Knowledge Management

CT024-3-M

Knowledge Strategy 1

Dr Alan Eardley
Staffordshire University
Based on the work
of Prof. Michael Zack
Northeastern University College
 Learning Outcome

• Explain strategy linking to KM

• Analyse Strategic Linking Models
• Discuss Zack’s Knowledge Strategy
Framework

Knowledge Management Introduction

 KM Research Seems to
Indicate…
• Important resource in many business organisations
• Organisational learning is the most strategically important
capability for many business organisations
• Many initiatives to develop and exploit organisational
knowledge are not explicitly linked to the organisation’s
business strategy
• Most knowledge management initiatives are viewed
primarily as ‘information systems projects’
• While many managers believe that strategic advantage
can come from knowing more than competitors, they
cannot articulate the link between knowledge and
business strategy.

Knowledge Management Introduction

 Intellectual Capital

• For years many organisations have initiated a range of

knowledge management projects & programmes
• For some, focus has been on developing new IT
applications to support handling of the organisation's
explicit (i.e. documented) knowledge
• Others believe the most valuable knowledge is the tacit
knowledge that exists within peoples' minds, handled via
interpersonal interaction and social relationships
• These are experimenting with new organisational cultures
and personal interactions – social factors
• Many are experimenting with new organisational cultures,
forms and reward systems to enhance those social
relationships

Knowledge Management Introduction

 IT is not the whole answer…

• Properly aligned and integrated technical and

organisational initiatives can provide an infrastructure to
support KM processes
• But, while an appropriate IT infrastructure can enhance
an organisation's ability to create and exploit knowledge,
it does not ensure:
– that the organisation is making the best of its resources
– that it is managing the right knowledge in the right way
• How should an organisation determine:
– which efforts are appropriate?
– which knowledge should be managed and developed?

Knowledge Management Introduction

 Linking KM and Strategy

• The most important context for guiding a KM

initiative is the corporate strategy
• The organisation’s strategic context helps it to
identify KM initiatives that:
– support its purpose or mission
– strengthen its competitive position
– create shareholder value
• The link between KM and business strategy,
while often talked about, has been widely
ignored in practice…

Knowledge Management Introduction

 Lack of Strategic Linking
Models
• Many executives struggle to articulate the relationship
between their organisation's intellectual resources and
capabilities, and its competitive strategy
• They do not have well-developed strategic models that
help them to link knowledge-oriented processes,
technologies and organisational forms to business
strategy
• They are unsure of how to translate the goal of making
their organisations more ‘intelligent’ into a strategic
course of action.
• They need a practical yet theoretically sound model of
knowledge strategy – suggested by Michael Zack

Knowledge Management Introduction

 The Companies in Zack’s Study

• Image Corp. was a leading US photographic imaging firm,

manufacturing products such as film and photo processing
equipment (i.e. ‘physical products requiring assembly)
• Buckman Labs was a large manufacturer of specialised chemicals,
(i.e. ‘physical products’’ but not ‘assembled’)
• Lincoln Re was one of the world's largest life/health re-insurers, and
provided knowledge-based products and services (i.e. not physical)
• LeaseCo was an industrial clothing and equipment leasing firm,
providing a service based on physical products
• Big6 was a large public accounting and professional services firm,
providing knowledge-based services.

Together, Zack says these companies demonstrate the importance

of knowledge strategy regardless of industrial sector

Knowledge Management Introduction

 Zack’s Knowledge Strategy
Framework

The framework is
illustrated using
examples from
five companies
representing the
spectrum of
physical and
knowledge-based
products and
services

Knowledge Management Introduction

 Zack’s View of Strategy

• Links the (traditional?) resource-based view of

strategy with a (more up to date?) knowledge-
based view
• Presents a framework to help managers relate
their knowledge and learning requirements
business to their strategy
• Raises important implications for companies
competing with knowledge
• Based on SWOT and 5-forces analysis

Knowledge Management Introduction

 SWOT Analysis

• An acronym for Strengths, Weaknesses,

Opportunities and Threats
• A framework for reviewing the strategy, position
and direction of a company or business system
• A subjective assessment of data which is
organised in a logical order that helps
understanding, presentation and discussion

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 SWOT Analysis Grid

Present

Future

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 SWOT Functioning

SWOT analysis works like this:

Strengths Opportunities
Use the Strengths       Exploit the Opportunities
   
Weaknesses Threats
Stop the Weaknesses Defend against the Threats

• Emphasise the Strengths and Opportunities. 

