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Icac 2009 1

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Knowledge Based Assets for Competitive Success By Dr. Daniel Chandran (session 2)

Knowledge Based Assets for Competitive Success By Dr. Daniel Chandran (session 2)

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  • Yahoo! Created in 1994 by Stanford Ph.D. Students David Filo and Jerry Yang (hobby). It became a global brand for people to communicate with each other, find and access info and make purchases. Today it offers a comprehensive branded network of servises to more than 245 million people worldwide and available in 13 languages. Jessup, L. IS Today,p.156. Larry Page and Sergey Bin – cofounders of Google. “ google” means search for information. Became popular in 1998. In 2004 it was listed in NASDAQ. Showed a revenue of $805.9million. Today Bin and Page worth appx. $12.8 billion each. Google – less time and more content
  • E.g. customer details in a credit card system, students details in UTS admin, spare parts in auto parts business Dat a : raw data is too voluminous Information : raw data is transformed into meaningful information; ie. data manipulated or summarised. Information becomes knowledge with questions like “what implications does this information have for my final decision?” Knowledge is understanding of information based on its perceived importance. It can lead to a competitive advantage in business Knowledge : key resource in determining competitive advantage and marketplace success in the knowledge-based society. Process data and produce information: US National Information System for Jobs linked to Social Security No. Bad data will lead to poor information in turn poor decision. Time spent in correcting data errors will be unproductive and costly and heavy losses for the company. A PROCESS is any manipulation of data usually with the goal of producing info. When 3 strings of data ‘250784”, ‘459807’, and ‘1957’ are associated, they could be used to give the information that a person whose identity no, is ‘1957’ possesses a driving license no. 4567890 born on 25 th of August 1985. The essential difference between data and info, is that Data are not interpreted, whereas Information has a meaning and use to a particular recipient in a particular context and can be used for decision making. Info comes from selecting data, summarizing, and presenting it in such a way that its useful to the recipient. Some call Information as ‘explicit knowledge’. Knowledge may also be seen as accumulated information. People with knowledge know the meaning and implications of the information presented and how to use it effectively. So, Knowledge contains the ability to use information effectively for particular purposes.
  • Siemens Industrial Services – p.60- Davenport:KM case book. 77 million Euros Textile Plant to be started in Tamilnadu and planning and construction given to Schmidt-Meyer GmbH, Frankfurt. Rajiv Krishnan of Siemens India wants to find out if Schmidt-Meyer GmbH would like to have a partner in India with a global presence who could supply electro technical equipment and related services like installation, commissioning and maintenance of the plant . He wants to find someone who is familiar with textile industry in Germany who knows this company in Frankfurt. He uses KNOW-HOW EXCHANGE . Finds 7 people who deal with textile industry and sends emails to find out if they had any contacts with Schmidt-Meyer GmbH. One person answers and contacts Schmidt-Meyer GmbH from Germany. And gets the contract which is 12% of the entire project. EK – refers to knowledge that has been expressed into words and numbers. Such knowledge can be shared formally and systematically in the form of data, specifications, manuals etc. Eg. Basic principles for Stock Market analysis contained in a book. Tacit Knowledge – jncludes insight, intuition and hunches. It is difficult to express and fomalise and therefore difficult to share. It is more likely to be personal and based on individual experience Chunks are group of ideas or details that are stored and recalled together as a unit. E.g. an auto mechanic can recall 140 steps to rebuild porsche transmission flawlessly. Why should we manage Knowledge? Computers on Board Apollo 11 State of the art in 1960’s 4KB of RAM No disk drive 74 KB of auxiliary memory Question: How did they manage the extraordinary quantities of knowledge to accomplish the task? 2. John Smith’s auto repair shop - John Smith owns an auto repair shop in Oklahoma. He used to repair foreign cars in the local Toyota Dealership. Later he started his own shop and was training his staff in fuel injection, computer controlled ignition and multi valve and turbo charge engines. He spent more time in training and correcting the work than working on cars himself. This had affected his quality of work. He has a knowledge problem. He need to capture it in a way that is is easy to disseminate to his mechanics. He must find a way to manage this knowledge to survive.
