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Knowledge Strategies

Strategy is the mind of an organization; without it, the organization's actions will lack direction, consistency, and hence impact. It is highly probable that leadership's failure to adopt knowledge strategies suited to their business needs is the cause of the setback of many KM initiatives. Spo­radic writings in the literature address the issue of knowledge strategies in the knowledge econ­omy. Most KM literature focuses on building a knowledge base and remodeling the IT architecture after stressing the need for leadership's commitment. Without a knowledge strategy, leadership runs the risk of reducing the KM initiative to another IT program, maybe this time with a stronger human flavor. Before moving any further, leadership needs to choose the suitable knowledge strategies for their respective industry. Deciding on the knowledge strategy is the most important step of KM as it guides leadership's decision making as to how to acquire the knowledge resources required to attain a certain competitive position. In this respect, the knowledge strategy is part of the competitive strategy as it relates to the acquisition of the knowledge resources necessary to support the organization's mission, future product, and market positions. This part of the knowl­edge strategy (i.e., relating to competitive performance) should be aligned with the innovation and IP strategies, as together they form the organization's intellectual capital (IC) strategies.

Knowledge strategies play an additional role in the management of the organization by defin­ing how KM will be used to sustain the organization's competitive performance by creating new knowledge. This is because the knowledge strategy shapes the design of the knowledge base and the IT infrastructure in a way that supports business processes. Major costs are involved in build­ing a knowledge base and an IT infrastructure. To embark on implementing a KM program, therefore, without first determining the appropriate knowledge strategy may jeopardize the suc­cess of the whole program.

A number of generic knowledge strategies are outlined here to guide the KM initiative. Joseph Daniele, Xerox's Corporate Manager of Intellectual Property,17 mentions two knowledge strate­gies. He explains that a company can choose between a follower or acquisition strategy to fill gaps in its knowledge resources, identified by reference to a particular competitive position. Xerox started by listing its core competencies in 28 knowledge areas and assessing the strength of these competencies, whether comprised of "general" (organizational or explicit) or "specific" (individual/tacit) knowledge,18 by reference to desired competitive positions. To fill the identified gaps, Daniele explains, Xerox had to choose between the two strategies.

The acquisition strategy entails acquiring state-of-art general knowledge in a certain area, which, though costly, is available from public and private sources. The fact that the acquired gen­eral knowledge does not compensate for the lack of specific knowledge makes the case for a fol­lower strategy stronger as it enables the internal development of the required competencies. The follower strategy, adopted by the Japanese in the 1970s to compete with U.S. companies, entails reverse engineering of the products of the competition for insight. The follower strategy, Daniele explains, though not very effective in bridging specific knowledge gaps, will reduce the cost of entry to a certain field of knowledge, and provide the organization with the minimum knowledge required.

It cannot be an overstatement to say that the knowledge strategy would affect the overall com­petitive strategy and strategic decisions of an organization. The acquisition strategy, for example, may direct the organization to seek a strategic alliance or a merger to get both the tacit and explicit knowledge resources required from the market. No doubt this has been to a great extent fueling the merger mania of the knowledge economy. At the same time, the organization would need to invest in training, mentoring, and maybe retaining experts to convert as much of the acquired explicit knowledge resources as possible into tacit knowledge, and vice versa. However, adopting a follower strategy will direct an organization to augment the competitive intelligence function and place more emphasis on internal learning and experimentation, as well as develop its reverse engineering capability.

When it comes to knowledge strategies for defining how internal knowledge will be created and leveraged, rather than acquired, four generic strategies are identified: personalization, codi­fication, best practices-oriented, and communities of practice (CoPs)-oriented knowledge strate­gies. The personalization and codification strategies were identified by Hansen et al.19 Though the authors studied and reported on the use of these strategies in service industries, they are rele­vant to all industries. The personalization strategy entails reliance on individual experts and their tacit knowledge where a high level of creativity is needed to address unique problems. The great need for tacit knowledge entails the development of individual expertise and the implementation of systems to connect experts.20 The authors note this strategy is highly desirable for service com­panies that offer customized, highly specialized, and high-priced services like McKinsey in the consulting industry and Memorial Sloan-Kettering Cancer Center in the health care industry.

The codification strategy is adopted by organizations in the same industries that provide solu­tions to common problems, which recur with considerably limited variations. As a result, the cod­ification of past experiences (explicit knowledge) to create a knowledge base of common problems and solutions is very useful. In this case, the authors found the services offered to be moderately priced, requiring a moderate level of creativity. Examples of this are the big account­ing firms' consulting services like PricewaterhouseCoopers and KPMG, and Access Health, a call-in medical center. Adopting either of these strategies affects the design of the knowledge base, the IT system, and the recruitment policy in different ways.21 While the personalization strategy stresses the need for a KM system with a focus on connecting individual experts, the codification strategy focuses on building comprehensive databases dealing with the various but identifiable client needs. The authors explain that though businesses usually use both strategies for different purposes, they should adopt one as the predominant strategy (80 percent to 20 per­cent) for their KM program.

