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KNOWLEDGE
MANAGEMENT
(KM)
Three Schools of Thoughts!
1.The Economic School
2.The Organizational
School
3.The Strategic School
Approaches to KM
1.The Economic School
First Economic Wave:
From 8000 BC to 1800
AD …. Agri Economy
driven by physical
(muscle) power (Labor)
Approaches to KM
1.The Economic School
Second Economic Wave:
upto 2000 AD …
Industrial Economy
driven by Machine Power
and Collar workers
Approaches to KM
1.The Economic School
Third Economic Wave:
21st century Knowing
Economy driven by
ICT and Knowledge
Workers.
Approaches to KM
1.The Economic School
K as a Factor of Production!
Traditional : Land, Labor ,Capital.
Strategic Factor of Production:
Is K a Public Good or Private Good?
How to convert Private Good into
Public Good?
Approaches to KM
1.The Economic School
Three decades ago, market-to
book value ratio in most
companies was close to ONE.
Today this ratio has grown to
FOUR on average.
Approaches to KM
1.The Economic School
If today Microsoft is worth 200
billion dollars and its book value in
1997 was 10 billions, then its IC is
190 billion dollars.
Market-to-Book value ratio is 20
and this ratio is caused by IC.
Approaches to KM
Is Microsoft Worth
5 Multinationals?
$185 billion will buy Microsoft or five large
companies combined:
Boeing, McDonalds
“Either the former is overpriced or the latter
under priced?”
Business Week (28 July 1997).
Widening Gap
0
2
4
6
8
10
12
14
1960 1970 1980 1990 2000
K-based firms
Average
Market/Book
Value Ratio
A Typical Example
0
10
20
30
40
50
60
Glaxo Wellcome Assets
£bn
Physical
Goodwill
Market Value
Drugs in Development,
Patents, and other
Intellectual property
etc. etc.
Seven K. Levers
• Customer Knowledge - the Most Vital K.
• Knowledge in Products - ‘Smarts’ Add Value
• Knowledge in People - But People Walk Away
• Knowledge in Processes - Know-How
Organizational Memory - Do We Know What We
Know and What We ought to Know?
• Knowledge in Relationships - Richness
and Depth
• Knowledge Assets - Intellectual Capital
Value Chain
- a linked set of Value Creating Activities
- from Raw Material to end use Product
Procurement R&D Manufacturing Marketing Distribution Service Customer
Value
Chain
Customer
Basis
Vertical Integration
- The process that
links the aquisition
of raw material to
the sale of the
finished product
-examples:
-Oil companies
-Fast-food
cartons
Natural Gas
Ethane
Styrene
Polystyrene
Cartons
Fast-Food Restaurants
Final Customer
Change, Knowledge,
and Value in Process.
PX Y
Input Output
ISO-9000 (2000) defines
Product / Service
As
An Output of
a set of Activities
or a Process.
Axiom 1 = Product/Service is
an outcome of a
process.
Axiom 2 = Activities are the
basic components
of processes and
transform inputs
into output.
Axiom 3 = Carrying out an
activity will always
involve its management.
Axiom 4 = Activities are the
driving force of
performance and GIRO is the
driving force for an Activity.
Activity
G
O
R
I
K. Input = K. present prior to activity
K. Output = K. present in output as a result of activity
K. Goal = K. which directs and constrains the activity
K. Resource = K. which acts on the Input to produce the
Output
Fundamental Assumptions of KVA
Underlying Model: Change, Knowledge, and
Value are Proportionate
PX Y
Input Output
P(X) = Y
Fundamental assumptions:
1. If X = Y, NO value has been added.
2. “Value” is proportional to “ Change”
3. “Change” can be measured by the Amount of
Knowledge required to make the change.
So “Value” is proportional to “Change” which is
proportional to “ the Amount of Knowledge required to
make the change”
Two Approaches to KVA
Step
s
Learning Time Process Description
1. Identify core process and its sub processes.
2. Establish common units to measure
learning time
Describe the products in terms of the
instructions required to reproduce them
and select unit of process description.
3. Calculate learning time to execute
each sub process.
Calculate number of process instructions
pertaining to each sub process.
4. Designate sampling time period long enough to capture a representative
sample of the core process’s final product/service output
5. Multiply the learning time for each
sub process by the number of times
the sub process executes during
sample period
Multiply the number of process
instructions used to describe each sub
process by the number of times the sub
process executes during sample period
6. Allocate revenue to sub processes in proportion to the quantities generated by
step 5 and calculate costs for each sub process.