  • KM - Justification Is current knowledge going to be lost? Is proposed system needed in several locations? Are experts available/willing? Can experts articulate how problem will be solved? Is there a champion in the house?
  • From this definition, it is clear that KM is fundamentally about a systematic approach to managing intellectual assets and other information in a way that provides the company with a competitive advantage. KM is a business optimisation strategy, and not limited to a particular technology or source of information. What KM is about? Knowledge is about People and Activities, supporting their work and interactions Return on investment is from how the knowledge is used to implement and improve the business processes Deals with knowledge within the framework of an organisation as its focus Process of capturing and making use of a firm’s collective expertise anywhere in the business Doing the right thing, NOT doing things right Viewing company processes as knowledge processes KM strategy must align with the Business Strategy - Ref: Gartner Shift from ‘information’ to organisation’s ‘knowledge’ focusing on creating, gathering, organising and disseminating organisation's “knowledge” Use of modern information technologies (e.g. the Internet, Intranets, data warehouses, etc) to systematise, facilitate and expedite company-wide knowledge E.g. McDonald’s operating manual captures almost every aspect of restaurant management, including cooking,nutrition, hygiene, marketing, accounting etc. Knowledge creation, dissemination, upgrade,and application toward organizational survival
  • Why Knowledge Management? Creates exponential benefits from the knowledge as people learn from it Has a positive impact on business processes Enables the organisation to position itself for responding quickly to customers, creating new markets, developing new products and dominating emergent technologies Builds better sensitivity to “brain drain” React instantly to new business opportunities Ensures successful partnering and core competencies with suppliers, vendors, customers, and other constituents Shortens the learning curve, facilitates sharing of knowledge, and quickly enables less trained brokers to achieve higher performance levels “ knowledge to Do the job” “ knowledge to create value” “ innovation” “ Knowledge is power” “ knowledge worker” “ learning organization” “ knowledge economy”
  • Awad. Chap1. P.2- KM involves people, technology, and processes in overlapping parts. Using accessible K from within and outside sources Representing K in databases and documents Promoting K through the organisation’s culture and incentives Transferring and sharing K through the organisation
  • A knowledge organization derives knowledge from several sources: Customer K – their needs, who to contact, customer buying power etc Product K – who is buying them, prices, other similar products in market place Financial knowledge – capital resources, where to acquire capital and at what cost Indicators of knowledge : thinking actively and ahead, not passively and behind Using technology to facilitate knowledge sharing and innovation
  • It is an environment were customer service is improved through better problem-solving, where new products are available to the market more quickly , and where the organisational processes that deliver the new products continue to improve through innovation and creativity of the people behind the product and the production process. This is where the technology, networking and data communication infrastructure play an important role . Technology has made knowledge sharing and innovation more feasible. Creates exponential benefits from the knowledge as people learn from it Has a positive impact on business processes Enables the organisation to position itself for responding quickly to customers creating new markets developing new products dominating emergent technologies Builds better sensitivity to “brain drain” React instantly to new business opportunities Ensure successful partnering and core competencies with suppliers, vendors, customers, and other constituents Shorten the learning curve, facilitate sharing of knowledge, and quickly enable less trained brokers to achieve higher performance levels
  • KMS life cycle centers around three questions: What is the problem that warrants a solution by the KMS? - How important is the problem? What will the company and the users will gain from the system? What development strategy should be considered? Who is going to build the system? What processes will be used to build the system? E.g. of life cycle: College – Admission, education, graduation Air flight – Boarding, takeoff, cruising, landing, disembarking IS Development – Problem definition, analysis, design and implementation These 3 questions lead to other questions when knowledge developer get involved in the system development process. CAPTURING - This phase deals with knowledge capture and includes email, audio files, digital files and the like. Go to all the sources and never judge the usefulness of the captured knowledge until after it is subjected to testing. Organising -Captured data or info should be organised in a way that can be retrieved and used to generate useful knowledge. These are the methods used to organising. Speed, user-friendliness, efficiency of access and accuracy are important elements to consider throughout the organising phase. For refining Data Mining can be applied. Data Mining takes explicit knowledge found in databases and transforms it into tacit knowledge. Data Mining software is used to find patterns in data, predict behaviour and warn against future problems based on the data supplied in data warehouses. Transfer After refining, knowledge should be disseminated or transferred. This includes making knowledge available to employees via tutorials or guidelines for effective use. The key point is not to let stored or available knowledge sit idle in a repository like a database. It should be available to authorised users to contribute to the the corporate competitive advantage. Discovering K, Generating K, Evaluating K,Sharing and Leveraging K.
