Key Issues in Knowledge Management

Key Issues in Knowledge

Management

Introduction

Knowledge management (KM) has been drawn increased attentions

from the existing academic journals, especially since 2000.

Additionally, courses related to KM have become popular among

worldwide business schools and the topic is included in agenda

of firms. The topic also applicable to a wide range of job

field from private to public sectors and job positions related

to the topic include such as knowledge manager or officer

(Lussier, 2008).

There are some main arguments of this essay. KM is related to

business strategies and sharing knowledge effectively in firms

in order to gain profits. Characteristics of KM can help firms

further understand the issue of KM. The first feature, which

is strategy, refers to the effective use of intellectual

capital, the culture feature refers to workforce diversity and

the third feature, which is organizational learning, refers to

the exploration and exploitation of corporate knowledge. The

process of knowledge creation has close relationship with

tacit and explicit knowledge. The reason for the fail of KM in

western firms is the conflict of different cooperate culture

between eastern and western firms. Knowledge management system

(KMS) can be a good platform for companies to cooperate human

capitals and technological factors and in this case the role

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of information technology (IT) is also vital. However,

companies should carefully notice the target users and

specific business aims for using KMS. Furthermore, KM has

important empirical applications in the project based

organizations (PBO). The use of KM in the construction

industry can benefit firms to reduce costs and improve project

quality, but meanwhile firms should also consider the problem

of employees’ resistance to share knowledge and the framework

of their projects due to the complex characteristics of the

construction industry. Consulting firms use different KM

strategies according to codified and personalized knowledge.

The content of the essay can be considered as divided into

three parts. The first part refers to the key issues around

the concept of knowledge and KM, and the second part refers to

the topic around the relationship among KM, KMS and IT. The

final part refers to the empirical applications of KM in PBOs.

This essay will firstly discuss the basic definition of

knowledge and KM, and then focuses on the important features

of KM, the basic process of KM, some criticisms about KM, the

concept of KMS, relationship between IT and KM, some

disadvantages of using KMS and adopting IT into KMS. Then the

essay will focus on some empirical applications of using KM

strategies in the construction industry and in consulting

firms.

Definitions of Knowledge and KM

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It is important to know about the definition of knowledge

before studying the concept of KM. So far many literatures

have provided their definitions for knowledge that have

different conceptual focuses. For example, according to Awad

and Ghaziri (2004), knowledge can be considered as the

understanding or skills that individuals obtained during the

process of learning, which benefit individuals’ ability to

analyse contents and make related decisions. Moreover, Klicon

(1999) believed that knowledge is the cognitive process of

generating clear and deep understanding of complicated data

and information. Davenport and Prusak (1998) argued that when

referring to commercial organizations, knowledge often deeply

rooted into corporate documents, inventories, organizational

practices and routines.

There are also some important definitions about KM. Beijerse

(2000) argued that KM in organizations is based on information

management by directing strategies, framework, different

culture background, attitudes and capacities of the corporate

workforce. Therefore corporate goals can be achieved if

knowledge of workforce becomes productive. In general, the

basic definition of KM focuses on how to explorate and share

knowledge effectively within organizations.

Main Features of KM

KM has some important features that can reinforce the

understanding of the basic definition of the topic, and such

understanding is also significant to business organizations. of 23

As Lussier (2008) argued that the topic has four main

dimensions: strategy, culture, organizational learning and the

support from technology or information systems.

The strategic aspects mainly refer to the effective use of

intellectual capital in order to improve the performance of

organizations. Intellectual capital refers to the total value

of knowledge of employees in corporations, or any types of

proprietary knowledge that can increase the competitive

advantage of corporations. Its subsets includes such as

information or human capital. Intellectual knowledge is a type

of capital that can be regarded as an asset that include all

the useful resources for a corporation to gain its

considerable profits, new productions and consumers. It is not

easy to measure intellectual capital since the process may

take quite a long period. Firms invest considerable amount of

money into their employee development and training about

specific business issues and the firm may benefit from such

investment after some years. In recent years intellectual

capital plays an increased important role in job market due to

the increasing use of technology.

Cultural aspect mainly refers to the management of diverse

workforce in corporations. Workforce can be diverse in terms

of employees’ nationality, age, physical conditions, gender

and religion. Diverse workforce often close related to equal

pay employment and wage discrimination. The advantage of

diverse workforce may benefit the process of knowledge sharing

from various cultural backgrounds especially for multinational

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corporations, but the disadvantage of the issue related to the

cultural shock or gap among different nations.

