spell». This
raises technical, organisational and cultural challenges. But the dry spell
can be overcome only with the help of spearheads. Again, spearheads are
not just the management and seniors with specialisations. Even experts
have a lot of decisive knowledge. For implementation, it is necessary to
identify potential spearheads and plan measures beforehand.
– Management attention for knowledge objectives: Knowledge
objectives should be in tune with the overall strategy of the company or
should be derived from it. They primarily present the stakeholders’
perspective of the company. This process should not be performed once
but should also be implemented permanently in order to build a learning
organisation.
Identification and creation of analogies: A significant factor for
success and acceptance of collaborative systems for knowledge workers is
the ability of the employees to develop analogies between themselves and
others. This step from anonymisation, a trustful behaviour of knowledge
workers among themselves, should be supported clearly by ICT systems in
units and cells of personal communication and teamwork. As the user of the
system, a knowledge worker depends to a great extent on his motivation
that is boosted by personal grading of his work.
For a successful ICT system usage, it is necessary to manage user
expectations from IT projects. The belief that a problem is solved by
installing a comprehensive and expensive ICT solution is detrimental to the
success of the knowledge management initiative. Part of the journey is
taking a proactive view of information and technology risk—particularly as
it relates to strategic business initiatives. Projects that are important from a
growth and performance perspective may also subject the organization to
high levels of cyber risk. As businesses integrate business and IT, it is
necessary to make the chief information security officer and his or her team
active participants throughout the project life cycle—from planning and
design through implementation, testing, and deployment (Deloitte, Jan
2015).
Case Study
KM at eClerx – an Example of Knowledge Process Outsourcing
eClerx in India is a specialist Knowledge Process Outsourcing (KPO)
company that provides data analytics and customised process solutions to
global enterprise clients across a wide range of industry sectors from its
offshore delivery centres in India. Incorporated in 2000, the company has
four delivery centres across Mumbai and Pune and onshore support and
client engagement operations in Austin (Texas), New York, Dublin and
London.
With each passing year since its inception, eClerx has entered into more
short-term and higher-complexity engagements; concurrently, the collective
knowledge base and organisational capabilities of the company have
continued to grow. By late 2003, it was clear that one-on-one apprenticeship
and nurturing of the transfer of tacit knowledge needed to be supplemented
with a broader framework of KM.
In the absence of such a framework, new staff were tossed into a
whirlpool of process execution and expected to perform without any
substantial introduction to the firm’s history, culture, processes and lessons
learned. Senior management thus proposed KM as a solution for moving
ahead, acknowledging constraints and remodelling to a world where
cutting-edge technology and intelligent processes must partially displace
approaches used in the start-up years at eClerx.
It was also felt that KM would address concerns about the company’s
ability to retain knowledge when staff moved on. In line with others
companies in the knowledge-intensive professional services space, the
firm’s annual employee attrition averages about 30%. Without KM, an
employee’s departure could mean that strategic advantage might be
depleted, not only through loss of human capital, but also accumulated
experiential knowledge.
Today, the KM team at eClerx has a decentralised and «cellular»
structure. Each operations unit has dedicated knowledge anchors (KAs) to
provide localised support. The premise is that learning is more than
«vanilla» classroom training. It’s not always possible or optimal for staff to
abandon core work duties every time they require support. Also, the
dynamic nature of eClerx’s business means that waiting for explicit
knowledge (to be documented) before acting is inadequate. Instead,
spontaneous learning opportunities are created by leveraging Web 2.0
technologies to connect consumers with creators of knowledge.
All offline and online learning programs are consolidated under a single
umbrella – a «virtual university» that offers over 3000 courses. This in-
house university supports:
– Domain-specific knowledge on areas such as derivatives, risk
management, trade processing, key regulations and so on for financial
services clients, and online retail and analytics.
– Functional knowledge that is core to the eClerx business, programs on
data mining and warehousing, advanced business statistics, Business
Objects, SQL Server 2008.
– Business process training that delivers process execution know-how. The
emphasis here is on application rather than mere acquisition of
knowledge of processes.
– Training on supporting competencies, including analytical thinking and
problem solving, six sigma, team management, interpersonal
communication, strategic orientation, leadership, time management,
quality management, and project management.
Since documented knowledge must typically be reviewed and quality
assured, the cycle of publishing documented knowledge may not be quick
enough to take action for gaining competitive advantage. Instead,
taxonomies, shared platforms, an ask-an-expert system, blogs and wikis,
discussion forums and simple contact lists act as smart «push» options that
code knowledge and learning into the work of each knowledge worker at
eClerx.
eClerx has deployed Microsoft Office SharePoint Server 2007 (MOSS
2007). The MOSS 2007 implementation enables:
– Content Management: Document management, version control, check-
in/check-out document locking, auditing, and role-based-access controls
at the document library, folder, and individual document levels.
– Enterprise Search: Efficient search and retrieval of relevant content saves
time.
– Team Portals: Multiple portals that mirror the organisational structure
and facilitate collaboration at team level.
– Collaboration: With offices in the US, UK and India, the Web 2.0
capabilities of MOSS 2007 enable eClerx employees to leverage
workspaces, tasks, surveys, forums, blogs, wikis and RSS.
– Wikis and blogs: Wikis provide eClerx employees with a forum where
they can contribute and build on the existing knowledge base of the firm.
Blogs, on the other hand, catalyze the socialisation process by trapping
experiences and lessons learned as they happen.
Source: Makhija (2009)
– In order to carry out analytical activities, a knowledge worker has a
distinct need for an optimum access to company’s «knowledge and
information bases». There is no need to reinvent the wheel for efficient
results. Good teamwork in expert network is one of the success factors.
In such cases, the systems should encourage know-how pool and
networking of experts.
– The systems for knowledge workers are considered from the following
perspectives of productive knowledge work: individual efficiency,
teamwork, information supply, and active information search,
cooperative use of knowledge and planning and control.
– Users, business processes and ICT settings build a close system. All three
influential factors are necessary for productivity and efficient working.
Massive weaknesses in users, organisations of business processes or
system settings can rarely be compensated by the remaining two factors.
– High-performance workplaces augment the capabilities of their skilled
staff for activities such as exploring data, developing innovative
processes or products, and working with suppliers to respond to the
requests for proposals. This support helps workers locate the right
people, find the right content, support the right communication channels
and focus on where to create maximum return.
– A knowledge-oriented company is unimaginable without efficient
information management. Providing, storing and distributing information
is a basic requirement for creation and transfer of knowledge in phase 1
where explicit knowledge has to be made sharable.
– The art of designing ICT systems lies in balancing individual user
requirements and requirements of a coherent and robust system
landscape from the perspective of an organisation. The human factor
influences the overall productivity decisively in direct interplay with
usability of the entire system landscape. New disruptive technologies
which can change the KM landscape in an organisation can also subject
the organization to high levels of cyber risk which needs to be managed.
– A knowledge-oriented company should protect its knowledge from
outside but allow employees a free access to most of the information.
Distrust towards one’s own employees and the restricted information
access thereof, hinder the process of knowledge transfer.
– Technology should not replace human processes, intuition and
experience, but rather, find a suitable source of exploitation so that
human judgment is multiplied and not just replaced by expert systems
(Carlos and Favero 2016b).
7.7 Questions
1.
Discuss why Knowledge Management initiatives inspired by
Information Technology alone do not result in successful Knowledge
Management.
2.
What are the characteristics of an «enterprise 2.0»? What does this
mean for the ICT system and what are the implication for
users/contributors?
3.
«Information empowerment is a full equation for information sharing.
One half of the equation is getting the right information to the right
people at the right time. The other half of the equation is making sure
that people can do something with the information when they get it».
Discuss.
4.
Which ICT tools can enhance teamwork?
5.
As a student you are a knowledge worker: Draw a mindmap of your
information and communication systems.
6.
«Deploying the social platform to improve the corporate KM strategy
points towards a completely different KM approach as compared to the
deployment of SharePoint». Discuss.
7.
Discuss the impact of machine learning and Robot on the operational
framework of an organisation.
8.
Intergrating Social Media in Knowledge Management Systems will
result in more unwanted material. Discuss.
7.8 Assignments
1.
An information junkyard
A large consumer products company decided to restructure the
organisation so as to be able to improve professional work. The
professional staff was instructed to document their key work processes
in an electronic database. It was a despised task. Most staff felt their
work was too varied to capture in a set of procedures. After much
debate and motivation the task was completed. Within a year the
database was populated but it resulted in creating an expensive and
useless information junkyard.
Discuss the lacunae in designing the knowledge management
system and suggest a framework that would help the organisation in
improving professional work.
2.
The challenge to find high quality information
«People in large corporations face the same challenges finding
information on their organisations» intranets as they do finding it on
the Internet: there is too much to search from and searches can yield as
much nonsense as helpful material.
Discuss this in the framework of Knowledge Management
processes highlighting the imperatives and the challenges.
3.
Integrating social media in the organizational work place
Empowering individuals by giving them tools to connect and share
on their own terms to meet their needs and not through channels and
formats that are imposed upon them, will result in resolving problems
and identifying solutions faster.
Discuss the pros and cons of using social media in functional
systems. What would be the organizational challenges?
7.9 KM-Tool: Knowledge Taxonomy and

Knowledge Map
What is a taxonomy and knowledge map?
A taxonomy is a technique that provides the structure to organise
information, and documents in a consistent way. Information and
knowledge is put in hierarchical or contextual order (like a folder
structure in your windows explorer or a mind map).
Why use taxonomies and knowledge maps?

This structure assists people to efficiently navigate, store, and retrieve
needed data and information across the organisation. It builds a natural
workflow and knowledge needs in an intuitive structure.
How to develop a taxonomy or knowledge map?

Developing a taxonomy involves finding an appropriate breakdown for
the diverse forms of information contained and used by different actors
within an organisation.
1.
Start with a general category for the area of work being addressed,
e.g. «processes» or competences
2.
Establish the subcategories for this category. These can be
developed by answering the question «what types of, for example,
processes or competences are there?» Repeat the process of division,
based on the planned application of the taxonomy, and the users
concerned. The division used should be consistent with the
expectations of the users, otherwise it becomes hard for them to
navigate the system intuitively. Decide on standard terms and
naming of documents. These should follow the same logic and
consistency across different types of item, following the same
pattern for similar situations so that, once learned, the user can
reasonably predict how it will apply in a new situation.
3.
Decide on the kind of visualisation of the taxonomy. (e.g. folder
hierarchy, Mind map, knowledge tree, etc)
4.
Optional: Assess the maturity and depth of information/knowledge
in each «branch» of the structure.
Sources and links:
A useful video on Taxonomy is available on YouTube at ► www.
youtube.com/watch?v=qGymV0ZCme4&feature=player_embedded
Useful Links
► http://drupal.org/project/modules
► www.apqc.org
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8. Measuring and Safeguarding

Intellectual Capital

Germany
Despite important contribution of knowledge and services to value

creation and growth of modern companies and nations, our
management control systems, our economic models and our social
measuring instruments concentrate – baring a few exceptions – on
physical and financial assets and physically and financially
measurable outputs J.B. Quinn (Adapted from Quinn 1992, p. 243).
Learning Outcomes
– You will know what the challenges to evaluating intangible assets
are,
– You will be able to differentiate between deductive summarising
and inductive analytical approaches to evaluate intellectual assets;
– You will know how to use a Balanced Scorecard as a
multidimensional measuring instrument;
– You will be able to assess risks of loss and know how to protect
intellectual assets;
– You will be able to establish a knowledge inventory.
8.1 Finding Measures for Intangible Assets1
«What is not measured is not managed» is an often made statement in
business practice. The measurement and evaluation system is thus the core
system for the perceptions of any company. This system, directly influences
the performance measurement and evaluation of the top management and of
all employees, and indirectly influences the strategic decisions. Each
organisation thinks and functions through its measurement system even if
many decision-makers may be unaware of it. The measurement system can
be considered as a strategic map which reflects the organisational reality in
a certain manner. We all know that the basic difference between various
kinds of maps is the purpose they serve; thus we have road maps, hiking
maps, flight maps, and climate maps. But all good maps have the following
things in common:
– They give an orientation: In a complex environment, maps help us to
focus on the important things and to find our path which lies in the
future.
– They are rational and goal-oriented models of reality: Maps never depict
the reality one to one. For one, it is impossible to do so, and secondly it
would not serve the underlying goal to provide orientation, because the
complexity of the maps would overburden the cognitive capacity of
human beings and the organisation.
So what do the orientation maps in today’s organisations look like? On
which significant parameters do they help us focus? Do these parameters
help us find a suitable strategy? And how is the strategic performance of an
organisation defined?
Classic approaches answer these questions with the help of various
financial indicators. Starting with turnover, net income or EBIT, these
indicators include traditional returns figures such as ROI or ROS up to the
new estimates of shareholder value (ROCE, EVA, DCF, CFROI, etc.). The
disadvantage of all these financial indicators is that they are not enough to
adequately consider the resource «knowledge» and its significance in the
framework of the knowledge economy. These figures thus lead to
mismanagement, which in turn negatively affects the success of the
organisation in the long run.
According to the disadvantages of the existing performance
measurement systems can be summarised in several key statements:
We too often measure the wrong things

– To start with, we measure what is easy to measure, without questioning
the strategic purpose the results of such a measurement are supposed to
provide us. This way, we become prisoners of our indolence and our
bounded rationality.
– Financial indicators are the parameters which, in today’s organisations,
are the easiest to collect. In doing so, we invest all our energy in
aggregating these financial parameters to meaningful indicators. Here,
usually the mathematical computability dominates the cause-effect chain
and the chronological order of the strategic development is overlooked.
During all this we also forget the non-financial, intangible aspects.
– Very often we are inclined to measure only the inputs. Input factors
usually have very little significance in predicting to the output achieved
with them. This is generally decided in the organisation (through its
structure and processes).
– We concentrate too much on stock figures and too little on flow figures.
In this way, we strengthen our static view about things and loose the
perception for the processes in the course of time.
– We try too hard to divide the organisation into individual units, and
forget about its synergies and correlations which characterise every
organisation and are in fact its raison d’être.
Too often we measure using the wrong scale

– Often we measure for the short-term: Our time scale is too short. This
way, we end up getting static measurements and not dynamic. We get to
look at a series of snapshots instead of the complete film. Thus, for
strategic decisions and business understanding, we miss out on noticing
important dynamic processes such as delay effects or feedback loops.
– Our measurements are solely quantitative and not interlinked and
qualitative. This unnecessarily reduces the quality of the information
available to us. We fail to see cause-and-effect relationships and trust the
supposedly objective numbers more than our own experience.
– We measure with an absolute standard and not with relative. By their
definition, however, absolute parameters are always control-oriented and
not learning-oriented, because findings can be drawn only from the
relative interplay with other parameters.
– We measure only internally and relate very little between the
organisation and its environment. This leads to a distorted perception and
blinkered attitude to one’s work. Concentration on internal mediocrity
distorts the view of the possible potentials.
We do not measure what is important

– Intangible assets are generally hardly measured or not measured at all.
As a result, we rely mainly on tangible assets while making strategic
decisions.
– We hardly know the knowledge base of our organisation and its strategic
value. We are unaware of the areas in which we have a knowledge-edge
over our competitors. We do not know how widespread knowledge is in
the market. It is therefore difficult for us to form sustainable knowledge
strategies.
– We do not know how effective our knowledge management system is and
what its strategic contribution is. This makes it difficult for us to define a
knowledge management strategy.
– We know nothing about the quality and nature of the learning potential of
our organisation. Are we in a position to learn faster than our
competition?
– We know nothing about the extent and strategic edge of our organisation-
specific intelligence. In which areas do we have structural advantages?
Which areas are our strongholds? What constitutes our competitive
advantage?
We measure without realising why:

– Though a number of indicators are available to us, we find it difficult to
link these to our strategy. We therefore use indicators to exercise
operational control instead of using them for strategic learning.
– We find it difficult to interpret deviations. We therefore concentrate on
correcting these deviations. But in doing so we overlook strategic
opportunities and risks.
Case Study
Intellectual Capital Statement of Austrian Research Centre,
Seibersdorf (ARCS)
The Austrian Research Centre of Seibersdorf (ARCS) is the biggest
extramural research company of Austria. Being found as a nuclear research
institute, its field of activity was developed into a broad spectrum of
different natural sciences, technology and social sciences with about 700
employees at numerous locations.
Intellectual Capital reporting is supposed to document the future value
creating potential and present its progress along the strategic re-orientation
of the company. Being a largely publicly financed organisation management
wanted to increase transparency of resource use and results achieved for the
community and A Balanced Scorecard was developed before the project of
intellectual capital statement. This Balanced Score card was supposed to
deliver specific information for the internal research and knowledge
management.
With the implementation of intellectual capital statement, a three-
member team was created apart from the control team which comprised
members from different parts of the company and external specialists. This
three-member team was made up of two employees of ARCS and an
advisor. The ARCS intellectual capital statement is based on a process
model that illustrates a knowledge cycle within the company over a certain
period of time. The broad threefold classification of intellectual capital in
human, structural and relational capital was selected for this purpose. Using
this model, it is possible to trace the three capital forms that represent the
input for the actual value-creation process (see ◘ Fig. 8.1).
Fig. 8.1 Process model of ARCS
The most important core processes of this research organisation are the
order and programme research. Three knowledge-based resources are
transformed into knowledge within the framework of these processes that
are organised in form of projects in the organisation. This model can be
illustrated with the following example: A talented researcher (human
capital) works in one of the laboratories in Seibersdorf (structural capital)
within the research network of ARCS (relational capital). He works not
only on problems pertaining to fundamental research (programme research)
but also on industrial projects for application development (order research).
Thus, on the one hand, new findings arise in form of publication and
methods and on the other hand new products or solutions come into being.
The employee learns by himself and enhances his experience. Apart from
these findings, there are also financial refluxes that are parallel to the
business area of ARCS. For this purpose, detailed indicators are developed
that can be retrieved just like the complete intellectual capital statement
from ► www.arcs.at.
Source: Bornemann and Leitner (2002) and ► www.arcs.ac.at
8.2 Intellectual Capital Reporting