  • Kaplan, p.4. An organisation’s strategy describes how it tends to create value for its shareholders, customers and citizens. Without a comprehensive description of strategy, executives can’t easily communicate the strategy among themselves or to their employees. Balanced Scorecard is a Strategic Planning & Management System, used extensively in business and industry, govt., and non profit organisations to align business activities to the vision and strategy of the organisation; and monitor organisation performance against strategic goals. Originated by Robert Kaplan and David Norton, Harvard Business School. Thompson and Strickland. 2010.Crafting and executing strategy. Ed 17. McGraw-hill. P.6 The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing the business. The Company’s strategy is all about: How management intends to grow the business How it will build a loyal clientele How each functional piece of the business will be operated How performance will be boosted.
  • Fred R. David: Strategic Management concepts. 10 th ed. Prentice Hall, 2005. Mission Statement – “enduring statements of purpose that distinguish one business from other similar firms. A mission statement identifies the scope of a firm’s operations in product and market terms.” – Vision Statement – “What do we want to become?” – first step in strategic Planning. – “Our vision is to take care of your vision”. Mission and vision statements set the general goals and direction for the organisation. – Kaplan p.34-35
  • Investing in staff training. Training program in TQM or Customer relationship management? Dell and McDonald – companies following a low total cost strategy would get higher value in TQM training. IBM Consulting follows a total customer solution strategy would benefit from CRM Training. Human Capital: What competency (KNOWLEDGE) and motivational levers must we have to create value for customers? Skills, talent and know-how required Learning & Development Compensation / incentives Information Capital: How should the IT assets be organized to support the internal processes to create value for customer? Infrastructure support for cost efficiency & customer experience Applications for customer, operation and innovation management processes (CRM, SCM, KM) Organisation capital How should we work together to create value for customers? Culture – emphasize on knowledge sharing as a learning organization Leadership Alignment Teamwork
  • Operations Management Processes – are the basic, day-to-day processes by which companies produce their existing products and services and deliver them to customers. Manage Operations; Processes that produce & deliver products and services (cost efficiency / customer experience)  operational excellence Supply (acquire raw materials from suppliers); Production (convert raw materials to finished goods); Distribution to customers; Manage Risk Manage Customers Processes that enhance customer value  customer intimacy Selection – identify the target population Acquisition; Retention-retain customers Growth – manage the relationship effectively Innovation : Processes that create NEW products and services  product leadership Opportunity Identification for new products and services Manage R&D portfolio Design/develop new products and services Launch new products and services Regulatory : Processes that meet any mandatory regulatory requirements and improve communities and the environment Environment; Safety and health; Employment; Community
  • Growth targets – customer satisfaction leads to customer retention and, through word of mouth, the acquisition of new customers. Value Proposition – defines the company’s strategy for the customer by describing the unique mix of product, price, service, relationship and image that a company offers its targeted group of customers. The value proposition should communicate what the company expects to do for its customers BETTER or DIFFERENTLY than its competitors. e.g. Virgin Blue, Dell, Walmart, McDonald’s and Totota – successful for the best buy or lowest total cost in their categories – attractive prices, consistent quality, ease of purchase and good selection. Mercedes, Emirates emphasise product innovation and leadership – high prices, above the average in their categories, offer products with superior functionality. Customers are willing to pay more. Complete customer solutions – IBM providing customised products and services tailored to their needs – h/w, s/w, installation, training, education and consulting that tailored to each organisation’s needs.