Organizational learning mainly focuses on the exploitation,

exploration and sharing of knowledge. The concept of

organizational learning is not only about the aggregate

information from employees, but also based on systematic

integration and corporate explanation of new knowledge that

may include any risks. In general, the process of

organizational learning has three basic factors for the

majority of firms: action, reflection and conceive.

Organizational learning successfully connects work tasks,

innovations and actions. When referring to the issue of KM, an

ideal environment for organizational learning should be

created.

Basic KM Process

Alavi (2000) provided a typical process for KM that widely

used by organizations, especially in Europe. The first step is

knowledge creation, the second one is knowledge storage, the

third one is the distribution of knowledge and finally is the

empirical application of knowledge. The foundation of

knowledge creation theory is tacit knowledge. Knowledge

creation can be defined as the process of creating,

disseminating within organizations and integrate it into

services and productions. Tacit knowledge is used to

understand the transform of individual knowledge into explicit

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knowledge, which is useful for organizations. Knowledge is

created through individual experiences and then stored in

human mind as values, skills or memories (Nonaka and Takeuchi

(1995). Konno et al. (2000) developed a dynamic model for

knowledge creation theory that focuses on dialectic analysis

of explicit and tacit knowledge. The model is assumed to be

used in an environment with the mixture of cultural, social

and historical aspects and social interactions among

individuals are assumed to be the negative factor that

influences the model.

Knowledge is then be stored and recycled and wait for use

within organizations. This process can be described as

organizational memory that contains personal memory and shared

knowledge that generate from social activities. However,

organizational memory needs to be carefully treated since any

bias attitude may prevent organizations benefit from

innovations. Therefore organizations should adopt a more

fixable approach to structure and outlook current knowledge

(Alavi, 2000). Alavi (2000) believed that the importance of

knowledge distribution has been underestimated and it has some

important factors such as the perceived value and motivational

characteristic of source, the availability of transform

channels and the learning ability of the knowledge receiver.

Criticisms about KM

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There are some critiques about KM. Clegg and Ray (2005)

pointed out some unsuccessful projects of KM in western firms

and concluded one significant and underlying reason for the

situation: the ineffective management of corporate culture. A

high and low context theory was used by Clegg and Ray (2005).

High context states mainly refer to Asia countries, for

example, China or Arab nations, while low context countries

mainly refer to the western countries, such as the UK or the

USA. High context countries require the information receiver

has deep understanding of local culture or traditions when

analysing the information, but the information in low context

countries is relatively more adequate and straightforward. It

seems possible to extract main options and code language from

individuals and then delivery the explicit knowledge to others

during KM process. However, Eastern countries, which are the

high context type, have more ability than low context western

states in terms of facing the relationship between tacit and

explicit knowledge, solve the problem of package and transform

of the essential tacit aspects. Cultures in low context

countries have lots of common knowledge that are very popular

among the public. The situation is named as ‘alignment’ of

tacit knowledge among individuals by Clegg and Ray (2005). By

doing so, the transform of explicit information between

individuals are more feasible than before. The insider-

outsider theory can be used to understand the above problem

and the concept is that high standard of knowledge alignment

are exist in insiders. Additionally, the building of culture

is a key issue in terms of KM approaches, but it has

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limitations since different individual has different views

about culture. Building culture is especially difficult to

achieve in low context countries where the code of message is

limited (Clegg and Ray, 2005).

Definitions of KMSKM has close relationship with KMS. The concept ‘Knowledge

management system’ has various definitions among literature.

In those literature focuses on KM, KMS means technological

aspect, for example, the IT based systems that provide support

and strengthen the process of knowledge in business

organizations (Alavi and Leidner, 2001). In contrast, in more

recent researches, the basic definition of KMS has been

integrated with additional factors, such as business

strategies, consumers or services, instead of only focus on

the technological part. Therefore, KMS can be known as provide

a good platform for the close and effective interactions among

technological software, networks, employees, employers,

resources and productions (Jennex, 2005). Additionally,

according to King (2009), KMS is a type of communications and

information system (CIS) that based on the use of computers

with the main aim to help different processes of KM in

organizations. KMS has the components of networks and

databases to help individuals in organizations to share and

argue ideas with experts from a wide range of fields. Compared

with CIS in organizations, KMS require more human interactions

during operation process.