Making the effectiveness of knowledge work measurable means to analyse
the end result of knowledge work, i.e. the intellectual assets or the
knowledge capital generated. Since the beginning of the 1990s there have
been efforts to extend the existing, mainly financially oriented,
measurement system to non-financial or intangible assets. Knowledge
reporting in companies always has an internal and an external dimension.
The internal dimension has mainly to do with strategic control and internal
accounting.
The external dimension deals with external accounting and reporting,
and thus stresses the significance of communication with external
stakeholders of the company, especially with its shareholders (cf.
Abhayawansa and Guthrie 2014).
In the following we will not enter into a discussion of International
Accounting Standard (IAS 38), where some intellectual assets and their
valuation are regulated but refer instead to the relevant accounting
literature.2 A key argument against the recognition of intangible assets in
balance sheets still is the uncertainty of future economic flows from such
assets.
We distinguish two categories of approaches to evaluating intellectual
capital:
– Deductive summarising approaches rate the difference between a
company’s market value and book value. Some examples are indicators
such as market-to-book value ratios, Tobin’s q and Calculated Intangible
Value (CIV). Such derived indicators evaluate the intangible assets in
monetary form but either fail to explain or explain only partially the
difference between the market and the book value. Therefore, from a
knowledge viewpoint, they are not suitable as sole variables for operative
and strategic control of a company.
– In contrast to deductive approaches, inductive analytical approaches
describe and evaluate and aggregate components of intellectual assets
with the purpose to arrive at an overall value. One such approach is an
intellectual capital statement as an instrument for targeted presentation
and development of intellectual capital of an organisation. It shows the
correlation between the organisational objectives, the business processes,
the intellectual capital and the success of the organisation and describes
these elements by means of indicators.3
Sveiby (2010) has developed a somewhat wider systematisation
summarised in ◘ Table 8.1.
Table 8.1 Methods for analysing the intellectual capital
Approach Description
Direct Estimate the $-value of intangible assets by identifying its various components.
intellectual Once these components are identified, they can be directly evaluated, either
capital individually or as an aggregated coefficient
methods
(DIC)
Market Calculate the difference between a company’s market capitalisation and its
capitalisation stockholders’ equity as the value of its intellectual capital or intangible assets
methods
(MCM)
Return on Average pre-tax earnings of a company for a period of time are divided by the
assets average tangible assets of the company. The result is a company ROA that is then
methods compared with its industry average. The difference is multiplied by the company’s
(ROA) average tangible assets to calculate an average annual earning from the Intangibles.
Dividing the above-average earnings by the company’s average cost of capital or an
interest rate, one can derive an estimate of the value of its intangible assets or
intellectual capital
Scorecard The various components of intangible assets or intellectual capital are identified and
methods indicators and indices are generated and reported in scorecards or as graphs. SC
(SC) methods are similar to DIS methods, expect that no estimate is made of the $-value
of the Intangible assets. A composite index may or may not be produced
Table based on: ► http://www.sveiby.com/articles/IntangibleMethods.

htm
In the following we will explain some of the approaches relevant for

practice.
8.2.1 Deductive Summarising Approaches

«Market-to-Book Value» Relation
The simplest indicator of the value of an intangible asset is the difference
between the market value and the book value. For companies listed on stock
exchange, the market value can be calculated easily as share price
multiplied by number of shares. The book value can be taken from the
annual balance sheet. This happens under the assumption that everything
that is not attributed to the book value is based on the components of
intangible assets. Thus, if a company such as Microsoft is worth
approximately 86 billion US dollars and the book value is approximately 7
billion US dollars, the value of its organisational knowledge base is 79
billion US dollars.
Though this calculation is easy, it is not very helpful because of the
following three reasons (Stewart 1997):
– The stock exchange value changes rapidly and is not characterised by
rational and suggestible factors. A 5% drop in the stock exchange price
without any change in the book value of an asset does not mean that the
value of knowledge base has reduced by 5%.
– A company’s book value and even market value to a certain extent are set
too low. Through extensive use of depreciation, the book value appears
to be lower than its real value (keyword: hidden reserve).
– The informative value of the sentence «the intangible assets of Microsoft
are worth 79 billion US dollars» is restricted. What can a manager or an
investor deduce from this sentence?
Instead of considering the difference between market value and book
value, it makes more sense to analyse the quotient that is obtained when
market value is divided by book value. With this quotient, a company can
compare itself better with similar competitors. If they operate in the same
economic zone and are exposed to similar exogenous factors, a benchmark
between different companies appears to be meaningful and informative. A
diminishing market-to-book value quotient can be an indicator of a warning
that enough investment has not been made in organisational knowledge
base, maintenance of brand or development of an image and its transparent
presentation.
Tobin’s q
James Tobin, winner of the Nobel Prize for Economics, developed a
quotient that relates market value of an asset to its replacement value. If q <
1, the market value of an asset, a building for instance, is lower than the
replacement cost. As a result, the company will ensure that such assets are
purchased or held as funds in as less numbers as possible. If q > 1, it means
that the market value of the asset is higher than the replacement cost. This is
particularly applies to knowledge or experts. A high value of q reflects the
value of investment in technology and employees. If q is very high, e.g. q =
2, the use of this asset is considered to be very profitable. In this respect, q
can be seen as a measurement for «monopoly return». The company gains
high profits with such resources because it is the only one that uses them.
Hence, q is also a measurement of inimitableness and sustainable
competitive advantages. Thus, for example, a company can buy young
researchers «at a good price from the market». The company’s ability to
integrate and motivate these employees in a functional development team
gives rise to technological solutions that are far too valuable than the sum of
market value of individual researchers. Imagine the calculation of Tobin’s q
to get the value of a football team. Tobin’s q can be calculated for the entire
company as market value divided by the replacement value of fixed assets.
The advantage of Tobin’s q is that unlike the market-to-book value ratios, it
neutralises the effects of different depreciation practices. The informative
value of this indicator is highest if similar companies are compared over a
longer period of time.
Calculated Intangible Value (CIV)

This evaluation method was developed by NCI Research (Kellogs School
of Business, Stewart 1997) to encourage knowledge-intensive companies.
Even here, the basic consideration is that a transparent presentation and
financial evaluation of intangible assets should encourage the readiness to
invest in knowledge-intensive companies. The approach is built analogous
to rating of market value. While evaluating brands, if one assumes that
instead of similar products, higher price can be achieved through the brands
alone, then in case of calculated intangible value one assumes that
companies that develop and use their organisational knowledge base in a
better way, gain higher owned-capital returns than similar companies with a
less developed organisational knowledge base.
While the deductive summarising evaluation manages to assign a value
to the organisational knowledge base, they are – as aggregate values – not
in the position to shape the cause-effect relation between interventions and
changes in the knowledge base. Thus, this class of indicators is suitable
only for strategic and operative control of a company from knowledge
viewpoint. The inductive analytical method explained below is more
suitable for this purpose.
8.2.2 Inductive Analytical Approaches

The analytical description and evaluation of different components of
organisational knowledge base as well as other components of intangible
assets structured by Sveiby (1997) under the term «intangible assets
monitor», by Stewart (1997) as «intellectual capital navigator» and by
Roos et al. (1998) as «IC index» or by Bueno et al. (2014) as «Modelo
Intellectus». The concept of the Austrian Research Centre Seibersdorf
(Leitner et al. 2000) has also found its way in creation of intellectual capital
statement in Austrian universities. The Seiberdorf model inspired a
«Intellectual capital statement – Made in Germany» and the European
Intellectual Capital Statement (INCAS). In Denmark, approximately 20
companies created intellectual capital statements for a pilot project by
following Sveiby’s approach (Mouritson et al. 2001). Based on this, the
Danish Ministry of Economics published «The Danish Guideline for
Intellectual Capital Statements» (Danish Agency for Trade and Industry
2000).
Downloads of guidelines for intellectual capital statements

– «Intellectual capital statement – Made in Germany»: ► http://www.
akwissensbilanz.org/Infoservice/Infomaterial/Leitfaden_english.pdf
– The Danish Guideline for Intellectual Capital Statements: ► http://
en.fivu.dk/publications/2001/a-guideline-for-intellectual-capital-
statements
– European Intellectual Capital Statement (INCAS): ► www.incas-
europe.eu/
There are some approaches that integrate financial as well as non-financial

indicators into a complete system for operative and strategic control of the
company. The most prominent representative is the «balanced scorecard»
developed by Kaplan and Norton (1996). The multi-stage indicator model
according to North et al. (1998) in particular tries to make the cause-effect
chain visible and present the correlation between the financial and
intangible resources.
The financial valuation of individual elements of intellectual capital
statement is still in its early stages but is already practiced in a due
diligence in Mergers and Acquisitions.
The following are some of these approaches that have gained
importance in theory and practice.
Intangible Assets Monitor

Sveiby assumes that the market value of a company is made up of visible
equity and intangible assets. Intangible assets are composed of components
of «external structure», «internal structure» and «competence of the
employees». The external structure contains relationships with customer
and suppliers. The internal structure covers processes and technologies, in
short, everything that remains when an employee leaves the company
(Sveiby 1997).
The intangible assets monitor evaluates these elements of organisational
knowledge base from the perspective of growth/renewal, efficiency and
stability related to employees, internal structure, external structure. Sveiby
set his approach to practice in a Swedish company Celemi, which develops
and sells learning tools (cf. ◘ Fig. 8.2). From the aspect of their
contribution to the knowledge base, the customers are divided in to three
categories:
Fig. 8.2 Indicators of «intangible assets monitor» (Source: Sveiby 1997, p. 165)
Image-enhancing customers who ease Celemi’s task of acquiring new

customers and reducing marketing costs come under the «external
structure» category in the intangible assets monitor. Organisation-
enhancing customers who demand «state of the art» solutions, who are
relatively new for Celemi and promote development of new products, are
posted under growth/renewal section of the internal structure. Competence-
enhancing customers challenge the knowledge of Celemi’s employee and
stimulate a common learning process. These customers are posted under the
growth/renewal section of the employees.
However, this classification simultaneously brings forth the problem of
limitations of indicators. One could argue that organisation-supporting
customers should also be considered from the perspective of efficiency
wherein, for example, they support just-in-time deliveries or zero-error
quality and a 24-h service. In turn, the competence-supporting customer
could also be classified under the growth/renewal section in the internal
structure.
Intellectual Capital Navigator

Stewart (1997, p. 243ff.) suggested that companies should be evaluated
under the same perspectives as mentioned by Sveiby and the result should
be presented as shown in ◘ Fig. 8.3 – in a target-performance comparison.
The indicators for human capital, structural capital (according to Sveiby’s
internal structure) and customer capital (the supplier relations are not
considered) are shown in addition to the market-to-book value
relationships. Three key figures are suggested for each of the latter three
categories. However, Stewart does not differentiate between
growth/renewal, efficiency and stability. Yet, he implicitly focuses mainly
on the indicators of growth and renewal. Motivational measures are taken to
create scales for every indicator in such a way that the target value in the
graphical presentation rests on the arc. This diagram provides a simple
target-performance comparison as a starting point for targeted intervention
in organisational knowledge base.
Fig. 8.3 The «intellectual capital navigator» (Source: Stewart 1997, p. 245)
The Intellectual Capital (IC) Index

The IC index of Roos et al. (1998, p. 89) is based on classification of
intellectual capital into relational, innovation, human and infrastructural
capital. Indicators are built for each of these capitals. Analogous to the cost-
utility analysis, they are weighed and aggregated – into an index and an IC
index, and presented over a course of time. On the one hand, this
presentation of intellectual capital takes into account the need for simplified
key figures but on the other hand its significance is restricted only to new
trends. Furthermore, the relative weightage of individual key figures is not
based on concrete examples (see ◘ Fig. 8.4).
Fig. 8.4 The «intellectual capital index» (Source: Roos et al. 1998, p. 89)
The Balanced Scorecard

The Balanced Scorecard developed by Kaplan und Norton (1996) is a result
of one of the surveys in the USA supported by the KPMG auditing and
consulting firm in order to increase the informative value of traditional
financially-oriented key figures. The model (see ◘ Fig. 8.5) views a
company from four perspectives – customer perspective, financial
perspective, perspective of internal business processes, and perspective of
learning and growth.
Fig. 8.5 Structure of Balanced Scorecard (Source: Kaplan and Norton 1996, p. 76)
The Balanced Scorecard is a strategic management system that can be

used to support the operative implementation of a long-term strategy.
Different perspectives of the company are not only juxtaposed but also
shown in their cause-effect correlation. Strategic objectives, measurement
categories, operative targets and initiatives are specified for each of the
perspectives. Kaplan and Norton compare the balanced scorecard in their
application with a flight simulator wherein a complex number of cause-
effect relations of critical variables are considered that describe the flight-
route as well as a strategy to reach a destination.
However, there is the awareness that every organisation should compile
its own, custom-made and context-specific set of indicators in order to
capture and control the dimensions that are relevant for them.
Simultaneously, the Balanced Scorecard supports the dense connection of
knowledge objectives and knowledge measurement which will ideally lead
to fast feedback processes.
InCaS Intellectual Capital Statement: Made in Europe

Based on the Austrian methodology (see case on p. 256) the German
Federal Ministry of Economics and Labour supported the trial of a
methodology called «Intellectual capital statement – Made in Germany»
which was then tested and adapted in the European context by pilot
companies. The «Intellectual capital statement-»4 developed is considered
as an instrument for medium-sized enterprises to present their intangible
assets in a structured form and evaluate these assets. As an instrument for
strategy development and organisational development, the intellectual
capital statement allows systematic deduction of measures for optimised
internal controlling of business processes. As an instrument for external
communication, the intellectual balance sheet facilitates the decisions
pertaining to banks and investors for instance, because future potentials of
the company are made transparent.
The intellectual capital statement comprises intangible assets in form of
human capital (employee competence, employee behaviour), structural
capital (IT, intellectual property, organisational culture, process organisation
etc.) and relational capital (relationships with customers, suppliers, others
partners and public).
◘ Figure 8.6 shows the intellectual capital statement model. The
statement starts with the initial situation of vision and strategy of the
organisation and gives an overview of options and risks in the business
environment. From this, the organisation derives a range of measures on
how it wishes to position itself according to the different dimensions of
intellectual capital, namely human, structural and relational capital.
Fig. 8.6 The intellectual capital statement model developed by the Intellectual Capital Statement
Project Group (AK-WB)
The interaction of business and knowledge-based processes, together

with the other tangible and financial resources which are not observed in
the intellectual capital statements, leads to business success. From this
result, the organisation draws conclusions for the future which can lead to
changes in visions and strategies. The knowledge gained from the
intellectual capital statement on the knowledge processes and the relevant
resources make it easier to derive measures in a new cycle and to facilitate
the sustained orientation of the organisation.
The complete intellectual capital statement is created using five steps
with four milestones:
– Milestone I presents the intellectual capital statement in its simplest form.
Three steps are needed to achieve this milestone: assessing the initial
situation relating to business environment and strategy, recording
intellectual capital, and self-evaluation of intellectual capital. The target
group of Milestone I is the management of the organisation which can
define measures for improvement on the basis of the results.
– Milestone II targets the same group but goes one step further in
supporting self-evaluation with indicators. Thus, self-evaluation is given
further concrete form and supported using facts. The collection and
assessment of indicators is, at the same time, preparation for internal or
external communication.
– Milestone III provides a processed document or a presentation of the
organisation’s intellectual capital. It is tailored for a specific (external
and/or internal) target group and describes the most important
information attractively and in a structured form.
– Milestone IV works out a full intellectual capital statement which is also
suited to monitor the organisation. It integrates amongst other things
correlation analyses and assessments which provide information on
where the measures should be initiated in order to optimise business
success.
The first draft of the intellectual capital statement is best implemented
in a cohesive step-by-step project over a period of between 4 and 12 weeks.
Different time allocations can be calculated for the effort, depending on the
initial situation and number of individuals involved. As a minimum,
Milestone I demands an effort of half a work-month. Up to three work-
months can be required for full implementation up to Milestone IV. The
goals pursued with the intellectual capital statements should always be
synchronised with the milestones. This makes it possible to implement the
intellectual capital statement in a cost-effective, result oriented and step-by-
step manner.
Danish Guideline for Intellectual Capital Statements

Following a 2-year research project, Danish Agency for Trade and Industry
published the first «Guideline for Intellectual Capital Statements» in
November 2000.5
The intellectual capital statement begins with a knowledge narrative.
Based on the customer requirements, the use value of a company’s product
is presented to the customer. This gives an idea of the extent to which the
features of the product, that create value for the customer, depend on the
company’s intellectual capital.
This future knowledge-oriented strategy is subsequently broken down in
a set of different objectives – the management challenges.
In the third step, actions are derived from such challenges. Actions are
operative measures necessary for achieving knowledge objectives. In order
to make their effect measurable with reference to the set objectives, actions
are supported with indicators. The development of the intellectual capital in
the previous period can be read and new goals can be set for the following
period from the realisation level of the ascertained goals.
The findings of these processes are interpreted in the intellectual capital
report and presented to the internal and external target groups in different
details.
The implementation of these process components within IT skill
resources is shown with examples in ◘ Fig. 8.7. Based on the guidelines,
certain goals, measures and indicators were defined with the respective
team leaders. Finally, 84 different key figures were measured considering
two deadlines. An intellectual capital statement is divided into human
capital (objective A), structural capital (objective B) and relational capital
(objective C with F) along the formulated objectives. In order to achieve the
objective of «qualification courses for the IT area of the bank», it is
necessary to take different measures in the field of training management
and customer service (cf. ◘ Fig. 8.7). They are measured by means of the
described indicators and evaluated within the intellectual capital statement.
By means of this intellectual capital statement, it is possible to read the
development of intellectual capital of a unit over the course of time as well
as with reference to the goals set for oneself.
Fig. 8.7 Implementation of Danish guideline for IT skill resources department of a bank (an extract)
Case Study
Intangible Assets Monitor Applied to a Cricket Team
Let us consider the intangible assets of a first division cricket team.
Firstly, the players of the team are the employees that gain a market value
by their transfer fee and success in the game in the ongoing season. The
players not only have an individual value as «experts» but also as a team.
Furthermore, a value can also be assigned to the trainer as an employee as
well as to the assistants etc. who could also be described in the internal
structure and processes (guiding processes, team development processes)
and can be quantified admittedly with some difficulties. Externally, the
customer and relations with (loyalty of the fans) have a high value.
8.2.3 The Multi-stage Indicator Model
The model developed by North, Probst and Romhardt (1998) is composed
of a multi-stage indicator system that separates the indicators of knowledge
base, interventions, transfer effects and results of business activity. This
model (◘ Fig. 8.8) shows how company objectives can be achieved
through targeted interventions in the organisational knowledge base and
whether the results can be measured/can be made measurable.
Fig. 8.8 Process of measuring and transforming knowledge