  • Revenue growth by deepening relationships with existing customers. This helps to Sell more of their products and services. E.g. banks can talk to the customers when they go the teller to use their credit card and borrow to purchase a home or car. Companies can also generate revenue growth by selling entirely new products. E.g. Amazon.com; woolworth’s encourages its customers to use their petrol stations – 4cents off.
  • P.46-S. Debowski: KM. Strategic KM requires comprehensive planning. Planning should clarify the knowledge goals and establish effective values and processes to support those directions. Long and short term goals need to be clearly defined. Strategic KM requires progressive review and replanning to take into account the changing environment. 2.People – Recognising that strategic knowledge relies on people. Sharing culture which encourages knowledge diffusion can be developed through effective networks, Community of Practices (CoPs) and other social community strategies. 3. Alignment of strategy, Principles, Processes and practices needs to be carefully managed to ensure that KM principles do not fracture when implemented 5. Performance – requires regular evaluations to consider how well it is integrated into the business context. Expected outcomes and the indicators of successful knowledge performance need to be clearly expressed.
  • Key propositions KM initiatives have to be aligned with corporate goals Top management involvement and commitment are important Systematic collaboration of all employees involved in the transformation have to be supported Efficient and effective knowledge sharing and creation have to be practiced continuously to overcome barriers
  • Businesses confront new market realities daily. At the same time, there is inherent pressure to optimise the performance of operational processes in order to reduce costs and enhance quality. Businesses confront new market realities daily. There is pressure to reduce costs and enhance quality. Businesses to understand the customer and predict customer behaviour and offer the right product at the right time at the lowest price possible.
  • Transcript

    • 1. Knowledge based assets for competitive success Session 1
      • Dr. Daniel Chandran
      • Faculty of Engineering & Information Technology
      • University of Technology, Sydney
      • August 2009
    • 2. Objectives
      • What is Knowledge?
      • What is Knowledge Management?
      • Why Knowledge Management?
      • Why KM fails?
      • Business Strategy Map
      • KM Implementation Strategy
    • 3. Question - 1
      • If you were asked to detail your specialist knowledge, how would you describe your knowledge?
      • Have you ever thought of the market value of your knowledge and what this may be?
    • 4. Question - 2
      • Given that there is a competitive market for your knowledge and skills, how do you ensure that your knowledge is state-of-the-art and kept up to date?
    • 5.
      • Data are the raw material of which Systems are built - a number, a word, an image, a picture
      • Information is processed data (for a purpose) or value-added data
        • Aggregation of data that makes decision making easier
      • Knowledge is understanding what the information means or implies
        • Refers to information that enables action and decisions
        • (Info with direction)
        • Key resource in determining competitive advantage and marketplace success
      Data, Information and Knowledge - Distinction
    • 6.
      • Explicit Knowledge – Expressed into words and numbers
        • Can be shared formally and systematically.