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The Role of IT in KM

The role of IT in KM can be significant since it is deeply

rooted into every part of the process of knowledge. The

function of IT not just all about provide access to past data

or statistics with the main aim to understand consumer

opinions, but also classify and store explicit knowledge and

provide chances to effectively use tacit knowledge that based

on individual experiences and workforce cultures. The use of

KMS successfully link target users and process knowledge in a

sharing environment (Alavi and Leinder, 2001). Furthermore, as

Hagenhoff et al. (2003) argued that the use of technological

softwares in KM can be mainly divided into seven independent

parts: knowledge search, knowledge presentation, knowledge

integration, knowledge transform, the publication and

framework of knowledge, the cooperation and communication of

knowledge and finally the administration of knowledge. The

search of knowledge mainly focuses on the pull and push search

functions. Knowledge presentation shows the connections

between research results and main tents. Knowledge integration

can be automatic or manual type, and external resources will

be integrated by the process of data aggregation and analysis.

Individuals in corporations can be able to communicate and

corporate different knowledge and all the individual users are

meanwhile administrated by the centre management system.

Finally, KM could also related to other information

technological subjects, such as E-learning.

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Criticisms of using KMS and IT

However, KMS and the use of IT into it have some important

challenges or potential problems. Knowledge plays a vital role

in the survival of enterprises. Employees’ views may be

influenced by technological or social aspects. The most

considerable problem for firms is how to cooperate and

integrate the job task and social aspects of employees into

the pre designed corporate KMS (Tatnall, 2010). Firms may face

practical problems of implementation of KMS since it may be

not easy to identify the exact involved users of the KMS,

types of knowledge that should be used and the main aim to use

KMS. Individual employee’s learning behaviour in different

occasions is very important for firms to understand and the

KMS may also has negative influence on individual’s learning

process. Similar problems also apply to group learning. As a

result, firms may not fully benefit the technological

advantages of KMS. In this case managers have to interpret

their strategic goals by using archaic approaches that have

already been used many years ago (Datri and Sacca, 2010).

Organizations should consider the level of accessibility so as

to improve targeting useful knowledge. Additionally, knowledge

should be represented efficiently to end users without any

invalid or unreliable parts. Knowledge should also be able to

rescale based on any provided settings and secured by reliable

technological systems (Vahdatikhaki, 2011). Furthermore, as

Mckeen et al (2009) argued that finance performance can be a

good indicator for the degree of success of KM in

corporations. The success of KM in practical projects of firms

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is not only about a well operating database and active

employees who prefer sharing their information. The practice

of KM has a direct and positive impact on the performance of

corporations and this further leads to a direct connection

with corporate finance performance. Therefore, a bad financial

performance of firms can be a warning for these firms to

consider the adjustment of their corporate KM strategies or

approaches.

Empirical Applications of KM for PBO

KM has important empirical applications that have close

relationship with KMS. KM was used only by a limited amount of

technological companies in the past but for the recent years

the use of KM has become quite popular among organizations

with various size and business fields, especially for those

PBOs that require intensive use of the internet (Gottschalk,

2005).

KM plays a significant role in PBOs, for example, in

construction or consulting firms. According to Davenport et al

(1998), the success of PBOs can be shown by the financial

return of a new plan or process that is used to solve problems

in firms. Therefore it mains a positive of return of corporate

investment in KM projects indicates a relative high

possibilities of KM success for firms. Additionally, Davenport

et al (1998) further argued that the development of knowledge

content as well as project survival are two other important

indicators of successful KM practice. A development in

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knowledge content indicates an improvement in process and

facilities and therefore a better approach of using further

knowledge can be available. Project survival refers to whether

a KM initiative can prevent corporate knowledge from drying up

or not. The effective use of KM in construction projects can

help industrial firms to organise their business activities.

KM has some advantages for construction firms since it can be

more effective than other corporate assets, such as materials

or capitals. Moreover, the use of KMS could benefit

construction projects and other industrial firms by sharing

previous knowledge or experiences so costs and producing time

is reduced and quality of projects is improved. (Ahmad et al.

2007).

Problems of using KM in the Construction Industry

Construction organizations face some important challenges and

potential problems when integrating KM into corporate projects

despite those advantages of using KM in the industry.