Considering our processes of measuring knowledge, there are four
classes of indicators.
– Indicator class 1 describes the organisational knowledge base.
– Indicator class 2 describes inputs and processes as measurable factors of
interventions for changing the organisational knowledge base.
– Indicator class 3 measures intermediate results and transfer effects.
– Indicator class 4 measures financial as well as non-financial results.
Using this model, it is possible to create a cause-effect correlation and
measure changes in the organisational knowledge base with reference to
business results.
We will use the aforementioned indicator system to explain the
following example of a case study of a home and savings association.
Case Study
Intellectual Capital Statement of a Home Loan Bank
Initial situation
A home and savings association with 800 part-time external staff wishes to
improve customer service and contract contingent for two of its most
popular construction-financing products by introducing an expert system
built on modern information and communication technology. For this
purpose, the following company objectives should be operationalised:
– Improved quality of advice,
– Lower cancellation rate,
– Higher premium volumes
– Reduced consulting expenses
The intellectual capital statement at the beginning of the business year,

(time T0, indicator class 1), shows for the employees a training level
between secondary school (two third of employees) and school leaving
examination, with subsequent administrative training (one third of
employees), conservative attitudes that confront the use of experts system
sceptically in absence of customer, a high variance of product competence
measured through self-evaluation and a competence for using information
and communication technology that is marked by the dominance of the
popular windows applications.
In the internal structure, the process of advising and closing deals are
less structured and supported rudimentarily by information and
communication technology. The ICT structure is characterised by individual
laptops of external advisors who have not yet been linked and do not have
access to a central server. In the external structure, the customer
relationships are affected not only by ample loyalty but also by a certain
amount of dissatisfaction over the lack of ability of the external staff to
provide information.
Actions
The following interventions (indicator class 2) were made in the
organisational knowledge base for achieving the knowledge objectives:
– An expert system was developed.
– 800 PCs of the field staff were made capable of multimedia.
– In 3 days, all the 800 external staffs were trained to use the new software
and the changed method of desired customer dialogue.
– Over a year, the competence of the field staff in dealing with the new
software and the desired behaviour towards the customer was improved
in a coaching process wherein the regional groups shared their
experiences.
At this level of intervention, the indicators measure the input that can also
be expressed in monetary form. In our example, the input indicators appear
as follows:
– Development of software: 16 employee months, information and
communication inputs, and creation of a CD-ROM.
– Upgrading the PCs: 800 multimedia upgrade sets for laptops.
– Training: Cost of trainer, cost of rent of premises/logistics, unpaid
investment of external staff, 3 days of training × 800 − 2400 employee
days and coaching user groups: X days experienced coach.
– Travelling cost, logistics and 800 external staff.
– Unpaid expenses of external staff: 4 × 0.5 days × 800 = 1600 days.
Intermediate result
The intervention in the knowledge base of a company creates measurable
intermediate results (indicator class 3) of quantitative and qualitative form.
We can describe them as follows: Availability of expert system across the
group, 760 external personnel passed the counselling interview with test-
customers successfully, 20 employees were retrained and 20 others were
rejected because they were not willing to work or were incapable of
working with the expert system. The third quarter of the year witnessed an
increase in business volumes and reduction in contract cancellations. In
their own log sheet, the external staff recorded reduction in time taken by
them to close a deal.
The following business results (indicator class 4) were seen at the end of the
business year (T1):
– Business volume increased by 15% but volume per employee increased
only by 17.5% because the rejected external employees were not
replaced.
– External product testing of home and savings association and insurance
companies reveals an improved image and a higher customer satisfaction
with the qualit y of advice.
Thus, the set company objectives are achieved. The change in
organisational knowledge base is reflected in the year-end intellectual
capital statement (final balance sheet). The external staff confronts the
multimedia-supported deals and customer dialogue positively. They have
improved their product competence for selling products A and B.
Simultaneously, they have also improved their competence pertaining to
information and communication technology. The value of the internal
structure has increased by PC upgrades, information and communication
structure and improvement in processes of customer counselling and
closing deals. But none of these processes can be evaluated detached from
the employees. However, employee experience is documented and codified
in an expert system so that it is possible to train new employees quickly.
This «shortened learning curve» accelerates the growth process of the
company. The changes to the external structure refer to an improvement in
the customer relations by increasing customer satisfaction and gaining new
customers (15% increase in volume refers to new customers). The value of
the brand increases due to the image of the company as a modern service
provider. These new customer relationships can also have financial
implications, e.g. increase of value of a customer of a home and savings
association.
8.2.4 Evaluation of IC Reporting Approaches
Which conclusions can be drawn from the explanation of the IC reporting
models above?
There is no one particular model yet for accounting the intellectual
capital because each approach has strengths and weaknesses. The
weaknesses particularly refer to standardisation and objectified methods as
well as informative value for internal and external target groups (see also
Veltri and Bronzetti 2015).
All the models evaluate intellectual capital with the help of a set of
indicators as opposed to aggregated key figures and present cause-and-
effect relation to a certain extent. Thus, the models prove to be
advantageous for evaluating internal processes are of limited value to an
outsider.
The present communication of results is a central aspect of IC reporting
because companies publish Intellectual Capital Reports willingly without
any statutory provisions. Thus, today many companies balance their
intellectual capital to position themselves externally as an innovative
company rather than for internal purposes. Accordingly, there is a lot of
interest in presenting positive results. Intellectual capital statements may be
a marketing instrument in danger of «window dressing».
The size of the company is a restrictive factor. Today, primarily smaller
companies or units are balancing their intellectual capital. The desire for
objectivity incorporates a number of objectives, success factors, data
clusters and correlation between these elements in the analysis. Therefore,
the models should be oriented at smaller units within this company.
Publishing sensitive, internal data has a negative effect on competitive
advantages of a company. Often, the extent of this effect goes unnoticed.
The field of innovations itself comprises this aspect that clearly pleads for a
differentiation between creation of internal and external reports. Even if the
necessity for such differentiation is mentioned in the model, it does not
provide any approaches for a concrete course of action. Hence, there is a
risk that the published balance sheets would include only those values that
have little informative significance or would have been derivable anyway
from other sources. This would contradict the original approach of
uncovering hidden assets which use knowledge accounting and are largely
responsible for creating explanatory gaps between market value and book
value of a company.
Even the investors should make themselves familiar with this new type
of capital and its accounting. This is because the intellectual capital
statement is actually generated only if it is read and interpreted by
management and investors correctly. The present debate on the
implementation of new rules for lending by banks offers a big chance of
bringing the topic of intellectual capital statement out in public. The
Brazilian Development Bank BNDES, for example, evaluates Intellectual
Capital and intangible assets to determine prospects of competitiveness as a
basis of giving major loans. The extent of success in developing
transparent, comparable and significant levels will decide whether the
intellectual capital report will find its place or will remain purely a
marketing instrument.
8.3 Protecting Knowledge

8.3.1 Loss of Knowledge: The Organisation Forgets
As a result of the measurement of Intellectual Capital, companies are often
more aware of what significance is being assigned to their intangible assets.
Companies often wonder about ways to protect themselves against
complete loss or loss in value of knowledge as well as prevent or reduce
knowledge-related risks. As we have seen in the previous chapters,
knowledge lives in the brains of employees, is stored as information in the
respective systems, takes a concrete form in processes as well as
technologies and is legally safeguarded by patents, licences and
corresponding contracts.
The dilemma of knowledge protection and knowledge sharing is of
particular interest in a increasingly networked economy (Hurmelinna-
Laukkanen and Tarkiainenen (2011). The conflicts between the two are easy
to pinpoint: if certain intangibles are protected against copying and
imitation, the firm is typically not willing to let others use those assets
freely, and certainly not without compensation. Moreover, many protection
mechanisms inherently make knowledge exchange impossible or highly
difficult, and firms relying on those mechanisms are often bound to keep
the knowledge within the firm – whether they want it or not. On the other
hand, the firm can choose to provide other firms with an access to its
knowledge assets, in which case it typically needs to put keeping secrets
aside. Networking and collaboration for innovation presents one area,
where knowledge exchange is imperative for reaching the wanted
outcomes.
Considering the chances of an enterprise to reap profits from its know-
how, the first thought is that it should reach the position of the sole
beneficiary of the knowledge assets – or at least being the one to control the
use of these assets. In other words, appropriability mechanisms should
enable keeping certain technological or operational advances secured from
the use of anyone else. Intellectual property rights (IPRs) are by definition
designed to protect intellectual creations and aim at granting the creator the
rights that provide certain ownership over the intangibles and at fostering
diffusion of ideas and further innovative creations IPRs create barriers
against harmful imitation. However, intellectual property protection is only
one among many barriers to imitation.
The knowledge asset can suffer damage either because it is lost due to
changes of employees and employee teams or because it loses its value due
to innovations. The effect of loss of knowledge and unavailability of
knowledge are similar. ◘ Figure 8.9 describes the forms of knowledge
loss based on individual and collective loss of employees as well as loss and
unavailability of electronically stored information.
Fig. 8.9 How do organisations forget? (Source: According to Probst et al. 1997, p. 311)
8.3.2 Ways of Safeguarding Knowledge

A company can protect itself from loss or devaluation of knowledge by
taking three types of measures – employee-related, technical and legal.
Employee-related measures establish conditions to ensure that qualified
employees are retained in the company, knowledge is constantly passed on
to colleagues and as far as it is relevant, continues to be available even after
an employee leaves the company. The value of employees’ knowledge can
be safeguarded by continuous training and development combined with
practical application of knowledge. Furthermore, knowledge can be
safeguarded by identifying key employees and evaluating the value of their
knowledge for the company. Employees should have a feeling that their
knowledge is at least as valuable in the company as outside. This not only
involves matters of compensation but also handling competent employees
in the company and their job and labour facilities. Allocating positions at
the right time, familiarising new employees with the work and using
valuable knowledge of employees after they leave the company are some
other ways of preventing loss of knowledge.
Systematic transfer of knowledge to the next generation of employees
has gained a lot of importance, especially against the backdrop of
demographic development.
The following are some principles that should be considered during
knowledge transfer:
– Motivation: Senior management should highlight the need and trigger
and control the process of sharing knowledge across generations of
employees.
– Recognition: Reward successful knowledge transfer by way of monetary
incentive if need be or in target-setting for present and newly recruited
employees if necessary.
– Involving in work groups: Organise the tasks in such a way that an
experienced employee is included in a work group, mentoring or
shadowing concepts are helpful.
– From push to pull: Do not ask the leaving employee to «just write
everything down» and push-out his knowledge. Instead, ensure that
successors may pull relevant experience.
– From managing to advising: Use the experience gained by working on
projects to provide advice to new project teams. For example the
construction manager will step aside sometime before retirement and
become a consultant of the construction team.
– Future-orientation: In a fast changing business environment many
past experiences are not longer relevant in the future. Rather address
questions like: What would you have willingly implemented if you
had time? What potential business strategies do you perceive?
– Integration in business processes: Make knowledge transfer an integral
part of daily business by defining clear organisational measures.
Case Study
Volkswagen’s Knowledge Relay
With the knowledge relay, the experts of the Volkswagen’s
knowledge management team have developed an instrument that ensures
optimum transfer of specialist, expert and project knowledge to the
successors and assures valuable learning to the company. Custom-made
expert interviews are the main highlight of this process. They are
organised, moderated and documented by a team of specialists so that
the participants can concentrate completely on communicating and
receiving knowledge. Three different methods were developed under
knowledge courier. The first method for change in discipline focuses on
transfer of specialist knowledge, the second method for change in
leadership emphasises transfer of «relational knowledge» and
experience, and the third method for project closure is based on
identifying the lessons learnt.
The course of such methods is explained below with help of an
example of change in leadership:
The quality assurance manager at VW plant in China was just about
to retire. His successor, who came from a managerial position of another
company, should give his best in this new position – but how? A new
company, a new plant, new colleagues and a predecessor who was about
to retire were all waiting for him. VW plant wanted to retain the
knowledge of their long-tenured quality assurance manager within the
company. His experience primarily comprised important contacts,
experiences, processes and organisational procedures.
A handover session was organised between the predecessor and the
successor as well as between the successor and his seniors. The session
helped the participants to get to know each other, exchange experience,
build trust and establish a positive relation. This dialogue was designed
and prepared very well by the specialists beforehand. By means of a
subject catalogue and support of advisors, the predecessor and successor
decided independently over topics that were important from their
perspective and about which they wanted to talk to each other. The
successor invested five evenings with advisors of Volkswagen
management to filter out questions that were important for him and to
identify the persons to whom these questions were to be asked. They
worked with mind maps. A tree was generated from each topic and every
branch corresponded to a sub-topic, a question. The questions were
checked for redundancy and it was ensured that the questions were not
repeated. The actual handover discussion not only included numbers,
organigram, quality and budget but also involved important key persons
or dealing with a secretary. A one-day seminar – a Transition Workshop
– was held with the new manage, the outgoing manager and all
employees. This created a foundation for interaction between the new
management and the employees. The employees bombarded the new
comer with questions like «How do you encourage your employees?» or
«What is unacceptable to you?» In doing so, the new comer could learn
something about his team. Supported by a competent moderator and
coupled with knowledge of the predecessor, the successor managed to
make an optimum start in the new role. In case of a change in discipline,
the knowledge management team calls for IT-supported documentation
in addition to personal interviews and expert interviews.
Source: ► www.volkswagen-coaching.de
The second form of safeguarding knowledge is using technical systems.

Elements of explicit knowledge can be stored as information in the
databases such as project profile, customer contacts, presentations, etc.
Furthermore, knowledge of employees becomes an integral component of
processes or technologies. Knowledge becomes explicit and is given a
concrete form as employees contribute in increasing productivity and
quality in continuous improvement processes. Technical systems are
capable of storing explicit knowledge. Implicit knowledge takes a concrete
form in the behaviour of employees. Technical systems are also suitable for
controlling selective access to information, laboratories, buildings, etc. thus
allowing only specific employees to access information and knowledge.
Thus, information and knowledge are protected from unauthorised use.
Knowledge is legally protected by patents, license contracts, franchising
contracts or know-how contracts of external knowledge bearers with
alliance partners, suppliers and customers. However, contracts alone cannot
provide complete protection against loss of knowledge as knowledge is held
by employees who perceive it as power. The loss of implicit knowledge
caused by leaving employees is generally more significant than the loss
caused by the illegal transfer of documented explicit knowledge. Generally,
legal safeguarding protects companies against imitation only for a certain
period of time and ensures exclusive use of innovation for this period.
Patents have less importance in industry sectors having a very high rate of
innovation such as electronic industry, as against pharmaceutical or
chemical industries which have long development time frames and product
lifecycles.
Harvey and Lusch (1997) suggest a security plan for intangible assets
similar to the one for tangible assets. Such a plan should analyse and find
out which knowledge losses are most consequential for a company. Based
on this, it is necessary to determine preventive options of knowledge
protection and execute them systematically. Among other things, Harvey
and Lusch suggest that the company should think about how much they
spend on protecting their tangible assets considering the value of these
assets and they transfer this percentage even on the intangible assets. This
approach can contribute to the awareness that the intangible assets of a
company should be protected as much as tangible assets. It is also
advocated to create the role of an «intangible assets risk manager».
Case Study
Better Use of Patents at Dow Chemical (Petrash 1996 )
Dow manufactures approximately 2000 chemical products in 15
business units over 40 joint ventures worldwide. With a turnover of
approximately 20 billion US dollars (of which approximately 1 billion goes
in R&D) and about 4000 employees, Dow owns approximately 25,000
patents and spends about 30 million US dollars every year for patent
management. Because of inadequate overview of the patents, Dow set a
goal of using its patent know-how in a better way and developing it
systematically. Dow chose the following procedure for this purpose:
1.
Creating patent portfolio for every business unit: Identify all the
patents. Find out whether they are still active. Find the business unit
that gains benefit from the patent or sponsors it (i.e. bears the costs
related to the maintenance of the patent).
2.
Rating the use of patents: Rate the patents as per the criteria such as «is
used», «will be used», «will not be used» etc. Take decisions pertaining
to the patents belonging to the categories «will not be used», «abandon
patents», «search possible licence numbers», etc.
3. Integrating the patent portfolios in the company strategy: Check how
the existing patents can be integrated in the business strategy in order
the existing patents can be integrated in the business strategy in order
to use the knowledge optimally. Identify «know-how gaps» that arise
while implementing the business strategy. Think how the missing
know-how can be obtained externally or developed and stored
internally.
4.
Supporting the strategy by reviewing technology and conducting
technological analysis of competition: Estimate the value of the
existing patents and the possible cost of purchasing external know-how
or developing the know-how. Systematise the patents as per
technological criteria and conduct a technological analysis of the
competition (Dow uses a «patent tree» for systemisation).
5.
Investments in the patent portfolio: Decide about acquiring and
developing additional know-how according to the points 3 and 4. Use
the «not required» patents existing externally (waiver, licensing). Since
many of the «not required» patents have a little value, Dow took the
path to abandon these patents by bestowing them on universities and
similar institutions so that they can perhaps be used in such institutions.
6.
Managing the patent process: Install decentralised responsibility for the
patent management. Dow has launched over 75 «Intellectual Asset
Management Teams». These teams are responsible for managing
patents at the business unit level. The management of different
functional areas of a business unit meets 2–3 times every year to
discuss about improving the patent process and using patents. This
team of managers is lead by an Intellectual Asset Manager.
7.
Supporting the decentralised patent management by a central
technology management: Through a tech-centre, Dow supports the
decentralised activities of the developing technology by systematising
knowledge as per the themes, building networks of experts, updating
information systems, conducting training and advance training and
supporting the decentralised patent management process. Furthermore,
the tech-centre should plan and systematise the business strategy
keeping the development of «intellectual assets» in mind.
As per the information provided by the company, the improved patent
management has yielded over 40 million US dollar to the additional capital
and reserve for the business areas until now.
Source: Petrash (1996), S. 365–373
– With the increasing sensitisation for the importance of knowledge as a
resource, the companies are looking for options for describing and
evaluating knowledge and measuring the excellence of a knowledge-
oriented management process.
– There are a number of approaches to structuring and evaluating
intellectual capital. The «one best method», however does not exist. The
implementation of these new approaches in practice is impeded not only
by concrete description of organisational knowledge base of a company
but also by lack of available of data.
– It is not possible to create a universally valid set of «ten most important
knowledge indicators». Each organisation has to define organisation-
specific and context-specific indicator systems.
– A company can secure itself from loss or devaluation of knowledge by
means of employee related measures, technical systems and legal
measures.
8.5 Questions
1.
«What can be measured is not always important and what is important
cannot always be measured». Discuss this in the context of intellectual
capital reporting.
2.
Traditional lending models look for a history of profitability, tangible
assets and a reasonably predictable business environment. Knowledge-
based businesses do not fit this paradigm’. Discuss.
3.
Which components of intellectual capital are usually considered in
intellectual capital reporting?
4.
Identify the major knowledge assets/components of intellectual capital
in an educational institution/university/business school and indicate
why you consider them to be assets
5.
What can an organisation do in order not to lose important knowledge?
8.6 Assignments
1.
Intellectual capital reporting
Establish an outline of an intellectual capital report for a business
school based on the INCAs- methodology.
2.
Intellectual capital risk management
You have been assigned the new position of «Intellectual capital
risk officer». Your mission is to identify risks to loss and devaluation of
intellectual assets and propose preventive measures.
You are asked to develop an action plan
8.7 KM-Tool: Knowledge Inventory

What is a knowledge inventory?
A knowledge inventory is a form of stock taking used to identify and
locate knowledge assets around the organisation. This includes the
explicit and the very difficult to locate tacit knowledge sources. We
suggest that the inventory be focused on specific topic and knowledge
areas; for example «What do we know about customers, where is this
knowledge located? How and where is it available?»
Why use a knowledge inventory?