The best practices knowledge strategy entails capitalizing on what the organization knows but does not know that it knows—the knowledge that the best performing divisions have of a certain business practice. A best practice is one that "has been shown to produce superior results, selected by a systematic process and judged as exemplary, good or successfully demonstrated."22 The concept of best practice is based on the value of experience gained from repeating a certain activity a great number of times. Repetition means long use and experimentation that with time may result in the perfection of a certain practice. This strategy may entail benchmarking an orga­nization's best practices with those of the competition, or leaders in other industries. The choice of the benchmarked competitor will depend on the competitive position that an organization aspires to attain. Transferring such best practices perfected in one division to other divisions and business units results in renewing and leveraging the organization's knowledge resources in a cer­tain area.

Nothing explains the best practice strategy like British Petroleum CEO John Brown's state­ment: "As a big company we have more experiences than smaller companies ... So the ques­tion is what do we do with that experience? How do we find it? How do we interpret it? How do we apply it?"23 The gist of this strategy is to leverage existing knowledge and experience by identifying the best practices that develop over time, and disseminating them for use. The suc­cess of this strategy inspired and shaped the KM initiatives of many organizations. Chevron, for example, built its knowledge base around this strategy. Chevron started with mapping and storing best practices organization-wide in the knowledge base to make them easily accessible by all departments. Chevron identified different levels of best practices, including industry and local best practices. A few years later, Chevron estimates this effort saved them $130 million annually, and reduced operating expenses by $1.6 billion in 1992 alone.24

Many organizations combine a best practice and a CoPs strategy wherein communities of practice are formed for the main purpose of identifying and disseminating best practices across the organization. Ford adopted both strategies for their KM program by creating the BPR pro­gram in which the proven valued practices, called gems, are captured, verified, replicated, and monitored. A CoP is responsible for each of the practices, with 1,800 CoPs representing between 60 to 70 percent of Ford's 350,000 employees, replicating more than 2,800 best practices, result­ing in $866 million of actual value added to the company in 2001.25 The BPR was first introduced in 1995 with a pilot to replicate the best practices of four plants. Upon success, the program was launched across Vehicle Operations in the 53 plants in less than a year. In 1999, Ford adapted the same model and applied it to Health and Safety concerns, to environmental application in 2000, and six sigma project replication in 2001. Again, Ford's knowledge base was designed around this strategy, installing an intranet and content management application system for sharing, repli­cating and leveraging proven best practices among multiple units across the world.

Other organizations use a predominantly CoP strategy by allowing the free formation of CoPs by employees in strategic areas of knowledge, provided the CoP's value proposition is aligned with business needs. An example is Siemens, where any employee may suggest the formation of a CoP. Once the value proposition of the CoP is approved, the CoP members are taken through the formation steps and provided with requisite support. Siemens uses the CoP strategy to enable the transfer of knowledge among its 100,000 employees worldwide. Another is Shell Interna­tional, which started with small communities of 20 to 200 members, growing to over a hundred CoPs in 1998. The communities evolved and consolidated into three global communities with thousands of members each addressing a common problem. Shell estimates that through ques­tions and answers on the three technical global communities it saved $35 million in 1999 and contributed $200 million in value in 2000.2S The CoP strategy shapes the design of the knowledge base into a centrally managed intranet with decentralized content centers managed by CoPs, where CoPs create new content and monitor content as subject matter experts. Under this strat­egy a strong expert directory is required to facilitate building more CoPs of people who have common knowledge needs.

The role of knowledge strategies in the organizational strategic planning phase is what prompted some organizations to appoint a chief knowledge officer (CKO). The CKO's role is dis­tinct form that of the CIO in that the former is concerned with capturing and leveraging knowl­edge resources dispersed in various divisions, and orchestrating its use through the use of IT and other tools. Despite some overlaps, the CKO's role would also involve identifying the areas where change needs to be effected and facilitating that change, hence, the CKO's role involves change management and organizational development. In contrast, some organizations created the position of chief learning officer (CLO). The CLO's responsibilities are similar to those of the CKO with more direct focus on the development of human resources through training and men­toring. At Coca-Cola, for example, the CLO job is described as "creating and supporting an envi­ronment in which learning and applying what you learn is a daily priority."27

The CK/LOs have the unenviable responsibility of deciding on the appropriate knowledge strategies and leading the implementation of practices and systems that are apt to operationalize them. The challenges that the CKO faces stem from having to decide on the combination of knowledge strategies, rather than choosing between strategy A or B, that are best suited to address the organization's needs to leverage existing knowledge and create new knowledge, as evident from the examples of Ford and Siemens. The CKO needs to explore the generic knowl­edge strategies and how to combine them in a way that responds to the organization's KM needs and line of business. Regardless of the strategies adopted, certain changes to the structure, cul­ture, and IT and knowledge base architecture need to be implemented at the operational level, to which we now turn.

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