Construction firms also face the problem of implementing a

successful KMS into their corporate framework since it

requires a considerable change in corporate culture in all

managerial levels within the corporation (Aronson et al., 2000).

Useful knowledge may be wasted due to the complicate nature of

the construction industry so it could be difficult for firms

to carry out formal KM project plans. Construction industry

has the nature of unrepeated projects that challenges the KM.

Therefore, projects with solutions or practices may be

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mistaken by employees who have similar solutions in their

projects with different features or contents. In this case KMS

should be integrated to find the associated solutions to

specific problems instead of only provide general solutions to

all problems (Klicon, 1999). In general British construction

firms lack well planned and formal strategies for KM

initiatives and the majority of these firms need knowledge

managers or department to carry out their KM strategies,

especially for small companies (Al-Ghassani et al., 2005).

Moreover, UK construction firms lack formal project process,

for instance, similar projects are produced by a large number

of procedures, and this situation negatively influences the

implementation of KM.

Additionally, in construction industry employees are not

willing to share their own knowledge to others and it may be

hard to change this view of employees. The majority of

employees in the industry consider their own knowledge as

private property. For some large British construction firms it

could took many years for their employees to accept the idea

of sharing knowledge (Anumba et al., 2000). Davenport and

Prusak (1998) argued some main reasons for this situation.

There is limit trust among workers and managers and employees

do not fully aware the significance as well as future

advantages of KM to their firms. Additionally, workers do not

willing to accept new ideas and have low intolerance for

managerial mistakes. The process of knowledge sharing can also

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be negatively influenced by discrimination for employees who

from lower positions.

KM Strategies for Consulting firms

Consulting firms have different KM strategies due to different

nature and use of knowledge. As Hansen et al (1999) argued

that there are mainly two types of knowledge for consulting

firms: codified and personalized knowledge. The former type

include accounting consulting companies, such as Ernst &Young

while the latter type included those management consulting

firms, such as McKinsey &Company. Codified knowledge is reused

by firms to produce high standard and reliable information

framework. Firms that based on this type of knowledge

establish electronic systems for disseminates and stores

documents, and they also set up large scale of professional

team to provide consulting services in order to gain high

value of aggregate revenues. In this case IT plays a very

important role in terms of connecting individuals and recycled

codified information. Moreover, firms with codified knowledge

type focus on hiring young graduates who are good at reusing

information and problem solving. These new employees are

trained into groups or distance learning and they are rewarded

for any contributions to the corporate document system (Hansen

et al., 1999).

In contrast, personalized knowledge refers to the development

of individual employee’s skills and experiences so as to

provide high quality of analytically and strategic suggestions of 23

for clients’ problems. For those firms with the type of

personalized knowledge, service fees are high and they are

based on relevant solutions to specific problems.

Additionally, these firms prefer to establish professional

teams in small scale with the main aim to maintain high

margins of profits. These firms also use face to face approach

to network employees and clients and share tacit knowledge.

Therefore, in this case the investment of IT is not as much as

in those firms that based on codified knowledge. The reason

for this situation is that the main aim for personalized type

of consulting firms is to establish communications and

exchange tacit knowledge, which may be not as clear or

straightforward as explicit knowledge. Besides, personalized

type firms prefer to hire business graduate who are good at

dealing with tacit information and who have some years of

relevant work experiences. Training in this case is based on

individual mentoring and rewards for employees are based on

sharing knowledge directly to other employees (Hansen et al.,

1999).

KM in McKinsey &Company

McKinsey &Company is a famous multinational consulting firm

that established from the USA with services focus on solving

the problems of senior management levels. The company has

covered its service in both business and government

organizations. KM contribute the company solve consumers’

problems more effectively and every individual employee in the of 23

firm plays an important and specific role in developing and

practicing knowledge. McKinsey also developed some knowledge

centre in different countries. Researchers in those centres do

background study and data analysis and provide the results for

the firm’s worldwide consultants. Research topics cover from

financial issues, the management of supply chain, to overview

of specific industry. Additionally, McKinsey develop research

programmes that focus on the issue of globalization or

domestic economic growth for worldwide countries.

Technological softwares are also integrated into the analysis

of data intensive issues (Indu, 2007).