– Provides a mapping or quick overview over your existing knowledge
assets
– Identifies gaps («What we should know and do not know»)
– Gives us hints hoe to improve availability and accessibility of
knowledge
– Can be a preparation for a more elaborated intellectual capital
reporting
How to develop a knowledge inventory?

1. Demarcate a clear topic area (e.g. products, technologies, processes,
customers, etc.)
2.
The best way to make a comprehensive list of knowledge sources is
to segregate it by explicit and tacit knowledge.
3.
Some of the questions you might want to ask when identifying
explicit knowledge sources are:
– What explicit knowledge already exists? – Categories of
documents, databases, intranet libraries, links etc.
– Where this knowledge is located? – Locations in the
organisations and the various systems that house the information.
– Access and Organisation – How is the knowledge structured and
how easy of difficult is it for people to locate this information,
and do they have access to it as well.
– Purpose and relevance – why does the information exist? How
relevant is it to the users?
– Usage – who uses them? How often?
Identifying tacit knowledge sources is an entirely different
proposition. Unlike explicit knowledge, tacit knowledge is much
more difficult to quantify. Though there are a few questions you
could ask to create a rough map of where it exists.
– Who we have – The numbers and categories of people working in
the organisation.
– Where they are – Identifying where people are located is
extremely important when building a tacit knowledge map
– What they do and what they know – job profiles, expertise areas
and so on.
The above questions should give you an excellent place to start

collating the list of knowledge sources you have in your organisation.
Once this is done you can move on to the next step of identifying the
gaps after comparing this information to the information you’ve
garnered from the knowledge audit.
Source/link: ► http://itsallkm.wordpress.com/2007/03/12/what-is-
a-knowledge-inventory/
► http://www.kmtalk.net/article.php?story=20060905001530455
References
Abhayawansa, S., & Guthrie, J. (2014). Importance of intellectual capital information: A study of
Australian analyst reports. Australian Accounting Review, 1, 66–83.
[Crossref]
Bornemann, M., & Leitner, K.-H. (2002). Entwicklung und Realisierung einer Wissensbilanz für eine
Forschungsorganisation. Eine Fallstudie zum Forschungszentrum Austrian Research Centers
Seibersdorf. In P. Pawlowsky & R. Reinhardt (Eds.), Wissensmanagement für die Praxis: Methoden
und Instrumente zur erfolgreichen Umsetzung (pp. 335–367). Neuwied o. J: Luchterhand.
Bueno, E., Salmador, M. P., & Longo-Somoza, M. (2014). Advances in the identification and
measurement of intellectual capital and future developments in the intellectual capital research
agenda: Experience of the intellectus model and proposal of a synthetic index. Knowledge
Management Research and Practice, 12(3), 339–349.
[Crossref]
Danish Agency for Trade and Industry. (2000). A guideline for intellectual capital statements (p. 1).
Copenhagen: Danish Ministry for Trade and Industry.
Harvey, M., & Lusch, R. (1997). Protecting the core competencies of a company: Intangible asset
security. European Management Journal, 15(4), 370–380.
[Crossref]
Hurmelinna-Laukkanen, P., & Tarkiainen, A. (2011). Knowledge protection and knowledge sharing –
Benefits and problems in networked innovation. http://www.imp2011.org/add_articles/
Knowledge%20protection%20and%20knowledge%20sharing%20-%20benefits%20and%20
problems%20in%20networked%20innovation.pdf
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard. Boston: Harvard Business School
Press.
Leitner, K.-H., et al. (2000). Entwicklung eines Bilanzierungssystems. Forschung Austria

Report_A.03_08/00, Forschung Austria, Wien.
Lev, B., Cañibano, L., & Marr, B. (2005). An accounting perspective on intellectual capital. http://
www.uam.es/personal_pdi/economicas/lcanibano/2007/Tema%207%20Contabilidad%20Intangibles/
Accounting%20Perspective%20on%20IC%20_Lev%20Canibano%20Marr_.pdf
Mouritson, J., Larsen, HT., & Bukh, PND. (2001). Intellectual capital and the capable firm:
Narration, visualization and numbering for numbering knowledge. Report Copenhagen Business
School and Aarhus School of Business.
North, K., Probst, G., & Romhardt, K. (1998). Wissen messen. Ansätze, Erfahrungen und kritische
Fragen. Zeitschrift für Führung und Organisation, 67(3), 158–166.
North, K. (1999). Wissensorientierte Unternehmensführung: Wertschöpfung durch Wissen. (6th ed.

2016). Wiesbaden: Gabler Verlag.
Petrash, G. (1996). Dow’s journey to a knowledge value management culture. European
Management Journal, 14(4), 365–373.
[Crossref]
Probst, G., Raub, S., & Romhardt, K. (1997). Wissen managen. Wiesbaden: Gabler.
Roos, J., et al. (1998). Intellectual capital. New York: New York University Press.
Stewart, T. A. (1997). Intellectual capital. London: Nicholas Brealey.
sveiby.com.au.
Sveiby, K.-E. (2010). Methods for measuring intangible assets. http://www.sveiby.com/articles/

IntangibleMethods.htm
Veltri, S., & Bronzetti, G. (2015). A critical analysis of the intellectual capital measuring, managing,
and reporting practices in the non-profit sector: Lessons learnt from a case study. Journal of Business
Ethics, 131(2), 305–318.
[Crossref]
Footnotes
1 This chapter is based North and Gueldenberg (2011) and on North (1999, pp. 184).
2 See for example Lev et al. (2005).
3 7 www.akwissensbilanz.org
4 Further information under 7 www.akwissensbilanz.org
5 Danish Ministry of Science, Technology and Innovation (Hrsg.) (2002), “Intellectual Capital
Statements in Practice – Inspiration and Good Advice”, p. 3. 7 http://www.videnskabsministeriet.
dk/fsk/publ/2002/intellectualcapstatements/intcapst.pdf [15-08-2002].
https://doi.org/10.1007/978-3-319-59978-6_9
9. How to Put Knowledge Management

into Practice

Germany
The greatest danger in times of change is not the turbulence – it is to

act with yesterday’s logic Peter Drucker
Learning Outcomes
– You will know what the challenges and governance options of KM
are in organisations;
– You will be able to select a KM implementation framework that
suits the need of your organisation;
– You will know which eight steps should be considered in leading
change;
– You will be able to name the key competences of knowledge
workers;
– You will be able to carry-out a work-out session.
9.1 Shaping the Knowledge Organisation of the

Future
In a constantly turbulent and complex environment, knowledge
management should be able to support organisations in developing their
«dynamic capabilities» for reconfiguring, redirecting and integrating core
competencies with external resources. («Dynamic capabilities are the ability
to reconfigure, redirect, transform, and appropriately shape and integrate
existing core competences with external resources and strategic and
complementary assets to meet the challenges of a time-pressured, rapidly
changing Schumpeterian world of competition and imitation.») (Teece et al.
2000, p. 339).
At the same time, this «dynamization» is the core process of future KM.
In an environment that is characterised by unpredictable, varying and
«unexpected» crisis situations, knowledge management encourages swift
problem solving, permanent experimenting, and quick collective learning as
well as living with mistakes. This also implies a series of changes to how
organisational knowledge management should be designed in the future.
Organisations will need to give up attempts to force knowledge into an
orderly manageable and achievable form. In the future, organisations would
need to carefully consider when it is worth the effort to make knowledge
explicit and document it or whether it is more effective to switch over to
creating collective implicit knowledge (process of socialisation) in rapidly
changing situations.
The knowledge organisation of the future will need to further increase
its learning ability and develop methods for finding quick solutions across
organisational boundaries. How much energy should be spent in identifying
and transferring «Best Practices», if rapid changes instead demand the
development of «Next Practices»? ◘ Table 9.1 displays some of the
challenges of practising KM in turbulent environments.
Table 9.1 Differences between KM in stable and turbulent contexts
Knowledge management in stable context Knowledge management in turbulent context

Codify knowledge and document process Share tacit knowledge
Build on experiences Develop ability to learn fast and «turbo problem-
solving»
Disseminate «Best Practices» Develop «Next Practices»
Ensure knowledge transfer across employee Facilitate ad-hoc availability of knowledge
generations
Knowledge management of the future is hence closely coupled with
strategy, innovation management and personnel development which
encourage the dynamisation of organisations. It
1.
Focuses on competition-relevant knowledge and supports competency
(«Selective Knowledge Management» Howald et al. 2004);
2.
Defines and complies with normative standards and routines of
documentation, of knowledge exchange, of learning and of knowledge
protection (e.g. when should After Action Reviews be carried out and
how should their results be integrated in future value creating
process?);
3.
Offers professional services for «dynamization of knowledge» (turbo
problem solving, innovation workshops, knowledge carriers, organising
exchange forums such as knowledge markets, support of CoP, etc.)
These tasks can be accomplished by different governance options of
KM functions in an organisation.
The task of focusing on competition-relevant knowledge and supporting
relevant competency development can be accomplished by setting-up an
«expert organization» which includes competence centers for priority areas
relevant for supporting present business and relevant for future business
development, naming subject matter experts charged with systematisation
and dissemination of relevant know-how as well as communities of practice
linking expertise across the organisation and to the outside. As those
professionals having technical expertise usually do not have experience
about ways to document, share and learn they need either to be trained on
these issues or be supported by professional KM services (see below).
The task of setting and monitoring compliance with normative
standards and routines can be best accomplished if KM is attached to
functions already in charge of standards and procedures such as quality
management, process & information management or organisational
development. In these functions usually a central unit and decentralised
roles are combined to ensure implementation in all units of the organisation.
This means for example having a central knowledge manager attached to
quality or information management and a network of quality or information
managers in the business units who depending on the size of the unit might
be a full-time job or a role occupying 10% of a professional’s time.
The task of providing professional KM services can be accomplished by
different options. An effective one is to attach KM services to in-house
consulting services. Another is to place KM services within the context of
corporate universities and training/coaching functions, thus strengthening
the link between organisational learning and KM. A third option is to link
KM to business development and innovation management.
Independent from the organisational anchoring the end point should be
integration of KM in the daily practices of each employee, in each unit and
the management structures of the organisation, just like other management
disciplines such as financial, people, project or quality management. And
just like these other disciplines, KM needs a management framework within
which it can be embedded. Furthermore, knowledge workers need to
develop the relevant skills to manage their information and knowledge.
9.2 KM Implementation Frameworks

A framework is a defined set of technologies and processes, embedded into
business activity, and a defined set of roles embedded into the
organisational structure, all under an umbrella of governance. Like other
management systems, effective KM is a framework of roles, processes,
technologies and governance which has been embedded into the business.1
It is a change process which is not gradual but a step-change. It is a
remodelling of the organisation; a make-over, a new way of thinking that
needs to be treated and measured as a change process. Don’t go into KM
thinking that it is about a new IT tool, or just «trying out communities» –
you won’t get far if you don’t start to address the hearts and minds. This
also means that KM implementation must be structured like a change
program (including a piloting component), and must have a strong team of
change agents to implement the change.2
Introducing KM into an organisation will not happen by accident. It will
only happen if someone makes a deliberate decision. Very few CEOs wake
up one morning and «decide» to implement KM. Instead, like any other
practice, implementation of KM results from a series of decisions, and each
decision rests on evidence (Milton and Young 2007).
Implementing a KM system can be complex and dynamic, no matter
how well planned and developed it might be. Inevitably a degree of
organisational inertia is focused on the current rather than the new. Within
an enterprise, personal and group interests can adversely affect the
commitment needed to successfully implement such a system. The best way
to ensure KM system value and overall proper implementation is to focus
on enterprise performance as it relates to customer benefit (Bixler 2002).
In the following we will present some frameworks for KM
implementation.
9.2.1 Business Excellence Models as an Overarching

Framework
One option is to integrate KM initiatives in a Business Excellence
framework (see ◘ Table 9.2). Business Excellence (BE) aims at
developing and strengthening the management systems and processes of an
organisation to improve performance and create value for stakeholders. BE
is about achieving excellence in everything that an organisation does
(including leadership, strategy, customer focus, information management,
people and processes) and most importantly achieving superior business
results.
Business Excellence Models – first called Total Quality Management
Models – are now used in around 90 countries as a key mechanism to help
businesses to improve.3
There are several quite similar models in use around the world: The
Baldrige Criteria for Performance Excellence (CPE) which is used in the
United States but has been adopted in many countries in Asia. The leading
model in Europe is the EFQM Model (European Foundation of Quality
Management, ► www.efqm.org). For the public sector a «Common
assessment Framework» (CAF, ► www.eipa.eu) based on the EFQM
Model is in use in many European countries. These excellence models
usually start with a self-analysis followed by the determination of priority
actions and a change and implementation process along the PDCA-cycle
(Plan, Do, Check, Act). In order to integrate KM initiatives in a Business
Excellence framework in ◘ Table 9.2 we summarise KM objectives in
relation to the Baldrige Criteria for Performance Excellence which are also
closely related to the criteria used by the EFQM Model.
Table 9.2 Knowledge management objectives linked to the Baldrige criteria for performance
excellence
Baldrige criteria for performance excellence Link to knowledge management

1. Leadership: examines how your organisation’s senior Leaders recognise the link between
leaders’ personal actions guide and sustain your KM and performance, the right
organisation. Also examined are your organisation’s attitudes exist to share and use others’
governance system and how your organisation fulfills its know-how, leaders reinforce the right
legal, ethical, and societal responsibilities and supports its behaviour and act as role models
key communities
2. Strategic Planning: examines how your organisation Clearly identified Intellectual assets
develops strategic objectives and action plans, how your KM strategy is embedded in the
chosen strategic objectives and action plans are business strategy. Framework and
implemented and changed tools enable learning before, during
and after
3. Customer Focus: examines how your organisation Networks and CoPs and open
engages its customers for long-term marketplace success. innovation with customers, effective
This includes how your organisation listens to the voice of learning routines with and from
its customers, builds customer relationships, and uses (potential) customers
customer information to improve and identify opportunities
for innovation
4. Measurement, Analysis, and Knowledge Management: A KM action plan and resources for
examines how your organisation selects, gathers, analyses, KM exist, Knowledge is easy to get
manages, and improves its data, information, and to, easy to retrieve. It is constantly
knowledge assets and how it manages its information refreshed and distilled
technology
5. Workforce Focus: examines your ability to assess Skill/competence management is
workforce capability and capacity needs and build a work linked to business objectives and
force environment conducive to high performance personal development goals. A wide
variety of learning formats are in use
Incentive systems contribute to align
behaviour
6. Operations Focus: examines how your organisation Processes are documented, «Best
designs, manages, and improves its work systems and work Practices» are systematically
processes to deliver customer value and achieve identified and disseminated; quick
organisational success and sustainability. Also examined is problem solving routines tapping all
your readiness for emergencies required knowledge (e.g. work out
approach) are applied
7. Results: examines your organisation’s performance and Indicators measuring the quality of
improvement in all key areas – product and process knowledge management are in use;
outcomes, customer-focused outcomes, workforce-focused intellectual assets are evaluated
outcomes, leadership and governance outcomes, and regularly. Competitive Benchmarking
financial and market outcomes allows to learn from best performers
9.2.2 ISO 9001:2015 as an Implementation Framework