        • Explicit knowledge is codified and digitized
          • Eg.manuals,drawings, video tapes…
      • Tacit Knowledge – includes insight, intuition and hunches
        • Difficult to express and formalize and difficult to share
        • Based on personal experience
        • Best communicated through dialogue and scenarios with use of
        • metaphors
        • Personal, hard to formalize and complex
        • Chunking knowledge – knowledge stored in an expert’s memory as chunks
      • Characteristics of Knowledge
        • Can be Born, Die, Owned and Stored
      Knowledge Types
    • 7. Explicit and Tacit knowledge Oral Communication “ Tacit” Knowledge 50-95% Information Request “ Explicit” Knowledge Explicit Knowledge Base 5 % Information Feedback
    • 8. Definition
      • From a practical business perspective:
      • “ KM is a deliberate, systematic business optimisation strategy that selects, distills, stores, organises, packages and communicates information essential to the business of a company in a manner that improves employee performance and corporate competitiveness”. Bergeron, B.2003
      • It is a systematic approach to managing intellectual assets for competitive advantage
    • 9. Knowledge Management: Benefits People more productive Quicker to prepare outcomes Better quality outcomes Reduced cost in producing outcomes Revenue People costs
    • 10. Overlapping factors of KM PEOPLE (Workforce) TECHNOLOGY (IT Infrastructure) ORGANIZATIONAL PROCESSES
    • 11. Knowledge Derivation
      • Customer Knowledge – their needs, who to contact, customer buying power, etc
      • Product Knowledge – products in the market place, who is buying them, what prices they are selling at etc
      • Financial knowledge – capital resources, where to acquire capital and at what cost
      • Personnel practices Knowledge – expertise available, the quality service they provide, how to go about finding experts etc
      • Indicators of Knowledge: thinking actively and ahead; not passively and behind
    • 12. THE KNOWLEDGE ORGANIZATION Knowledge Organization Collect Organize Refine Disseminate Culture Leadership Techno- logy Intelligence Maintain Competition Knowledge Management Process KM Drivers Create
    • 13. KNOWLEDGE MANAGEMENT & INNOVATION PEOPLE Knowledge Base Outside Environment Existing methods/ processes Learning New ideas Conversion Insights Knowledge Creation Organizational Benefits Codified Technology
      • New products
      • New markets
      • Smarter problem-solving
      • Value-added innovation
      • Better quality customer
      • service
      • More efficient processes
      • More experienced staff
    • 14. KM Life Cycle
      • Four-Process View of KM:
      • Capturing – data entry, scanning, voice input, interviewing, brainstorming
      • Organizing – cataloging, indexing, filtering, linking, codifying
      • Refining – Contextualising, collaborating , compacting, Projecting, mining
      • Transferring – flow, sharing, alert, push
    • 15. Business Strategy drives KM
      • Understand business strategy in order to develop KM strategy
      • Balanced Scorecard Strategy Map
        • To align business activities to the vision and strategy of the organisation
        • Monitor organisation performance against strategic goals
        • Originated by Kaplan and Norton, HBS
    • 16. Mission / Values/Vision/Strategy
      • Mission – why we exist?
        • Starting point by defining why the organisation exists
      • Values – what’s important to us?
        • Remains fairly stable over time
      • Vision – what we want to be (mid to long term)?
        • Organisation’s direction and sets the organisation in motion
      • Strategy – how do we get there?
        • Evolves over time to meet the changing conditions posed by the external environment and internal capabilities
        • Strategy maps and Balanced Scorecards can be developed for any strategic approach
    • 17. The Strategy Map Financial Perspective Customer Perspective Internal Process Perspective Learning & Growth Perspective “ If we succeed, how will we look to our shareholders?” “ To achieve our vision, how must we look to our customers?” “ To satisfy our customers, which processes must we excel at?” “ To achieve our vision, how must our organization learn and improve?” Creates Value for the Enterprise Knowledge Management
    • 18. Long-Term Shareholder value Financial Perspective Productivity Revenue Growth Customer Perspective Price Quality Time Function Partnership Brand Product/Service Attributes Relationship Image Internal Process Perspective Learning & Growth Perspective Manage Innovation Manage Operations Manage Customers Manage Regulatory & Social Processes Human Capital Information Capital Organisation Capital Business Strategy Map: cause and effect GAME PLAN Financial Outcomes Customer Outcomes Value-Creating Processes Intellectual Assets and Activities to create value
    • 19. Learning and Growth Perspective: Intangible Assets
      • Knowledge that exists in an organisation to create differential advantage or the capabilities of the company’s employees to satisfy customer needs.