According to Indu (2007), the firm follows some certain steps

to apply KM. In the first step clients’ problem is defined,

any potential challenges are noticed and specific goal is

agreed on meetings that are held by client team. Then the

client team distribute the work task into specific pieces and

decide project plans to set hypotheses. Next the employees in

the target firm will be interviewed by the client team in

order to better understand the operating system of the target

firm. Data are also identified with the help of McKinsey’s

worldwide database network. The fourth step is the deep

analysis of selected data according to hypotheses. Possible

solutions and recommendations will be provided from the client

team based on the established trust relationship between

employees and the client team. Finally the client team will

also help the target firm to implement those solutions.

Although KM has contributed a lot for McKinsey’s success, the

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rapid increase in the total number of the company’s employee

and sub-offices around the world could have negative influence

on its corporate culture and its quality of KM. Moreover, the

majority of McKinsey’s assets are people and personal networks

despite the fact that the company sue IT systems and database.

Some researchers pointed out that McKinsey may face the

problem of retaining knowledge so the company should attempt

to storage knowledge by codification (Indu, 2007).

Conclusion

In conclusion, this essay has discussed the key issues in KM

in terms of three aspects: the basic concepts of knowledge and

KM, the relationship between KM and IT, and the empirical

application of KM in PBOs. The essay firstly focused on the

definition of knowledge as well as KM, four important

characteristics of KM that are strategies, culture,

organizational learning and technology support. Then the essay

discussed the basic process for KM that provided by Alavi

(2000) and the process includes the creation, the storage, the

distribution and empirical application of knowledge. Some

drawbacks of KM, the definitions of KMS, the role of IT in KM,

some potential challenges and problems of using KMS and IT are

also discussed. The empirical application part of the essay

focuses on the PBO especially in the construction industry and

consulting sector. Some challenges of using KM in the

construction industry and different KM strategies for

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consulting companies have been analysed. Finally, the essay

focuses on the case of McKinsey consulting company.

This essay has analysed and concluded some important

arguments. A large number of literatures have been provided

their own definitions about knowledge and KM. The concept of

Knowledge can be regarded as the learning process of master

new skills or understanding of new ideas. When referring to

corporate firms, knowledge is close related to business

practice and inventories. KM is used by firms to gain profits

based on the approach of sharing knowledge effectively. The

basic features of KM can help us to further understand the

concept of KM. The first feature, which is strategy, is mainly

based on the effective application of intellectual capital

within the firm, and the second characteristic, which is

culture, is mainly about workforce diversity that also related

to equal pay issues. The third feature organizational learning

refers to the exploitation and exploration of corporate

knowledge. The first step of KM process, which is the

knowledge creation theory, is closely associated with tacit

and explicit knowledge and knowledge storage is based on

organizational memory. The unsuccessful management of

corporate culture is the main reason for the fails of western

firms that use KM theories. The way that employees receive and

understand cultural values can be quite different between

firms in low and high context countries.

The concept ‘KMS’ can be defined in terms of technological

aspects or business strategies aspects. KMS can be a good

platform for firms to integrate human capitals, technological of 23

software and corporate resources in order to gain profits. IT

plays a significant role in KM since it relates to the search,

the presentation, the integration, the transform, the

communication and administration of knowledge. However, firms

should carefully identify the target users and specific aims

for using their KMS, and their employees’ learning behaviours.

Moreover, financial performance of the firm can be a good

indicator of the effectiveness of corporate KMS.

KM has some important empirical applications in PBOs, for

example, the construction and consulting sectors. Project

survival and the development in knowledge content are two main

indicators of the effectiveness of KM practices. The effective

integration of KM into construction projects can help firms to

reduce costs and production time and therefore improve project

quality. However, the construction firms also face the

problems of employees’ resistance to share knowledge with

other persons and firms should also pay much attention to the

project framework, design and process due to the unrepeatable

characteristic of projects in this industry. Consulting

companies apply different KM strategies that based on two main

different knowledge types: codified and personalized

knowledge. Specific strategies for these firms have close

relationship with filed include economic models of

corporations, IT systems and human resource management. Some

large consulting firms, such as McKinsey, have developed their

own worldwide knowledge centre for data researches. However,

McKinsey may face the potential challenge for retaining

knowledge. Therefore, a combined framework of codified

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knowledge and personal networks for the company seems to be

necessary.

Word Count --- 4336

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