In addition to overarching Business Excellence frameworks, management
standards provide guidance on the integration of KM in management
systems. The first country to adopt a standard to guide KM implementation
was Australia in 2005 with «AS 5037-2005 Knowledge management». It
took the International Standards Organization (ISO) until 2105 (10 years) to
integrate KM together with risk management in a revision of the ISO 9001
quality standard. ISO 9001:2015 now follows the same overall structure as
other ISO management system standards, making it easier for anyone using
multiple management systems.
A new clause on organizational knowledge (7.1.6) has been added to
ISO 9001:2015. The requirements of this clause are:
– «Determine the knowledge necessary for the operation of its processes
and to achieve conformity of products and services.
– This knowledge shall be maintained and made available to the extent
necessary.
– When addressing changing needs and trends, the organization shall
consider its current knowledge and determine how to acquire or access
any necessary additional knowledge and required updates.»
Separating the individual requirements of the standard text and
displaying them in a meaningful order creates a knowledge cycle, which
illustrates how the requirements of ISO 9001: 2015 relate to understanding
knowledge management and their implementation (see ◘ Fig. 9.1). It also
clearly shows that knowledge management within an organization is not a
one-off project, but a continuous process.
Fig. 9.1 The knowledge management cycle (North et al. 2016)
Therefore, the knowledge cycle consists of the following essential

elements:
Determine required knowledge: This first step identifies what
knowledge is required to be able to meet the customer requirements. You
should not only consider the required individual knowledge of employees,
but the entire relevant internal and external, implicit and explicit
knowledge. This applies not only to the requirements of customers, but all
interested parties should be included in the analysis.
Consider existing knowledge: The second step is to take into account
the knowledge actually available and set to the required knowledge scope.
This requires a sufficiently specific description of the existing knowledge
that allows an Is-target comparison. Identifying differences between the
existing and required knowledge trigger the next step in the process.
Acquire required knowledge: To comply with current customer needs or
to prepare for the future the organization should have a strategy and
systematic ways how knowledge can be procured internally or externally –
the knowledge acquisition of the organization may be based on the
following:
1.
on internal sources (e.g. intellectual property, accumulated from
experience knowledge, lessons from mistakes and successful projects,
acquisition and exchange of non-documented knowledge and
experience that results from improvements in processes, products and
services);
2.
on external sources (e.g. Industry standards, universities, conferences,
knowledge acquisition by customers or external suppliers). (DIN EN /
ISO 9001: 2015, 7.1.6 NOTE 2)
In a dynamic environment, where the requirements of customers and the
market can change very rapidly, it will be necessary to continually build or
to acquire new knowledge. In this sense, the requirement for gaining
knowledge within the knowledge cycle is to be understood also as a
measure for continuous improvement.
Transfer knowledge and make it available: It is important to understand
that organizational knowledge always represents a bundle of knowledge
resources. Knowledge materialises in documents, processes, tied in IT
systems, and in the organizational structure. It always needs people who are
able to capture this information and knowledge to enrich the exchange and
external knowledge that complements the internal resources. Therefore, a
good interaction between organizational, human resources development and
information and communication technology is a key success factor to
ensure that the right knowledge is available at the right time at the right
place.
Sustain, update, protect knowledge: The last step in the knowledge
cycle and as a requirement of ISO 9001: 2015 is to maintain the existing
and acquired knowledge in an on-going basis. Organizations have to
establish a process how existing knowledge can be updated and preserved.
On the one hand, this can be done by documentation of the required
knowledge, in order to preserve it for the organization, on the other hand,
knowledge can also be maintained by being passed on to (new) employees
and so is preserved for the next generation. The systematic identification of
knowledge loss risk, e.g. by retirement or employee turnover, sets an
important prerequisite for effective measures in the preservation of
knowledge (see also ► Sect. 8.4).
Before taking the first step to fulfill the requirements of ISO 9001, you
should appoint someone who is responsible for the knowledge management
in the organization. The new ISO 9001: 2015, does not foresee a single
representative of the top management for quality or knowledge
management but assigns responsibility for the quality management system
to the entire top management team. This is where knowledge management
responsibility should be located (regarding knowledge managers see ►
Sect. 5.4).
The following checklist provides some guidance which topics need to
be addressed in order to comply with the standard (◘ Table 9.3).
Table 9.3 Checklist – Knowledge Management Requirements of ISO 9001: 2015
Determine required knowledge

Knowledge and competence goals are derived from the business strategy: What do we need to
know and be able to do to meet «uniquely» the market and customer requirements today and in the
future?
(Future) Customer demands, market and technology trends are systematically analyzed and from
that the requirements for knowledge / competence are determined
Critical knowledge is identified for specific/key processes and determined concretely
Consider existing knowledge
The core competencies and mission-critical knowledge of the organization are determined
periodically and reflected: What do we know and what are we capable of doing, which ensures our
long-term competitiveness?
Important qualifications and skills of employees (human capital) are determined and periodically
evaluated
Process-relevant information, intellectual property rights and information systems (structural
capital) are documented and evaluated
External sources of knowledge and partnerships (relational capital) are recorded, the quality of the
relationship is evaluated regularly
Acquire required knowledge
There is a strategy and systematic approach to acquire needed knowledge internally and / or
externally
Various forms of learning support the acquisition of the required knowledge (e.g. training, e-
learning, job-based learning, team learning, coaching, mentoring)
Lessons learned (learning from mistakes / successes, after action reviews) are systematically
analyzed and harnessed
The organization develops and uses systematically external knowledge sources (e.g. Co-operations
with research and educational services, consultants, customers, suppliers, online services, and
more.)
Transfer knowledge and make it available
The corporate culture and incentive systems promote knowledge sharing and joint learning
Education and training are effectively aligned with strategic and operational knowledge /
competence goals
Training of new employees and knowledge transfer of leaving employees are systematically
practiced
Individual expertise is made available for the organization through documentation or personal
exchange
There is a push and pull strategy for different categories of knowledge
Media and information systems (e.g. databases, intranet, social software) support user-oriented
access and exchange of information/knowledge internally and externally
Sustain, update, protect knowledge
There is a strategy and a systematic approach to secure, document and update mission-critical
knowledge
Knowledge loss risks are systematically identified, unique knowledge is passed effectively in time
before staff changes
Legal possibilities of knowledge protection (e.g. patents, brand protection) are used systematically
9.2.3 Step Approach Frameworks to KM

KM initiatives require a change process in the organisation. Therefore
several frameworks define a sequence of steps inspired by change
management approaches to guide the implementation of KM practices
within an organisation. Wiig’s «Building Blocks», North’s «knowledge
ladder», Albers (2009) approach and Nihilent’s MC3 are such frameworks.
Building blocks according to Wiig

Wiig (1999) introduced a set of 16 common building blocks in a step-wise
manner to guide the introduction of KM practices in an organisation. They
were presented in the following order of implementation:
1.
Obtain management buy-in.
2.
Survey and map the knowledge landscape.
3.
Plan the knowledge strategy.
4.
Create and define knowledge-related alternatives and potential
initiatives.
5.
Portray benefit expectations for knowledge management initiatives.
6.
Set knowledge management priorities.
7.
Determine key knowledge requirements.
8.
Acquire key knowledge.
9.
Create integrated knowledge transfer programmes.
10.
Transform, distribute and apply knowledge assets.
11.
Establish and update a KM infrastructure.
12.
Manage knowledge assets.
13.
Construct incentive programmes.
14.
Coordinate KM activities and functions enterprise-wide.
15.
Facilitate knowledge-focused management.
16.
Monitor knowledge management.
Accompanying these building blocks, Wiig discusses the purpose and
characteristics of each building block and provided examples of KM
activities to introduce them.
9.2.4 A KM Implementation Framework Based on the

«Knowledge Ladder»
In ► Chap. 2 we have explained the «knowledge ladder» visualising the
steps of knowledge based value creation. The knowledge ladder has also
proved a practical framework to implement knowledge management in a
modular way. The challenge of implementing KM is on the one hand to
provide «quick wins» addressing priority problems and on the other hand to
integrate these actions into a longer and more comprehensive perspective
towards a learning organisation.
Therefore we have defined five modules or components which can be
used as work packages for a KM project. As a result of a KM self-analysis
(see ► Chap. 1) objectives for each work package as well as measures
can be defined. Below you will find a suggestion for formulation of
objectives as well as typical measures related to achieving the objective.
You can start at any step of the knowledge ladder provided you do not lose
a long-term perspective of completing all five components (see ◘ Fig.
9.2).
Fig. 9.2 KM implementation framework based on the «knowledge ladder»
1st Component: knowledge strategy

Objective Knowledge and learning are integral components of corporate
strategy. Core competencies and knowledge goals are derived from the
strategy and turned into measures for developing competencies and
safeguarding knowledge.
Measures for example:
1.
Identification, examination and communication of core competencies,
periodical execution of a «strategic knowledge analysis» or
development of an intellectual capital statement.
2.
Competence centres or communities ensure development of core
competencies and their incorporation in the performance process («key
topics»).
3.
Personal development is oriented towards core competencies and
knowledge goals derived from them.
2nd Component: Learning and competence development
Objective Competences of employee are evaluated systematically and
their development is encouraged. Collective learning is integrated in
business routine.
1.
Identifying competences and developing them by a systematic skill
management and different forms of learning
2.
Identifying key experts and integrating them into a team
3.
Establishing competence centres for key themes and comprehensive
performance processes.
4.
Encouraging informal learning through CoP (communities of practice)
and initiatives such as «colleagues learn from and with colleagues.»
5.
Learning in and from projects (project briefing/lessons learned) and
integrating in quality management
6.
Living in an «error culture» («The error of the month»)
3rd Component: Knowledge-oriented culture and management

Objective A culture of sharing knowledge and cooperation is encouraged
and followed systematically («Sharing knowledge is power»). Management
takes up the task of setting an example. Teamwork is the lived value of an
open organisation.
1.
Creating reasons for exchange of knowledge (e.g. common breakfast,
brown bag lunch, lunch bingo, etc.)
2.
Encouraging exchange over levels of hierarchy (e.g. skip level
meeting)
3.
Incorporating competence development and knowledge transfer in
employee appraisal
4. Encouraging knowledge transfer by rotating jobs, organising teams and
5. planning substitutions
Providing time for exchange of knowledge

6.
Playful motivation: «sharing knowledge earns you miles» and
establishing awareness
7.
Office architecture and communication zones encourage exchange of
knowledge
4th Component: Knowledge identification and transfer

Objective «Knowbodies» are identified and approachable («Knowing
who knows what»). Handover situations (orientation, preparation) are
attended to systematically.
1.
Yellow pages, expert finder, company Facebook, or knowledge mail for
identifying expertise
2.
Orientation concept and orientation package for new employees
3.
Accompanying handover situations
5th Component: Information availability

Objective Information strategy is demand-oriented (role concept), easily
accessible and retrievable (pull system), selected information is forwarded
in structured and coherent form to potentially interested persons (push
system) High-priority information is supervised by moderators who are
responsible for regular updating and consolidating of information.
1.
User-based structuring of information and overall concept for
decentralised databases as well as re-launching intranet
2.
Implementing cross-departmental wikis and blogs
3. Cleanup day of databases: clearing, discarding, giving away, etc.
These components can be adapted according to necessity and can be
implemented in a phased mid-term strategy.
Case Study
Suggestions for knowledge management in a small to medium law firm
1.
Discuss KM challenge with partners. Choose one partner as KM
officer, manager or coordinator (not to act in directive manner, but as
driving force, coordinator and adviser behind the KM effort). KM
needs to be recognised and started as a meaningful activity, important
to the future of the firm. Inform all colleagues.
2.
Defining key (major) areas of KM interest should be key practice and
competency areas that the firm wants to develop may be 4–7 major
areas of legal business, meaningful and prospective from client’s and
firm’s point of view. KM will focus on these areas. All firm activities
need not be covered.
3.
Appoint 1–2 partners responsible for KM in each area in addition to
doing client work and promotion.
4.
Define objective(s) of KM for each area (becoming market leaders,
offering new services, catching up with competition, improving
quality, etc.) related to real business and firm strategy objectives, and
client needs and requirements
5.
Define key terms (taxonomy, thesaurus) for KM effort in each area – a
limited number of key issues
6.
Define database (traditional + computerised), including: project (case)
profiles, presentations, literature, web links, directories, internal
expertise, external experts and other sources, etc.)
7.
Choose software solution adequate to coverage, objectives, volume
and resources
D l fil f h dl i h
8. Develop competency profile for each partner and lawyer in chosen
key areas, e.g., rating knowledge of each in each area as basic-good-
expert level (e.g. competence matrix)
9.
Define individual development targets by areas (becoming a top
expert, just keeping up-to-date, acquiring basic knowledge, ignoring
the area, etc.). Link KM with individual development efforts.
10.
Define with partners and all lawyers their individual roles and
responsibilities for making inputs in the database and contributing to
KM more generally
11.
Focus the whole effort on future, from existing (past) documents and
sources include selectively only essential know-how and sources that
will remain important in the future
12.
Among completed projects (client contracts) focus on those that were
really important, that offer a lot of learning, that were in prospective
markets, that could be easily replicated to save time, where the firm
could develop its own internal standard, etc.
13.
Do not produce any documents and files just for the sake of it; be very
selective and rational
14.
Organise (regular) knowledge-sharing events offering significant
learning – on important current or completed projects, outcome of
conferences, new legislation, new business trends and demands with
new implications to legal work – always sticking to the key areas of
business
15.
Circulate only a minimum of information to all or most lawyers, but
make sure that they get all the information that is imperative for them
to know
16.
Circulate and exchange some well-selected information and tips of
wider professional and intellectual interest beyond the defined areas
of business (ethics, conflict of interest, new trends in business and
law, etc.).
Periodically discuss the functioning and effectiveness of your system
17. Periodically, discuss the functioning and effectiveness of your system
at partner meetings and with other lawyers and take corrective
measures. Flexibility and adaptability are essential. Make sure that the
system is alive!
Nihilent’s MC3 Framework4

Organisations are like living organisms. In rapidly changing scenarios, they
need to be constantly aware of their environment, sense opportunities and
adapt quickly in order to win in the marketplace. This is the fundamental
belief that gave birth to MC3 – the world’s first patented holistic learning
and innovation framework that brings about knowledge-enabled
transformation in organisations. MC3 is the first patented framework of its
kind focusing on Learning and Innovation (South Africa Patents Act 1978,
No. 2002/1681) introduced by Nihilent, a global Consulting and Solutions
Integration company headquartered in Pune, India.
The framework adopts a cybernetic (cause and effect) approach, since
similar to the laws that govern nature everything a company does is
governed by what it is. It is a framework that integrates people, process and
technology, has a direct impact on business results and brings about not just
an incremental change but a transformation in an enterprise.
The MC3 framework truly transcends conventional change management
boundaries. It emphasises the need to create a context for learning, problem
solving and innovation through curiosity, thus increasing its capability to
create new knowledge in terms of innovations, process improvements and
better services.
When rephrased, the four constituents that symbolise MC3 are (see also
◘ Fig. 9.3):
– Motivation to seek and collaborate
– Capability to create, capture and disseminate knowledge and
information
– Capacity to leverage and institutionalise best practices
– Calibrate performance against predefined goals
Fig. 9.3 Nihilent’s MC3 framework (Copyright © 2007 Nihilent Technologies Pvt. Ltd)
The MC3 framework aligns and percolates strategy to all levels in the
organisation. It enables organisations to leverage their intellectual capital
and, supported by appropriate technology, achieve business results. While
application of the MC3 framework is tailored to suit each organisation’s
requirements, it addresses the following constituents:
– Intent Management: Create a mindset for learning and define a learning
agenda tied to the business goal and encourage individuals to learn better
and perform better.
– Content Management: Facilitate capture of tacit knowledge from
suppliers, customers and internal experts and acquire competitive and
business intelligence.
– Action Management: Apply the learning and thus change the way in
which the organisation performs and,
– Performance Management: Re-aligning individual goals with
organisational goals and assessing and analysing performance based on
these metrics.
Calibration is the first stage in the implementation of the framework.
It does the following:
– Calibrates the organisation across four crucial perspectives, namely:
finance, customer, process and learning
– Generates learning agendas within the business context and
– Acts as an overall Performance Management System for the organisation.
The Calibration stage consists of three distinct processes:
– Balanced Scorecard Implementation
– Competency Assessment
– Knowledge Mapping
The Balanced Scorecard implementation provides clear and measurable
targets to the organisation as a whole, the various departments within it, and
to the roles within these departments. This provides the business context to
everyone within the organisation. Competency assessment and knowledge
mapping help in defining the learning agendas for individuals in this
business context.
At the end of the Calibration exercise, individuals know what they are
supposed to do and also become aware of the gaps in their capabilities and
knowledge levels that could possibly hinder their progress in achieving
their goals.
The Motivation exercise follows the calibration and motivates
individuals to perform through group workshops and individual
counselling.
It takes inputs from:
– The Competency Assessment exercise, which identifies gaps in the
«soft» skills of the individual (like attitude, team building, etc.)
– The MC3 Assessment exercise which identifies motivational gaps in the
organisation as a whole.
Based on these inputs, people are categorised with respect to
motivational levels (High, Medium and Low) and interventional workshops
or individual counselling sessions are introduced depending on these
categories. This exercise generates a highly focused and motivated work
force that knows exactly what it has to do and how it is going to be
measured in the business context.
The Capability exercise equips the organisation with the ability to aid
this motivated, focused work force to learn, share, innovate and therefore
bridge their knowledge gaps and the knowledge gaps of the organisation as
a whole. Inputs are taken from the knowledge mapping exercise in the
Calibration phase. This is typically a knowledge management exercise and
breeds the essential learning habit within the organisation.
This phase requires two interventions:
– Non-technological interventions include:
– Tacit knowledge to explicit knowledge externalisation
– Creating repositories of knowledge
– Inculcating Communities of Practice
– Gathering Competitive Intelligence
– Ideation and brainstorming techniques, etc.
– Enabling technology also plays a large role in the knowledge
management initiative. Examples of technology interventions are
Collaborative tools, Employee portals, Business intelligence tools, Data
marts, Document management systems and E-learning systems.
Capacity is the final stage of the MC3 implementation process, where
the organisation develops the capacity to institutionalise the successes from
the previous exercise (Capacity) and scale it across the organisation.
Processes which build sustained successes and augment the transformation
of the enterprise are created.
This stage is also called Change Management because it equips the
organisation with processes that manage the change that takes place in the
organisation. MC3 involves Change Management diagnostics which are
immensely useful in this process.
«Change champions» are identified within the organisation and are
instrumental in continuing the cycle and developing the sustained
transformation that is so essential to excellence.
Even though this is the final stage of the MC3 framework, it doesn’t end
here. Change management leads to Recalibration of performance. Newer
and higher levels are targeted and the cycle repeats itself. The cycle has to
repeat itself for the organisation to survive.
Case Study
Share TRAnsactions Totally Electronic (STRATE)
Monica Singer, CEO of STRATE, the organisation that performed the
electronic settlement of all equity trades in South Africa, was planning the
way forward for the balanced scorecard driven knowledge management
intervention that STRATE had implemented over the past 8 months. At the
beginning, most of the knowledge about STRATE’s business had resided
with the consultants that had helped establish STRATE and the IT systems
that were so critical to its functioning. What she initially thought to be a
simple knowledge transfer exercise had actually resulted in a
comprehensive organisational transformation and she was delighted with
the outcome.
STRATE is the authorised Central Securities Depository (CSD) for the
electronic settlement of financial instruments in South Africa. It is a
regulated body formed by JSE Securities Exchange and five major banks of
South Africa. Its core competencies include an IT infrastructure and
application to serve the needs of the security trading market. Initially,
STRATE handled only equity market operations. It then acquired Universal
Exchange Corporation Ltd. (UNEXcor), which handles bond market
depository, clearing and settlement operations. UNEXcor was entrusted
with the responsibility of developing Money Market Clearing, settlement
and depository operations. With this acquisition STRATE would be a major
player in the electronic settlement of financial instruments in South Africa.
STRATE experienced amorphous growth in its short span of time. It
outsourced most of its projects to external service providers and consultants
especially in the Information Technology area including a world-class
settlement system namely SAFIRES (South African Financial Instruments
Real Time Electronic Settlement System). Most of the knowledge and
expertise was with third party providers/consultants and STRATE paid high
outsourcing costs.
Another challenge that STRATE faced was that business and technology
experts were wrapped in silos affecting productivity and hence «time-to-
market». There were low levels of communication between staff and
management leading to divided focus on long term and short-term goals
across various divisions.
The MC3 framework for learning and innovation was used at STRATE
to transform STRATE into a learning organisation. To ensure client
comfort, reduced risk and to capitalize on experience, the following were
built:
– A clear and flexible performance model aimed at accomplishing business
goals in line with the vision.
– A process for creating and utilising intellectual capital towards driving its
sustainability as a viable service provider.
– A process for transfer of required knowledge to role holders within the
organisation.
– A dynamic organisation in order to respond to the changes in the market
«The process opened my eyes to where we are and where we want to
go. This process has standardised the applicability of HR processes across
the organisation and clearly brings out the issues that contribute to the
company’s progress. We are very pleased. Now we know that KM is not a
theory.» says Brutus Molefe, Head-HR, STRATE.
Source: ► http://www.nihilent.com/casestudies/STRATE.pdf
9.3 Implementing KM: A Change Project