• Focus on the Strengths that differentiate company from
competitors
• Analyse the Weaknesses & Threats that might occur

Knowledge Management Introduction

 Strength and Weakness Factors

May be present or absent in varying degrees, e.g.:

• Resources: financial, intellectual, location
• Cost advantages from proprietary know-how
and/or location factors
• Creativity (e.g. ability to develop new products)
• Valuable intangible assets: intellectual capital
• Competitive capabilities giving advantage
• Effective recruitment of talented individuals

Knowledge Management Introduction

 Opportunity and Threat Factors

May be present or absent in varying degrees, e.g.:

• Expansion or down-sizing of competitors
• Activities (or inactivities) of competitors
• Market and product trends
• Economic conditions in the market
• Technology developments
• Changes in market size and/or conditions
• All other environmental conditions
• National and global influences

Knowledge Management Introduction

 Porter’s ‘5 forces’ of Competition
Model

Updates Porter’s Examines the

Substitute products/services
1985 work to effect of e-
include e- commerce on
commerce competition

Bargaining power of Rivalry among Bargaining power of

suppliers & markets existing competitors channels & end users

Porter M (2001)
Strategy and the Internet
Barriers to entry Harvard Business
Review. March.

Knowledge Management Introduction

 Porter’s ‘5 forces’ of Competition
Model

• Model focuses on the external side of strategy,

helping firms to analyze the forces in an industry
which give rise to opportunities and threats
• Industries that enable firms to dictate terms to
suppliers and customers, and to provide barriers
to new entrants and substitute products are seen
as favourable
• Strategy becomes a matter of choosing an
appropriate industry and positioning the firm
within that industry according to a generic
strategy - low cost or product differentiation.

Knowledge Management Introduction

 Porter's Model has come under
criticism

• The model addresses the profitability of industries

rather than individual firms - it does not help to identify
and exploit unique and sustainable advantages
• Its underlying economic theory assumes that the
characteristics (including resources and knowledge) of
particular firms do not matter with regard to performance
• It is the overall pattern of relationships among firms in the
industry (i.e. ‘the market’) that makes the difference
• If the industry as a whole has sufficient ‘barriers to entry’
and impediments to competition, then all firms should
prosper.

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 Resources and Capabilities
Approach

• Suggests that firms should position themselves

strategically based on their unique resources and
capabilities rather than their products and
services
• Resources and capabilities can be thought of as
a platform from which the firm produces products
for various markets
• Deploying resources and capabilities across
many markets and products, rather than
targeting specific products for specific markets,
becomes the strategic driver

Knowledge Management Introduction

 Resources and Capabilities
Approach

• While products and markets may come and go,

resources and capabilities are more enduring - a
resource-based strategy provides a more long-
term view than the traditional approach
• Competitive advantage based on resources and
capabilities therefore is potentially more
sustainable than that based solely on product
and market positioning

Knowledge Management Introduction

 The Advantage of Knowledge

• By having superior intellectual resources, an organisation

can understand how to exploit and develop its resources
better than its competitors, even if some or all of those
resources are not unique.
• Knowledge can be considered the most important
strategic resource, and the ability to acquire, integrate,
store, share and apply it the most important capability for
building and sustaining competitive advantage
• KM can therefore enhance the organisation’s
fundamental ability to compete – it tends to be unique
and difficult to imitate

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 Why ‘Knowledge is Power’…

• Unlike many traditional resources, it is not easily

purchased in a ready-to-use form
• To acquire similar knowledge, competitors have
to engage in similar experiences
• Acquiring equivalent knowledge through similar
experience takes time
• Competitors are limited in how they can speed
up their knowledge through greater investment –
unless they can recruit the firm’s staff…

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 Reading

• Zack M.H. (1999) Developing a Knowledge Strategy.

California Management Review, Vol. 41, No. 3, Spring,
Pp. 125-145.
• Nonaka, I. (1994) A Dynamic Theory of Organizational
Knowledge Creation. Organization Science, Vol. 5, No. 1,
Pp.14-37.

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 The Cases in Zack’s study

• The Cases in Zack’s study will be the subject of

the next KM tutorial

Knowledge Management Introduction