7. Calculate ROK, and interpret the results

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Final p pt km 16

  • 2. Three Schools of Thoughts! 1.The Economic School 2.The Organizational School 3.The Strategic School Approaches to KM
  • 3. 1.The Economic School First Economic Wave: From 8000 BC to 1800 AD …. Agri Economy driven by physical (muscle) power (Labor) Approaches to KM
  • 4. 1.The Economic School Second Economic Wave: upto 2000 AD … Industrial Economy driven by Machine Power and Collar workers Approaches to KM
  • 5. 1.The Economic School Third Economic Wave: 21st century Knowing Economy driven by ICT and Knowledge Workers. Approaches to KM
  • 6. 1.The Economic School K as a Factor of Production! Traditional : Land, Labor ,Capital. Strategic Factor of Production: Is K a Public Good or Private Good? How to convert Private Good into Public Good? Approaches to KM
  • 7. 1.The Economic School Three decades ago, market-to book value ratio in most companies was close to ONE. Today this ratio has grown to FOUR on average. Approaches to KM
  • 8. 1.The Economic School If today Microsoft is worth 200 billion dollars and its book value in 1997 was 10 billions, then its IC is 190 billion dollars. Market-to-Book value ratio is 20 and this ratio is caused by IC. Approaches to KM
  • 9. Is Microsoft Worth 5 Multinationals? $185 billion will buy Microsoft or five large companies combined: Boeing, McDonalds “Either the former is overpriced or the latter under priced?” Business Week (28 July 1997).
  • 10. Widening Gap 0 2 4 6 8 10 12 14 1960 1970 1980 1990 2000 K-based firms Average Market/Book Value Ratio
  • 11. A Typical Example 0 10 20 30 40 50 60 Glaxo Wellcome Assets £bn Physical Goodwill Market Value Drugs in Development, Patents, and other Intellectual property etc. etc.
  • 12. Seven K. Levers • Customer Knowledge - the Most Vital K. • Knowledge in Products - ‘Smarts’ Add Value • Knowledge in People - But People Walk Away • Knowledge in Processes - Know-How Organizational Memory - Do We Know What We Know and What We ought to Know? • Knowledge in Relationships - Richness and Depth • Knowledge Assets - Intellectual Capital
  • 13. Value Chain - a linked set of Value Creating Activities - from Raw Material to end use Product Procurement R&D Manufacturing Marketing Distribution Service Customer Value Chain Customer Basis
  • 14. Vertical Integration - The process that links the aquisition of raw material to the sale of the finished product -examples: -Oil companies -Fast-food cartons Natural Gas Ethane Styrene Polystyrene Cartons Fast-Food Restaurants Final Customer
  • 15. Change, Knowledge, and Value in Process. PX Y Input Output
  • 16. ISO-9000 (2000) defines Product / Service As An Output of a set of Activities or a Process.
  • 17. Axiom 1 = Product/Service is an outcome of a process. Axiom 2 = Activities are the basic components of processes and transform inputs into output.
  • 18. Axiom 3 = Carrying out an activity will always involve its management. Axiom 4 = Activities are the driving force of performance and GIRO is the driving force for an Activity.
  • 19. Activity G O R I K. Input = K. present prior to activity K. Output = K. present in output as a result of activity K. Goal = K. which directs and constrains the activity K. Resource = K. which acts on the Input to produce the Output
  • 20. Fundamental Assumptions of KVA Underlying Model: Change, Knowledge, and Value are Proportionate PX Y Input Output P(X) = Y Fundamental assumptions: 1. If X = Y, NO value has been added. 2. “Value” is proportional to “ Change” 3. “Change” can be measured by the Amount of Knowledge required to make the change. So “Value” is proportional to “Change” which is proportional to “ the Amount of Knowledge required to make the change”
  • 21. Two Approaches to KVA Step s Learning Time Process Description 1. Identify core process and its sub processes. 2. Establish common units to measure learning time Describe the products in terms of the instructions required to reproduce them and select unit of process description. 3. Calculate learning time to execute each sub process. Calculate number of process instructions pertaining to each sub process. 4. Designate sampling time period long enough to capture a representative sample of the core process’s final product/service output 5. Multiply the learning time for each sub process by the number of times the sub process executes during sample period Multiply the number of process instructions used to describe each sub process by the number of times the sub process executes during sample period 6. Allocate revenue to sub processes in proportion to the quantities generated by step 5 and calculate costs for each sub process. 7. Calculate ROK, and interpret the results