9.3.1 Structuring a Change Project
As discussed earlier the implementation phase
– Needs to be someone’s responsibility,
– Needs a change strategy and a plan,
– Needs a special team and budget,
– Has a start and an end, and
– Has objectives and deliverables.
So it needs to be managed as a project. Whatever process you use
internally for managing projects, apply it to your KM implementation.
Based on KM models, control projects model and a continuous
improvement cycle, Erfani et al. have defined a KM implementation Model
considering the five phases of Project Management. The model is shown
below in ◘ Fig. 9.4:
Fig. 9.4 Five phase implementation model of project management (Source: ► http://idosi.org/
wasj/wasj11(1)10/6.pdf)
It has been shown that while implementing the managerial models many
interested organisations don’t pay attention to the initiating phase and go
directly into the execution phase. These organisations face problems
because of neglecting preliminary requirements such as budgeting.
Moreover they do repetitive work since they don’t consider closing the
phase in their models and don’t have a method to document the results and
procedures of their projects (Erfani et al. 2010). Organisations wishing to
implement KM initiatives should be aware that this requires in most of the
cases a change of behaviour. This is why KM projects are fundamentally
change projects. To increase the probability of successful change those
leading KM initiatives should be aware of the principles of change
management.
9.3.2 Kotter’s Eight Steps of Change

There are many theories about how to «do» change. A widely accepted
model was introduced by Harvard professor Kotter with his eight-step
change process in his book, «Leading Change.» (Kotter 1996) We look at
his eight steps for leading change below.5
1.
Establish a Sense of Urgency
Talk of change typically begins with some people noticing a
vulnerability in the organisation. The threat of losing ground in some
way sparks these people into action, and they in turn try to
communicate that sense of urgency to others. Kotter notes that over
half the companies he has observed have never been able to create
enough urgency to prompt action. «Without motivation, people won’t
help and the effort goes nowhere […]. Executives underestimate how
hard it can be to drive people out of their comfort zones». In the more
successful cases the leadership group facilitates a frank discussion of
potentially unpleasant facts: about the new competition, flat earnings,
decreasing market share, a lack of communication and knowledge
sharing other relevant indicators. It is helpful to use outsiders
(consultants) who can share the «big picture» from a different
perspective and help broaden the awareness of people. When is the
urgency level high enough? Kotter suggests it is when 75% of your
leadership is honestly convinced that business as usual is no longer an
acceptable plan.
2.
Form a Powerful Guiding Coalition
Change efforts often start with just one or two people, and should
grow continually to include more and more who believe the changes
are necessary. The need in this phase is to gather a large enough initial
core of believers. Regardless of size of your organisation, the «guiding
coalition» for change needs to have 3–5 people leading the effort. This
group, in turn, helps bring others on board with the new ideas. The
building of this coalition – their sense of urgency, their sense of what’s
happening and what’s needed – is crucial. Involving respected leaders
from key areas of your church in this coalition will pay great dividends
later.
3. Create a Vision
Successful transformation rests on «a picture of the future that is
relatively easy to communicate and appeals to stakeholders A vision
relatively easy to communicate and appeals to stakeholders. A vision
helps clarify the direction in which an organisation needs to move».
The vision functions in many different ways: it helps spark motivation,
it helps keep all the projects and changes aligned, it provides a filter to
evaluate how the organisation is doing, and it provides a rationale for
the changes the organisation will have to weather. «A useful rule of
thumb: if you can’t communicate the vision to someone in five minutes
or less and get a reaction that signifies both understanding and interest,
you are not yet done with this phase of the transformation process».
4.
Communicate that Vision
Kotter suggests the leadership should estimate how much
communication of the vision is needed, and then multiply that effort by
a factor of 10. Leaders must be seen «walking the talk» – another form
of communication – if people are going to perceive the effort as
important. «Deeds» along with «words» are powerful communicators
of the new ways. The bottom line is that a transformation effort will
fail unless most of the people understand, appreciate, commit and try to
make the effort happen. The guiding principle is simple: use every
existing communication channel and opportunity.
5.
Empower Others to Act on the Vision
This entails several different actions. Allow people to start behave
and act in the new ways and to make changes in their areas of
involvement. Allocate budget money to the new initiative. Carve out
time on the agenda to talk about it. Change the way your organisation
is organised to put people where the effort needs to be. Free up key
people from existing responsibilities so they can concentrate on the
new effort. In short, remove any obstacles there may be to getting on
with the change. Nothing is more frustrating than believing in the
change but then not having the time, money, or support needed to effect
it. You can’t get rid of all the obstacles, but the biggest ones need to be
dealt with.
6. Plan for and Create Short-Term Wins
Since real transformation takes time, the loss of momentum and the
onset of disappointment are real factors. Most people won’t go on a
long march for change unless they begin to see compelling evidence
that their efforts are bearing fruit. In successful transformation, leaders
i l l d hi h i hi h l ill b
actively plan and achieve some short-term gains which people will be
able to see and celebrate. This provides prove that their efforts are
working, and adds to the motivation to keep the effort going. «When it
becomes clear to people that major change will take a long time,
urgency levels can drop. Commitments to produce short-term wins help
keep the urgency level up and force detailed analytical thinking that
can clarify or revise visions».
7.
Consolidate Improvements and Keep the Momentum for Change
Going
As Kotter warns, «Do not declare victory too soon». Until changes
sink deeply into an organisation’s culture – a process that can take time
– new approaches are fragile and subject to regression. Again, a
premature declaration of victory kills momentum, allowing the
powerful forces of tradition to regain ground. Leaders of successful
efforts use the feeling of victory as the motivation to delve more deeply
into their organisation: to explore changes in the basic culture, to
expose the systems relationships of the organisation which need tuning,
to move people committed to the new ways into key roles. Leaders of
change must go into the process knowing that their efforts will take a
while to produce results.
8.
Institutionalise the New Approaches
In the final analysis, change sticks when it becomes «the way we do
things around here», when it seeps into the bloodstream of the
corporate body. «Until new behaviors are rooted in social norms and
shared values, they are subject to degradations as soon as the pressure
for change is removed». Two factors are particularly important for
doing this. First, a conscious attempt to show people how the new
approaches, behaviors, and attitudes have helped improve the life of the
organisation. People have to be helped to make the connections
between the effort and the outcome. The second is to ensure that the
upcoming leaders believe in and embody the new ways. Kotter writes,
«There are still more mistakes that people make, but these eight are the
big ones. In reality, even successful change efforts are messy and full of
surprises».
9.3.3 Implementation Paths of Knowledge Management
KM implementation is long-term issue as in most cases it requires a change
towards an open, self-organised enterprise model. Such a change process
can have different starting points. In a survey of German companies four
main implementation paths of KM were identified (North and Papp 2001).
Most of the knowledge management initiatives of the companies surveyed
resulted from pressure to change or need to improve (path 3).
Ask yourself a question: How and where should we begin? Below we
will explain the four implementation paths. We found several companies
that switch from one path to another or combined paths over time (Ref. ◘
Fig. 9.5).
Fig. 9.5 Implementation paths of knowledge management (Source: North and Papp 2001)
Implementation Path 1: ICT Orientation

The first path implements new information and communication systems in
order to improve access, documentation and interaction. Best-practice
databases, discussion forums or yellow pages are established as a starting
point. In the second phase, a central coordinator or a coach motivates the
interested individuals to cooperate. This builds informal and formal
networks. In the following phase, creation and transfer of knowledge is
further encouraged by suitable incentive systems and active management
support. Sceptics are convinced that teamwork is worthwhile, organisation
culture changes gradually and existing organisation structures are adapted
to new working methods.
Implementation Path 2: Knowledge Manager as an Evangelist

The second implementation path begins with appointment of a coordinator
for knowledge transfer. This coordinator motivates exchange of
experiences, is supposed to keep a record of «who knows what in the
company», exemplifies knowledge exchange and demonstrates that
teamwork is worthwhile by means of small concrete examples. Inspired
exchange of experience gives rise to relevant networks that are then
supported by IT infrastructure. Following the snowball system, more and
more employees are included. Informal cooperation is formalised, rewarded
by incentive systems, and supported by the company management. For
instance, a knowledge manager of a pharmaceutical company is responsible
for «the business development of the company. Projects are established in
this context and persons who are suitable worldwide are recruited. In the
future, efforts will be taken to enhance the networks internally as well as
externally».
Implementation Path 3: Pressure to Change

The third implementation path is linked directly to internal and external
pressure of competition, e.g. through benchmarking surveys. A pressure to
improve is developed. Business units find out that they are facing similar
problems. Best practices are exchanged. Units start working together in
comprehensive projects, improvement goals are set and networks with
similar interests are generated. These networks store their information
systematically in databases and maintain discussion forums. The company
culture changes. Organisational structure and incentive systems are changed
from knowledge perspectives.
Case Study
Competence networks in an electronics company
A pilot project was started in the computer-chip developing division of
an electronics company in cooperation with the central process
consultation. The project primarily aimed at linking experts who worked on
the same subject. A meeting was organised every 6 months in which the
interest groups (20–30 people, international) discussed common problems
under the guidance of a moderator.
While organising the activities, it was always ensured that needs of
network members were met and functioning as an «instructor» was strictly
avoided. This gave rise to the requirement for an efficient form of
communication (primarily in international context). Communication
technology was adapted by installing a suitable video conference system.
Since the initiatives offered relatively fast results for quite a huge number of
participants, there was an increased interest in teamwork at the employee
level and the project also enjoyed desired and necessary support of the top
management.
Today, efforts are being made to link interest groups formed earlier.
Communities of Practice are implemented which consists individuals with
similar experience and interest. Presently, efforts are being made to connect
1500 employees. A major task in the process of connection is removing
barriers and reconstructing information and communication systems
accordingly. Roles should be defined (community manager, administration,
etc.) and the entire system should be integrated in day-to-day business.
Implementation Path 4: Top-Down Initiative

The fourth implementation path is a top-down initiation and begins with
ambitious goals of the company or comprehensive strategic programmes
that require cooperation or motivate cooperation. A company’s internal
«knowledge alliances» and cooperative projects are established and they
become components of daily work. Information and communication
infrastructure is built and rebuilt and networks are formed. Success in the
achievement of ambitious goals further encourages teamwork, particularly
when greater attention is paid to rewarding the overall success of a
company than satisfying particular interests of individual business units.
Which Is the Most Effective Path?

Depending on the implementation path and phase, the implementation of
knowledge management is subject to different levels of difficulties.
Companies following the first path complete a long stretch quickly but do
not reach very high. One can also call this way as «quick win» way. Quick
results like increasing interest and increasing number of users obscure the
view of much difficult part of the path, i.e. the necessary adaptation of
incentive systems and a corresponding change in the corporate culture.
Many companies rest on this intermediate goal for a long time, thus risking
their authenticity and creating useless IT graveyards.
In many surveyed companies, internal marketing was and continues to
be at the top in the plan of activities. Internal marketing aims at sensitising
people for knowledge management and motivating them to use knowledge
management tools. However, these important measures for stimulating the
exchange of knowledge should not serve as an end in itself. Words should
be followed by actions. The management and/or the spokesperson of
knowledge management should consistently exemplify the communicated
and encouraged image of an «ideal employee».
Findings from the second round of interview made it clear that
knowledge management initiatives often depend on individual employees
connected to the subject. These initiatives are doomed to fail if these
promoters leave the company or devote their time to other activities. In 5 of
the 30 surveyed companies, the position of such promoters or contact
persons remained vacant after the existing contact persons quit the
company.
Knowledge management requires a professional organisation that
ensures sustainable and systematic use of knowledge. There are different
ways of integrating knowledge management organisation in formal
structures in a given case. In the early times of KM implementation it was
often advocated that creation and transfer of knowledge does not require
active control. This perception is no longer true. A vast majority of those
who were interviewed admitted that a formally established knowledge
manager should promote, coordinate and monitor knowledge management
activities. Experiencing knowledge-oriented management of a company is
like entering into a new territory and experimenting.
9.4 Implementing KM at Individual Level: Key
Competencies for Knowledge Workers6
Independent from the organisational anchoring and implementation path the
ultimate objective is the integration of KM in the daily practices of each
employee, in each unit and the management structures of the organisation.
This requires the development of skills and competences to at individual
level. The following five key competencies are essential for knowledge
workers:
1.
Structuring and evaluating knowledge domains
«Finally I understand what you do!», exclaimed the CEO of an
international organisation after the employees had structured important
topics and fields of knowledge for each service module and had
systematised reference projects, documents, publications and methods
according to a standard pattern.
The challenge lies in presenting one’s own knowledge domain in such a
way that others understand what their colleagues do. An even greater
challenge lies in working together in one department:
– What is the core knowledge of our group or department?
– How do we distinguish ourselves from the others?
– What are the methods specific to our work?
While structuring knowledge domains and while visualising, e.g. with a
mind map or in the form of a process presentation, it does not make much
sense to start with the question, «What do we know?» Instead, a more
useful question would be, «Which services do we provide to our customers
and what is the knowledge required for providing these services?» (See also
tools knowledge taxonomy and knowledge inventory).
It is also practical to evaluate knowledge domains on the basis of their
maturity; for instance from «crude» (knowledge under development)
through «mature» (tried and tested) up to «excessively mature» or
«obsolete» (i.e. this knowledge is not required anymore and thus can be
discarded). Structuring knowledge domains and evaluating them is also
important in order to realise which knowledge we, as a group for instance,
lack and how we can acquire it. ◘ Table 9.4 shows a practically tested
structure of knowledge domains with reference to specific services, fields of
intervention or methods.
Table 9.4 Structuring and evaluating knowledge domains
Field of intervention, Specific Reference Maturity level (1 Documentation

service module, method knowledge «lighthouse» crude – 5 developed) and availability
….
….
2.
Learning teamwork: find a common language
«It took me much time to find a common language and a common
method of working in the team, but it was worth it», said a young
engineer who worked in a development project along with social
scientists, doctors and business economists. Several disciplines further
train lone fighters and when work groups are formed during training
they are mostly comprised of people from the same discipline:
Engineers work with engineers, doctors with doctors and so on.
Thus, it is important to have interdisciplinary work groups already
at the stage of training. With the interdisciplinary aspect also comes the
intercultural aspect. For instance, if a German engineer has to work
with a French engineer both have to understand the way of thinking of
the counterpart, which has been developed by different cultural
traditions. Thus, the ability to work together has to be learnt. There
should be room for reflecting on methods, implicit assumptions and
role allocation. We talk a lot about what we do, but very little about
how we work together.
3. Using information and communication media intelligently
A lawyer once said, «When I am not reachable, I somehow feel
excluded. But when I take time-off it’s business as usual even without
me».
During a routine working day, we rarely think about how we
communicate.
Handling communication tools consciously and developing one’s
own communication strategy is a skill of knowledge workers and this
skill has to be learnt.
4.
Self-management
«I had no idea what to do with the newly found freedom», said a
project engineer who had moved from a tightly controlled
conglomerate to a small engineering firm.
Utilising available freedom is difficult for many; even for students
it is more difficult than executing more or less predefined tasks. Using
freedom effectively requires the ability to manage oneself. This means
structuring tasks, setting goals for oneself, finding a certain work
rhythm, making decisions, and coping with uncertainty. All this was
taught and learnt insufficiently until now in the dominant education
system.
Self-management also means taking responsibility for developing
one’s own competencies. Knowledge workers should be able to
upgrade their competency profile and proactively develop further.
Marketing one’s own competencies also falls under the domain of
self-management. Thus, young consultants need to learn quickly that
they have to market their abilities in order to get interesting projects,
while perhaps their education trained them to wait until they are
approached.
Self-management also includes the ability of self-reflection, i.e. to
think, «How do I deal with myself and with others?»
5. Mindfulness
«While working, I always think about the next step and the step
after that. What I do now seems like a hindrance only to get to the next
step», said a manager in a seminar. Being mindful means to observe
internal and external processes calmly and with undivided attention.
Being mindful means to fully concentrate and appreciate the things one
is doing, or to pay undivided attention to a partner in a discussion.
Judging people and things in peace and without being prejudiced is not
always easy, especially when a quick decision is required. Being
mindful can be practiced, e.g. as shown through a number of
techniques of Zen Buddhism. What do you do to develop these key
competencies for yourself and for your organisation, and probably also
for students and managers in further training?
9.5 The 12-Point Programme for Knowledge-
Oriented Management of a Company
At the end of the book we would like to summarise our implementation
suggestions by the following 12-point programme which was developed in
a project with small and medium enterprises. You can start at any random
point. Under a mid-term perspective you should complete all 12 points one
by one. You can also use the 12-point programme as a checklist to examine
the latest status of knowledge-oriented management of your company.
1.
Sensitise your employees for knowledge management and carry out a
problem analysis: Where are we falling short of knowledge? Where
could we avoid errors through a better flow of knowledge? How could
we improve our innovation performance?
2.
Derive knowledge strategies from the organisational strategy. Which
competences do you want to develop in the coming years?
3.
Create enabling conditions that encourage creation and exchange of
knowledge, e.g. through incentive systems, knowledge criteria in
employee appraisals or employee agreements on teamwork
4.
Make arrangements for knowledge flows and learning from external
sources, i.e. from customers, suppliers, competitors, universities,
research centres or other external experts. This can also be done by
creating technology teams and customer forums. Cooperate with other
companies.
5.
Pay attention to targeted competence development of your employees.
For instance, create a competence profile and control the results of
development measures.
6.
Enable knowledge transfer across employee generations so that the
company does not lose any valuable know-how. This is possible
through godparent model following the motto «employees train
employees» or checklist for orientation of the successors.
Encourage creativity and innovation of your employees by
7. Encourage creativity and innovation of your employees by
introducing non-bureaucratic employee suggestions, making small
improvements immediately beforehand or initiating competitions of
ideas for new products.
8.
Support the learning process within and across projects by after action
reviews, debriefing (neutral persons document the project experiences
of employees) and through project discussions and lessons-learnt
databases.
9.
Integrate knowledge management in your business processes. The key
question here is: How can we make process knowledge transparent
and accessible?
10.
Create opportunities for facilitating personal exchange of knowledge.
This can be done by regular meetings, departmental breakfast, info
zones of knowledge markets.
11.
Bring structure to your documents, databases and intranet. Create
guidelines on documentation and define precisely which employee is
responsible for which content. Give incentives to your employees for
actually using the systems.
12.
Provide for an open and trustworthy atmosphere of teamwork so that
the employees are ready to share their knowledge with others.
Cogitate Incognita Think the unthinkable, think something new and put
it into practice
– KM needs to be introduced as a management framework consisting of
technologies and processes, embedded into business activity along with a
set of roles embedded into the organisational structure – all under an
umbrella of governance. Once embedded, the management framework
will deliver sustained organisational KM, but needs to be accompanied
by a change in behaviour and culture too. Different frameworks have
been introduced.
– The best way to ensure KM system value and overall proper
implementation is to focus on enterprise performance as it relates to
customer benefit.
– Knowledge management of the future is hence closely coupled with
strategy, innovation management and personnel development which
encourage dynamisation of organisations
– KM needs to be managed as a change project. Whatever process you use
internally for managing projects apply it to your KM implementation and
be aware of Kotter’s eight principles leading to change.
– The following five key competencies are essential for knowledge
workers: Structuring and evaluating knowledge domains, learning
teamwork: find a common language, using information and
communication media intelligently, self-management and mindfulness.
9.7 Questions
1.
What are the elements of a KM framework?
2.
Discuss the pros and cons of the four KM implementation paths.
3.
How can you measure the effectiveness of the KM initiative in an
organisation?
4.
What are the tasks of a knowledge manger (refer also to ► Chap. 5)?
5.
Where do you see differences in implementing KM in a firm, public
administration and a non-profit organisation?
9.8 Assignments
1.
Implementing KM in a hospital
The medical field in recent years has been facing increasing
pressures for lower cost and increased quality of healthcare. An
organisation can lower its cost through elimination of non value-added
activities and enhance quality of service through process control. It is
perceived that knowledge management can significantly increase the
efficiency of operations.
As a consultant, you have been assigned the task of implementing
knowledge management at a large hospital to improve the quality of
service. Identify the knowledge assets of the hospital and formulate a
KM strategy that would help them improve their efficiency and brand
name.
2.
KM vision
Formulate a vision, what you want to achieve with implementing a
KM project in a company? Conduct an internet search for published
KM visions and compare them.
9.9 KM-Tool: Work-Out (General Electric)