      • Intangible Assets must be aligned with the strategy in order to create value.
        • E.g. TQM and CRM
      • Human capital
      • Information capital
      • Organisation capital
    • 20. Internal Process Perspective
      • Manage operations
      • Manage Customers
      • Manage Innovation
      • Manage regulatory & social Processes
    • 21. Customers Perspective
      • Target segments
        • How the organisation will create differentiated, sustainable value to targeted segments
      • Growth targets by segment (product mix & product performance required)
        • Customer Retention
        • Customer Acquisition
      • Revenues per customer (lifetime value/profitability) vs Cost per customer
      • Customer value proposition: Define the conditions to create value for the customers: cost leadership? product leadership? Customer intimacy?
        • Product/service attribute
          • Price, quality, availability, selection, functionality
        • Customer relationship / experience
          • Service, partnership
        • Image / brand strength
    • 22. Financial Perspective
      • Growth targets (overall & by customer, by product/service)
        • Selling more
        • Spending less
        • Revenue growth by deepening relationships with existing customers
          • Banks – Home loans
          • Introducing new products e.g. Woolworths - Petrol
      • Cost/productivity targets
        • Lowering direct and indirect expenses
          • Spending less on people, energy and supplies
          • Utilising their financial and physical assets more efficiently
      • To deliver the vision / outcomes desired
    • 23. 5 Ps of Strategic KM
      • Planning
        • Defined knowledge needs
        • Systems and processes
      • People
        • Participants commitment
        • Sharing culture
        • Leadership values
      • Processes
        • Alignment of strategy, Principles, Processes and practices
      • Products
        • Capture
        • Distribution
      • Performance
    • 24. KM Implementation Strategy
      • Why – Intent? (From Business Strategy)
        • E.g. Business ability to cross-sell product lines based on customer needs
      • Who – knowledge worker?
        • E.g. Financial Advisor, Senior Manager etc
      • What knowledge?
        • Customers
        • Products
        • Processes / systems
        • Business relationships
        • Competitors
        • Partners / suppliers
        • Regulations
      • How – Infrastructure?
        • Formalized knowledge process (create, store, distribute, collaborate, protect)
        • System Assets (Customer, Product Databases)
        • Training & informal best-practice knowledge sharing
        • Certification institutions
    • 25. Successful Knowledge Management…when
      • Strategy aligned with the Business Strategy
      • Supported people in their work and activities to create value
      • Inculcated as a business discipline (corporate culture) supporting critical business processes
      • Used to improve the business processes
      • Measured against the strategic objectives
    • 26. Conclusion - Business Challenges
      • Optimize the performance of operational processes to reduce costs and enhance quality
      • Commercialize the products at the lowest price possible
    • 27. References
      • Awad, E.M. and Ghaziri, H.M. (2004). Knowledge Management. Pearson.
      • Becerra-Fernandez, I, Gonzales,A and Sabherwal, R. (2004). Knowledge Management: Challenges, solutions and technologies. Pearson.
      • Davenport, T.H. and Probst, G.J.B.(2002). Knowledge Management Casebook. John Wiley.
      • Debowski, S.(2006). Knowledge Management. Wiley.
      • Kaplan, R.S. and Norton, D.P. (2004). Strategy Maps: Converting intangible assets into tangible outcomes. Harvard Business School Press.
      • Nonaka, I. And Takeuchi, H(1995). The Knowledge Creating Company. OUP.
      • Thompson and Strickland. 2010. Crafting and executing strategy.
      • McGraw-Hill.
    • 28. Knowledge Exercise
      • 5 groups to present on the following scenario:
        • “ Suppose you were asked to do a 15-minute presentation before the managers of a small retailer about the pros and cons of KM. What would you say? Outline the content of your talk.”

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