What is a Work-out?
This problem solving methodology was developed by General Electric:
«Work-Out was based on the simple belief that people closest to the
work know more than anyone; how it could be done better. It was this
enormous reservoir of untapped knowledge, and insight, that we wanted
to draw upon. Across GE today, holding a Work-Out session is as natural
an act as coming to work. People of disparate ranks and functions search
for a better way, every day, gathering in a room for an hour, or eight, or
three days, grappling with a problem or an opportunity, and dealing with
it, usually on the spot - producing real change instead of memos and
promises of further study. Everyone today has an opportunity to have a
voice at GE, and everyone who uses that voice to help improve things is
rewarded» (General Electric, Annual report 1995, p. 5).
Why do a Work-out?
Work-Out is not just a cost-cutting process. It rather helps companies
grow along five key dimensions:
First, it provides a focus on stretch. By forcing people to rethink
what they are doing, it also encourages them to stretch to a goal or
challenge that is significantly beyond their current performance level.
For example, the stretch goal might be to cut the time to develop a
new product in half, or to reduce the number of customer complaints by
30% in the next year.
Second, Work-Out helps to develop systems thinking. Work-Out
encourages people to take a systems perspective. In the initial design
phase of Work-Out, the design team creates a comprehensive map that
describes the steps, processes, and subprocesses involved in producing
current results.
Third, Work-Out encourages lateral thinking. With the process map
as a starting point, participants brainstorm ways to achieve the goal and
sort through ideas, select the best ones, and develop them into
recommendations. Work-Out begins by focusing on the «low-hanging
fruit,» the easy fixes that can be made to virtually any process. Every
organisation develops clutter or inefficiency over time.
How to do a work-out?
No matter what the challenge, the process remains the same, with four
basic steps:
1.
Bring together the people who know the issues best.
2.
Challenge them to develop creative solutions.
3.
Make yes or no decisions on the solutions immediately in a public
forum.
4.
Empower people to carry out the solutions.
Work-Out particularly addresses «RAMMPP» inefficiencies, short
for reports, approvals, meetings, measures, policies, and practices. These
are relatively easy to find and remove.
The simple RAMMPP Matrix illustrated below lists each type of
clutter and the places where it might exist.
Sources/Links: Ulrich et al. (2002), a free @GE WORK-OUT KIT

can downloaded from ► www.scribd.com/…/3240020-GE-
WORKOUT
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[Crossref]
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[Crossref]
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[Crossref]
Footnotes
1 For an overview of KM frameworks see Wong and Aspinwall (2004); Liebowitz and Megbolugbe
(2003).
2 Knoco stories: Top 7 tips for knowledge management success 7 http://www.nickmilton.com/

2011/09/top-7-tips-for-knowledge-management.html
3 Adapted from 7 http://www.apo-tokyo.org/coe/files/Understanding-Business-Excellence.pdf
4 Our Model 7 http://www.mc3consulting.com/html/ourmodel/Framework
5 Adapted from 7 http://siriusmeetings.com/files/8steps1.pdf
6 This subchapter has been adapted from North and Gueldenberg (2011).
Multilingual Glossary
In the following core terms related to managing knowledge are explained.
Translation into German (DE), French (F), Spanish (E) and Portuguese (P)
languages are provided.
An After Action Review (AAR) is a process used by a team to capture
the lessons learned from past successes and failures, with the goal of
improving future performance. It is an opportunity for a team to reflect on a
project, activity, event or task so that they can do better the next time. It can
also be employed in the course of a project to learn while doing.
DE: After Action Review, Lessons Learned; F: revue après action; E:
Lecciones aprendidas; P: revisão depois de ação, lições aprendidas
Benchlearning is a process, in which a systematic and integrated
connection of performance comparisons and measures of mutual learning
are created in order to identify good practices by indicator based,
comparative learning systems.
DE/F/E/P: Benchlearning
Benchmarking is the structured comparison of processes and activities.
Camp (1994) defines it as «the continuous process of measuring products,
services, and practices against the company’s toughest competitors or those
companies renowned as industry leaders. »
DE/F/E/P: Benchmarking
Best practices are those practices that have been shown to produce
superior results; selected by a systematic process; and judged as exemplary,
good, or successfully demonstrated. «Best Practices» are a moving target as
they change with experience and innovation.
DE: Best Practices; F: meilleures pratiques; E: mejores practicas; P:
melhores práticas
The term competence (or competency) of a person or a group basically
describes the relationship between the tasks assigned to or assumed by the
person or the group and their capability and potential to do meet these
requirements. People mobilise knowledge, skills and behaviours to «do the
right thing» at the right moment.
DE: Kompetenz; F: competence; E: competencia, P: competência,
habilidade
Core competencies are a combination of skills and technologies that
deliver value to the customer. This combination is based on explicit and
hidden knowledge and is characterised by temporal stability and influence
on the products. Core competencies
1.
Are not easy for competitors to imitate.
2.
Can be re-used widely for many products and markets.
3.
Must contribute to the end consumer’s experienced benefits.
DE: Kernkompetenzen; F:compétences clés; E: competencias
esenciales; P: competências essenciais
A community of practice is a group of people who share a concern, a
set of problems, or a passion about a topic, and who deepen their
knowledge and expertise in this area by interacting on an ongoing basis
(Wenger/McDermott/ Snyder 2002).
DE: Wissensgemeinschaft; F: communauté de pratiques; E: comunidad
de practica; P: comunidade de prática
Dynamic capabilities are the ability to reconfigure, redirect, transform,
and appropriately shape and integrate existing core competences with
external resources and strategic and complementary assets to meet the
challenges of a time-pressured, rapidly changing Schumpeterian world of
competition and imitation (Teece et al. 2000).
DE: Dynamische Fähigkeiten, F:capacités dynamiques,E: capacidades
dinámicas, P: capacidades dinâmicas
Epistemology is a branch of philosophy that investigates the origin,
nature, methods, and limits of human knowledge. It raises questions such
as: (1) how reality can be known, (2) the relationship between the knower
and what is known, (3) the characteristics, the principles, the assumptions
that guide the process of knowing and the achievement of findings, and (4)
the possibility of that process being shared and repeated by others in order
to assess the quality of the research and the reliability of those findings.
Epistemological reflection is what enables us to elucidate the different
paradigms which give different answers to the questions raised by
epistemology (see Vasilachis 2011).
DE: Erkenntnistheorie; F: épistémologie; E: epistemología; P:
epistemologia
Information is organised data adding a meaning to a message.
DE: Information; F: informations; E: información; P: informação
Innovation is the successful exploitation of new ideas. In other words:
creating value from a new combination of knowledge.
DE: Innovation; F: innovation; E: innovación; P: inovação
Intangible Assets : According to International Accounting Standard
(IAS 38) «an identifiable non-monetary asset without physical substance».
Comprises assets such as reputation, brand value, monopoly rights and
other non-balance sheet items such as «potential» – i.e. the capacity to
generate competitive advantage in the future.
DE: Immaterielle Vermögenswerte; F: immobilisations incorporelles; E:
activos intangibles; P: ativos intangíveis
Intellectual capital: Intellectual Capital (IC), a subset of the intangible
assets including three sub-categories: Human Capital, Structural Capital,
Customer Capital. IC can include the knowledge of employees, data and
information about processes, experts, products, customers and competitors;
and intellectual property such as patents or regulatory licenses. (CEN).
DE: Intellektuelles Capital; F: capital intellectual; E: capital intelectual;
P: capital intelectual
Knowledge refers to the tacit or explicit understanding of people about
relationships among phenomena. It is embodied in routines for the
performance of activities, in organisational structures and processes and in
embedded beliefs and behaviour. Knowledge implies an ability to relate
inputs to outputs, to observe regularities in information, to codify, explain
and ultimately to predict (Carnegie Bosch Institute 1995).
De: Wissen; F: connaissances, savoir; E: conocimiento; P:
conhecimento.
Tacit knowledge represents the personal knowledge of an individual. It
is based on education, ideals, values and feelings of the individual person.
Subjective insights and intuition embody tacit knowledge that is deeply
rooted in the actions and experiences of the particular person.
DE: implizites Wissen; F: connaissances implicites; E: conocimiento
tácito; P: conhecimento tácito
Explicit knowledge is methodological and systematic and is present in
an articulated form. It is stored in the media outside the brain of an
individual (disembodied knowledge).
DE: Explizites Wissen; F: connaissances explicites; E: conocimiento
explícito; P: conhecimento explícito
Knowledge management enables individuals, teams and entire
organisations as well as networks, regions and nations to collectively and
systematically create, share and apply knowledge to achieve their strategic
and operational objectives. Knowledge management contributes to increase
the efficiency and effectiveness of operations on the one hand and to change
the quality of competition (innovation) on the other by developing a
learning organisation.
DE: Wissensmanagement; F: gestion des connaissances; E: Gestión del
conocimiento; P: gestão do conhecimento
Knowledge work is an activity based on cognitive skills that has an
intangible result and whose value added relies on information processing
and creativity, and consequently on the creation and communication of
knowledge.
DE: Wissensarbeit; F: travail du savoir; E: trabajo de conocimiento; P:
trabalho de conhecimento
Knowledge workers are people who primarily engage in knowledge
work. Also called «Creative Class» (Florida) or «white collar», «gold
collar» workers.
DE: Wissensarbeiter, F: Les travailleurs du savoir; E: trabajadores del
conecimiento; P: trabalhadores do conhecimento
Leadership is the process by which a person influences others to
accomplish an objective (Akhil Shahani).
DE: Führung; F: leadership, direction; E:liderazgo; P:chefia
Learning organisations are organisations where people continually
expand their capacity to create the they truly desire, where new and
expansive patterns of thinking are nurtured, where collective aspiration is
set free, and where people are continually learning to see the whole together
(Senge).
DE: Lernende Organisation, F: organisations apprenantes; E:
organizaciones que aprenden; P: organizações de aprendizagem
Management according to Drucker means: (1) Making people’s
strengths effective and their weaknesses irrelevant. (2) Enhancing the
ability of people to contribute. (3) Integrating people in a common venture
by thinking through, setting and exemplifying the organisational objectives,
values and goals. (4) Enabling the enterprise and its members to grow and
develop through training, developing and teaching. (5) Ensuring everyone
knows what needs to be accomplished, what they can expect of you, and
what is expected of them Management allows us to coordinate hundreds or
thousands of people with different skills and knowledge to achieve common
goals.
An Ontology is the study of entities and their relations used p.e. in the
semantic web as a basis for search.
DE: Ontologie, F: ontologie; E: ontología; P: ontologia
A Taxonomy is the classification of objects (information) in an ordered
system A taxonomy provides the structure to organise information, and
documents in a consistent way. Information and knowledge is put in
hierarchical or contextual order.
DE: Taxonimie, F: taxonomie; E: taxonomía, P: taxonomia
Knowledge Management Resources

KM Related Journals
Journal of Knowledge Management,
Journal of Knowledge Management Practice,
Electronic Journal of Knowledge Management,
Knowledge Management Research and Practice,
International Journal of Knowledge Management,
Knowledge Management,
Knowledge Management Review,
Knowledge and Process Management,
Interdisciplinary Journal of Information, Knowledge, and Management
International journal of knowledge culture and change management
Knowledge management for development journal,
Journal of Intellectual Capital,
International Journal of Learning and Intellectual Capital,
Learning Organization
E-Journal of Organizational Learning and Leadership
International Journal of Intelligent Enterprise
International Journal of Innovation and Learning
International Journal of Innovation and Knowledge Management in
Middle East & North Africa
Knowledge Management Toolkits 1

Toolkits in English
Toolkits Target Number Web links

group of tools
APO SMEs 26 ► www.apo-tokyo.org/00e-books/IS-44_Practical-KM-
toolkit Guide-for-SME-OwnerManager.htm
Knowledge All Over 30 ► http://www.kstoolkit.org
sharing organisations
toolkit
DBA Companies 7 ► http://www.usablebuildings.co.uk/Pages/Unprotected/
toolkit in design SpreadingTheWord/SharingKnowledge.pdf
practices
IDEA tools Local 8 ► http://www.idea.gov.uk/idk/aio/8595069
and governments
techniques
ODI toolkit International 30 ► http://www.odi.org.uk/sites/odi.org.uk/files/odi-assets/
agencies publications-opinion-files/ 188.pdf
SDC SDC partner 23 ► http://www.sdc-learningandnetworking.ch/en/Home/
toolkit countries SDC_KM_Tools
UN CPR UNDP 15 ► http://www.undp.org.ye/reports/Knowledge%20
offices Management%20Toolkit %20for%20the%20Crisis%20
Prevention%20and%20Recovery%20Practice% 20Area.pdf
Toolkits in Spanish and Portuguese
Toolkits Target Number Web links

group of tools
Bain & Company – Enterprises 25 ► http://www.bain.com/offices/saopaulo/pt/
Ferramentas de images/Management_tools_2009_POR.pdf
Gestão
EoiAmérica toolkit Multinational 82 ► http://docencia.udea.edu.co/ingenieria/
(America Grau) enterprises semgestionconocimiento/documentos/Mod7_
HerrTec.pdf
Toolkits in German
Toolkits Target Number of Web links

group toolsik
SIHK SMEs 15 ► http://www.sihk-wissensbilanz.e/
wissensaktivitaeten.htm
Toolkits Target Number of Web links
group toolsik
12 Punkte SMEs 20 ► http://www.ihk-lahndill.de/share/wissen/
programm 12punkte.html
Toolkits in French
Toolkits Target group Number Web links

of tools
Service public Public 15 ► http://www.fedweb.belgium.be/fr/a_propos_de_
fédéral de administration l_organisation/gestion_des_connaissances/
Belgique,
FAO (IDEA) Local 8 ► http://www.fao.org/knowledge/
governments networksandcommunities/knrepositories/fr/?tx_
mblnewsevent_organizer=29320
Index
A
AAR
See After Action Review (AAR)
Accelerated competition 8–11
After action review (AAR) 100–101
Alliances 94
closed A 95
inter-organisational A 94
intra-organisational A 94
open A 95
permeable A 95–96
Allianz Group Business Services (AGBS) 75–76
Ambidextrous organisation 66
American Productivity and Quality Centre (APQC) 165
Antagonisms 65–71
Asian Development Bank (ADB) 208–210
Asian Productivity Organisation (APO) 216
Assets
material A
See Tangible assets
non-material A 270–273
See also Intangible assets
Austrian Research Centre of Seibersdorf (ARCS) 272–273
Autonomy 45
B
Balanced Scorecard 279–280
Balancing antagonisms 65–71
Baldrige Criteria for Performance Excellence (CPE) 301–302
Benchmarking 70
Best Practices 33
Blogs 242
Book value 48
Bottom-up approach 118–119
Brazilian Development Bank (BNDES) 287
Business Excellence (BE) models 301–303
Business intelligence (BI) systems 257
BusinessSoftware AG 247–249
C
Calculated intangible value (CIV) 274
Capability 33
Capital
customers-C 49
human-C 49
innovations-C 50
intellectual-C 48–49
investor-C 287
location-C 272
organisations-C 49–50
structural-C 49–50
suppliers-C 49
Cloud computing 250
Coaching 137
roles of 180
Collective intelligence 110
Combination 44
Common assessment framework (CAF) 223
Communication
form 145
infrastructure 36
Communities of practice 97
definition 139
effect (result) dimension 145–146
functions 139
interactive community dimension 145
member dimension 143–144
MindTree 140
organisational support dimension 146
sharing tipps and tricks 142–143
success factors 141
Tech Clubs 143
type of 141–142
Company
culture 37
mission statement 177
Comparative knowledge advantage 7
Competencies 32
branch competence and inter-branch competence 137–138
centre 37
competency-based approach 135–136
Dare2Share 138
development 308
individual competencies 136
life cycle model of C 123
management 133
matrix 148–150
methods 136–137
organization deal with 134–135
skill and talent 135
talent and competencies managing 133–134
Competition 21
internal and external C 72
Competition vs. cooperation 69–70
Competitive 32–33
ability 19
advantages 2
collaboration 24
Context-rich systems 250
Co-opetition 65
Core competencies 33
intimacy 161
relationship management (CRM) 173
Corporate entrepreneurship 9
Creativity 2
Cross-cultural knowledge management 199
Culture
company 67
knowledge 37
organisational 84–85
Customer
knowledge 36
relationships 36
satisfaction 123
Customer relationship management (CRM) systems 173
D
Data 30
Debriefing method 174–175
Deductive summarizing approaches 274
Deming’s PDCA-cycle 257
Direct intellectual capital methods (DIC) 274
Disembodied knowledge 43
See also Explicit knowledge
Double loop learning 18
Dow Chemical 291–292
Dual cognitive–behavioural approach 17
E
eClerx 262–263
Economic value added (EVA) 76
Economies
of re-use 165
of scale 7
of scope 88
EFQM Excellence Model 218
e-Health 208
Embodied knowledge 43
See also Implicit knowledge
Emotional intelligence 96
Employees
assessment 163
behaviour 281
motivation of E. 37
Entrepreneurial corporation 89–92
Epistemology 41
Eureka Forbes (EFL) Senate 70–74
European Foundation for Quality Management (EFQM ® ) 223
European Intellectual Capital Statement (INCAS) 276
Europe Personal Service Numbers (PSN) 224
Evolutionary perspective 66
Experts 94
Explicit knowledge 46–47
Exploitative and explorative business 67
Externalisation 44
Extrinsic work motives 138
F
Fair values 76
Feedback 128
Field-specific competence 21
Financial Service Provider 82
Fishbone diagram 162
Front line entrepreneurs 179
G
Gamification 132
German International co-operation agency 204
GIGI-principle 72
GIZ 204
Globalisation 4
Goodwill 5
GoogleDocs 242
Group structures 96–97
H
Headstart 225–226
Hierarchical organisation 118
Hierarchy 82
High performance workplace (HPW)
automation and augmentation 245
goals and results 247
non-standardised work 245–246
team structure and functioning 246
Home Loan Bank 285–286
Hypertext organisation 76–78
I
IC, measuring and safeguarding
ARCS 272–273
deductive summarising approaches 275–276
financial indicators 270–271
inductive analytical approaches
Balanced Scorecard 279–280
cricket team 283
Danish guideline 282–283
IC index 279
INCAS 276
InCaS intellectual capital statement 280–282
intangible assets monitor 277–278
intellectual capital navigator 278
intangible assets 272
intellectual capital reporting 273–274
multi-stage indicator model 283–286
protecting knowledge 287–288
reporting approaches, evaluation of 286–287
safeguarding knowledge 289–290
strategic map 270
Implementation model 314–315
Implementation paths, KM 317–318
evangelist 318
ICT orientation 318
internal marketing 319
pressure to change 319
top-down initiation 319
Implicit knowledge 290
Impresario concept 7
Independence vs. integration 87–89
Indian Youth Climate Network (IYCN) 87
Indias National Knowledge Commission 229–230
Indicator system 283
Inductive analytical methods 276
Information 30–40
Information and communication technologies (ICT) 4
applications
internet of things 249
SMAC technologies 249
virtual reality 250
3D printing 249
APQC’s 2015 KM Priorities survey 241
designing challenges
acceptance and use 244
enterprise social networking applications 242
individualisation and demand-orientation 243–244
integration 244
managing and convergence technologies 243
performance and productivity 244–245
physical labor and transactional tasks 243
HPW
automation and augmentation 245
goals and results 247
non-standardised work 245–246
team structure and functioning 246
managerial activities 241
operational activities 241
productive knowledge work
active information searches 256
cooperative knowledge use 256–257
finding and binding experts 259–260
individual efficiency 250
information supply 254–255
Jeopardy 258
MIS 257–258
MITRE Corporation 258–259
teamwork 253–254
social media 240
success factors
analogies, identification and creation of 261–262
business processes 261
eClerx 262–263
establishing circular dependencies 261
knowledge culture and readiness, strengths of 261
management attention 261
orientation to productivity 260
working processes and operational procedures 261
Information processing epistemology 40
Innovation 2
cycle 214
Intangible assets 5
Intellectual capital (IC) 40
index 279
navigator 278
rating 274
reporting 273–274
statements 257
Interest-cluster principle 183
Internalisation 44–45
knowledge transfers 46
process 46
International contexts
automobile manufacturer works 200
cross-cultural management 199
integration approach 201–202
International Service Organisations
ADB 208–210
WHO 206–208
World Bank 210–211
local differentiation and global standardisation 199
orchestration approach 202–204
projection approach 200–201
International manufacturing networks 7
International Service Organisations
ADB 208–210
WHO 206–208
Internet
Intranet 256
Intrinsic work motives 128
Inverted organisation 82–83
Investors 165
Ishikawa diagram 162
ISO 9001:2015 frameworks
checklist 305–307
AS 5037-2005 knowledge management 302
knowledge management cycle 302
step approach frameworks 302
structure 302
J
Joint venture 7
K
KAO 93
Key performance indicators (KPI) 23
KM implementation
building blocks 307
change project
competence networks 320
five phase implementation model 314–315
implementation paths
See Implementation paths, KM
Kotter’s eight steps 315–317
dynamic capabilities 299
dynamization 299
frameworks
BE models 301–303
ISO 9001:2015
See ISO 9001:2015 frameworks
governance options 300
individual level 320–322
knowledge ladder 308
information availability 309–310
knowledge identification and transfer 309
knowledge-oriented culture and management 309
knowledge strategy 308
learning and competence development 308–309
MC 3 framework 310–312
professional KM services 300–301
setting and monitoring compliance 300
stable and turbulent contexts 299–300
12-point programme 322–323
KM maturity assessment 35–39
KM strategy
APQC 165
assessment of 162–163
Ba, concept of 164
breadth of application 162
cultivation of knowledge, ecologies 164
customer intimacy 161
difficulty of imitation 161–162
empirical surveys of 163–164
guiding principles 156–157
InnoCentive 168
innovation-oriented KM strategy 166–167
innovative office design 189–190
knowledge culture
corporate mission statements 185
incentive systems 185
leadership practices 187
management principles 185
restructuring 188
reward and incentive systems 187–188
knowledge markets
See Knowledge markets
knowledge sensitivity 159
normative knowledge objectives (know-why) 158
operational excellence 161
operative knowledge objectives (know-how) 159
process-oriented KM strategy
benchmarking and benchlearning 171–172
best practices 170
business processes 169
electronics manufacturer 173
good practices 171
knowledge integration processes 169–170
lighthouse principle 173
oil and gas company 173
product leadership 160
project-oriented KM strategy 174–175
relevance 161
Sense 2 168
strategic knowledge analysis 162
strategic knowledge gap analysis 155–156
strategic knowledge objectives (know-what) 158
tactical and strategic changes 157–158
Know-how
gaps 291
safeguarding 289
Knowledge
alliance, strategic
availability of 42–47
broker 183
buyer 75
combination of K 95–96
creation 10
culture 37
definition 35
dimensions 20–21
ecology 19
exchange 145
explicit K 47
globalisation 4
ICT 4
implicit K. 46
integration 42
knowledge ladder 307–310
Mail (software) 260
management 34–35
maps 265–266
market 16
narrative 282
networking 165
objectives 130
offer 83
organisation 36–37
safeguarding 289–292
societies and economies 2–4
spiral of K. 45
structural change 3
transfer 10
value dimension 48–52
work 127–130
Knowledge based competition 21–23
Knowledge-based firm 19–25
Knowledge-based theory, firm 52–55
Knowledge communicators 108
Knowledge evolution 9
Knowledge intensity
indicator 18
matrix 20
process intelligence 18
product and process intelligence 18
product intelligence 20
value added by physical work: 18
Knowledge ladder 31
information availability 309–310
knowledge identification and transfer 309
knowledge-oriented culture and management 309
knowledge strategy 308
learning and competence development 308–309
Knowledge management (KM)
business organizations 3
cycle 302
definition 13
implementation
See KM implementation
international contexts
See International contexts
methods 136–138
public sector
See Public sector
rural development 230–231
SMEs
See Small and medium-sized enterprises (SMEs)
strategy
See KM strategy
Knowledge managers 180
job description 181–182
skills of 181
Knowledge markets
actors 179
checklist 177
enabling framework conditions 176–177
instruments, processes and structures 176–177
internal knowledge-based market economy 175–176
knowledge brokers 175
market metaphor 175
players and rules of game 176–177
principles of
common interest principle 182–183
give and take principle 184
lighthouse principle 183
push and pull principle 183–184
setting demanding goals 178
TCL 185
Knowledge nations 7
Knowledge-oriented company 18
Knowledge process outsourcing (KPO) 7
Knowledge sharing 71–74
cycle 214
Knowledge spiral 45
Knowledge work(ers), digital age
affect trends
crowdworking 109–110
digital leadership 110–111
distributed value generation 109
man and machine interaction 110
self-management 110
work without borders 109
communities of practice
definition 139
effect (result) dimension 145–146
functions 139
interactive community dimension 145
member dimension 143–144
MindTree 140
organisational support dimension 146
sharing tipps and tricks 142–143
success factors 141
Tech Clubs 143
type of 141–142
competencies
branch competence and inter-branch competence 137–138
competency-based approach 135–136
Dare2Share 138
individual competencies 136
methods 136–137
organization deal with 134–135
skill and talent 135
talent and competencies managing 133–134
definition 107
Knowledge work(ers), digital age, (cont.)
drivers and obstacles
burn-out, risk of 114–115
customer and business strategy 112
knowledge worker productivity 111–112
making time-off 115–116
recruit top-class knowledge workers 113
Six Sigma standard 114
software developer reports 113
information brokers 117
infrastructure managers 117
knowledge engineers and entrepreneurs 116
knowledge practitioners 116
middle management 118–120
motivating knowledge workers
company breakfast 131
efficient work equipment 129
employee appraisal 130–131
enabling advanced learning 129
extrinsic motivation 127
gamification 132
intrinsic motivation 127–128
learning processes 129
management consultancy 132
monetary rewards 129
promoting teamwork 129–130
stimulating office environment 129
work motive and incentive 128
organisational concept/management approaches
bottom-up approach 118–119
middle-up-down approach 118–119
top-down approach 118–119
professionals 123–126
support employees 117
types of 108–109
upper management 120–122
visionaries and context designers 117
Kondratiev waves 7
K&P Engineering 9
L
Lead factories 179
Lean production 96
Learning
curve 114
by doing 44
process 44
Learning management systems (LMS) 257
Learning organisation (LO) practices 19
Lessons learned 137
Lighthouse principle 183
M
Management
principles 185
yellow pages 177
Management information systems (MIS) 257–258
Market
knowledge 5–7
value
Market capitalisation methods (MCM) 274
Market-to-book value relation 275
Meta-national strategy 203–204
Middle-up-down approach 118–119
Mid-level management 116
MindTree 93
Minnesota Mining and Manufacturing Company (3M) 85
Mistrust-based alliance management 10
Monitoring 184
Motivation 34
barriers of M. 46
factors of M. 129
Motivators 92
Multidivisional organisation 87–93
Multi-domestic concept 8
Multi-stage indicator model 283–286
N
Network
epistemology 40
management 86–87
“not invented here” syndrome 11
NovaCare 83–84
O
Operative goals 166
Operative integration 91–92
Organisational
capital 49–50
form 63–101
knowledge basis 77
learning 17–19
structure 84
understanding 91
Organisational ambidexterity 66
Organisational form
hypertext-O 76–78
infinitely flat-O 81–82
inverted-O 82–83
multidivisional-O. 87–93
platform-O 78–80
spaghetti-O 68–69
spider-O 86–87
starburst-O 84–85
Organisational knowledge (OK) theorists 17
Organisational linkages 70–74
P
Patent portfolio 291
Platform organisation 78–80
Problem solving competence 5
Problem solving groups 20
Process oriented KM strategy 169
Process-oriented organisation 9
Product intelligence 20
Production factors 54
Production impresarios 7
Professionals 124–126
Project organisation 76
chapter 55
focus 166–168
Public sector
KM challenges 221–222
KM practices
CAF 223
Headstart 225–226
organizational culture and leadership practices 223–224
process standardization and service platforms 224
Welsh Government (United Kingdom) 224–225
new public management 220–221
Push-and pull-principle 183–184
Push vs. Pull approach 205
Q
Quality
circle 96
management 94
Quality management 66
R
Redundancy 45
reinventing the wheel 10
Renewal 65–69
Resource based view 53
Return on assets methods (ROA) 274
Reward-incentive systems 73
S
Scorecard methods (SC) 274
SECI-model 43–45
Segmentation 73–74
Self-referential epistemology 41
Senior level coaches 89
Share transactions totally electronic (STRATE) 313–314
Single loop learning 15
Six Sigma standard 114
Skype 242
SlideShare 242
SMAC (Social, Mobile, Analytics, Cloud) technologoies 249
Small and medium-sized enterprises (SMEs)
dynamic SME 211–212
effective implementation 217–220
organisational learning 214–215
peculiarities 212
Sparrow, John aspects 212–213
strategies 215–217
types of firms 213
Small to medium law firm 312–313
Smart machine 250
SME lifecycle 214–215
Social competence 21
Socialisation 45
Spaghetti organisation 68–69
Spider organisation 86–87
Stability vs. renewal 65–68
Stakeholder 159
Starburst organisation 80–81
Strategic goals 161
Strategic knowledge alliance 94–96
Structural capital 49–50
Supplier capital 49–50
Supply chain 7
Symbols 30
Synergy 73–76
management 165–166
T
Tacit knowledge 43
See also Implicit knowledge
Tangible assets 48
Tata Chemicals Limited (TCL) 185
Tobin’s q 275–276
Top-down
communication 117
method 118–119
Top management 93
Total knowledge management (TKM) 156
Total quality management (TQM) 156
Training on the Job 114
Trust-based alliance management 9
12-point programme 322–323
Twinning 205
Twitter 242
U
Upper level management 179
Upper management 120–122
V
Value-based knowledge management 157
Value creation 30–40
Value dimension of knowledge 48–52
Visionary 120–122
Volkswagen’s knowledge management 290–291
W
Welsh Government (United Kingdom) 224–225
West Midlands Knowledge Management Centre, UK 212
Wikipedia 242
WIPRO 80
Work-outs 37
Y
YouTube 242
Footnotes
1 Prepared by Renia Babakhanlou.

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Springer Texts in Business and Economics

Springer Texts in Business and Economics (STBE) delivers high-quality

ISSN 2192-4333 e-ISSN 2192-4341

Library of Congress Control Number: 2017962625

© Springer International Publishing AG, part of Springer Nature 2018

The use of general descriptive names, registered names, trademarks, service

Printed on acid-free paper

This Springer imprint is published by the registered company Springer

We have tried to encapsulate the essence of this book by providing brief

1. Why is «knowledge» and «knowledge management» a hot

2. What is the relevance of knowledge as a competitive factor?

3. What does «knowledge of an organisation» actually mean?

4. Is it possible to measure knowledge?

5. What is knowledge management?

6. What are the hurdles in the creation and use of knowledge?

7. How to promote knowledge sharing?

8. How to create a «knowledge ecology» that promotes

9. How can we organise processes and structures to support a

10. How should a company introduce knowledge management?

Figure 1.2 Phases of knowledge production and dissemination 4

Figure 1.3 The value of a company is being increasingly determined based

Figure 1.4 What hampers the creation and transfer of knowledge? 11

Figure 1.5 Basic questions for the knowledge management of an

Figure 1.6 The knowledge intensity matrix 20

Figure 2.1 The knowledge ladder 35

Figure 2.2 Degree of maturity of knowledge-based management of a

Figure 2.3 Differences between capital and knowledge 45

Figure 2.4 Four ways to create and transform knowledge 47

Figure 2.6 Organisational knowledge base is part of intangible assets 52

Figure 2.7 Skandia’s structuring of organisational capital 54

Figure 2.8 Performance improvement attributed to KM initiatives (240

Figure 3.1 Balancing stability and renewal 70

Figure 3.2 Balancing competition and cooperation 75

Figure 3.3 Payoff matrix of a two-person knowledge-sharing dilemma 76

Figure 3.4 Criteria to decide whether to share or not to share knowledge 77

Figure 3.5 The hypertext organisation 81

Figure 3.6 The inverted organisation 87

Figure 3.7 The starburst organisation 89

Figure 3.8 The spider organisation 91

Figure 3.10 The processes and roles in an entrepreneurial corporation 94

Figure 4.1 Possible structuring of work 115

Figure 4.2 Actors in a knowledge-oriented company 121

Figure 4.3 Functions and roles of middle management 124

Figure 4.4 Functions and roles of upper management 126

Figure 4.5 Life-cycle model of the market value of specialised

Figure 4.6 Functions and roles of professionals 130

Figure 4.7 Branch competence and inter-branch competence 141

Figure 4.8 Dimensions of communities of practice: the MIEO model 148

Figure 5.2 The KM process framework by Buckowitz and Williams 162

Figure 5.3 Strategic objectives according to Traecy and Wiersema 164

Figure 5.4 Strategic knowledge analysis 166

Figure 5.5 Assessment of knowledge management situation 167

Figure 5.6 Information and knowledge analyses of business processes 173

Figure 5.7 How best practices emerge 174

Figure 5.8 Knowledge organisation in project cycles 178

Figure 5.9 Governance concept of knowledge markets as «internal social

Figure 5.10 The knowledge market concept 180

Figure 5.11 Extract from the short analysis of knowledge-oriented

Figure 5.13 Coaches = catalysts of knowledge management 184

Figure 5.14 Extract from the short analysis of knowledge-oriented