According to Webb (1998), KM is the process of identification, optimization and active management of intellectual assets to create value, increase productivity and gain and sustain competitive advantage.
Meanwhile, Murray (1998) said KM Is a strategy that turns an organization’s intellectual assets and the talents of its members to produce ewe productivity, value and increase competitiveness. Therefore, we can conclude that KM Is a discipline, designed to provide strategy, process, and technology to increase organizational learning. A part from that, strategy is the major plan to be undertaken and allocating resources to organization (Cannon, 1968).
Asker (1984) also suggested that, organization needs to assign people or a group of people to seize the responsibility for analyzing new issues, such as KM and developing responsive strategies. This is due to the fact that KM is gradually turning into a major resource center for the organizations. The basic factors provide the changes for competition advantages of the organization whereby more knowledge are shaping. The research focus is shifting towards the managing KM through strategic management process. Knowledge Is crucial.
Meanwhile David (2005) defined strategic management in a broader perspective whereby it includes the process of formulation, implementation and controlling. Figure 1 indicates the strategic management
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The process of developing effective and efficient KM strategy starts with the formulation stage, implementation stage and finally controlling. The framework to develop strategic-management process is dynamic and continuous. Any changes in management model can necessitate a change in any or all of the other components related. In addition, if an organization is able to link the overall strategic management process, the organization will be able to manage the knowledge well thus has the potential to create important values.
Figure 2: The Strategic Management Process Source: Carpenter & Sanders (2007) The formulation stages begin with the establishing of the vision and mission. Clear vision and mission leads people in the organization to the same direction. Most organizations have now adopted vision statements to communicate as the fundamental values and beliefs to all employees. Usually a vision is a statement which addresses core beliefs and identifies target markets and core products. The vision statements are designed to be inspirational and provide energy throughout the whole organization.
Developing the vision statement is often considered as the knowledge assets and competitive advantage. It is not obvious how it is translated into the strategic requirements connecting the conceptual “mission” of knowledge management with the processes that serve it. KM is generally formed by the systematic process for creating, acquiring, disseminating, leveraging and using knowledge for the competitive advantage and to achieve organizational objectives. Integration between internal and external resources require organization to match internal strengths, and weaknesses and external opportunities and threats.
It is important for the organization to undertake KM initiative by evaluating the environment in order to understand what knowledge should be managed and the performance. Organization that is capable to manage knowledge successfully will also be able to reflect the internal and external competitive strategy. From the formulation strategy process, the organization can manage their knowledge as well as solve the problem of KM effectively. Figure 3: Model for Strategic Formulation Source: Caymans (2004) According to Caymans (2004) in the sass’s and sass’s, strategy formulation is based on master budget and long-range planning methodologies.
According to Carpenter & Sanders (2007), strategy formulation is a process of deciding what to do. Strategy formulation is a formulation and implementation is shown in Figure 4. Figure 4: Formulation and Implementation Strategic Formulation Strategy Implementation A strategy is only as good as its implementation. However, the processes are not as simple as planned. The challenge is that the organizations have to face the barriers to stimulate employees throughout an organization to work with pride and enthusiasm towards achieving stated objectives.
There are companies that apply knowledge management into their corporate strategy, business practice, organizational culture and human resources practice. They are using knowledge management because they know that knowledge management have given them benefits and maintained competitive advantages. Implementation level is related to the structure in the organization. Each functions and divisions need to resolve the management issues such as the policies, annual objectives, allocating of resources, culture, human resource, and rewards.
Numerous approaches have been developed which then claimed that they have become a guide for the organizations to employ and implement knowledge competencies or shared memory in a more effective and efficient way. An enormous number of KM instruments in organizations is the information and communication technological (ACT) instruments. Technology is very important in KM to be implemented successfully. Several factors to have identified as part of the effort, and technology is definitely one of them.
The important components of KM systems that include three sets of technologies are communication, collaboration, and storage and retrieval. Turban et al (2008) defined the function of KM system follows six steps in a cyclical manner which are: a) Create knowledge b) Capture knowledge c) Refine knowledge d) Store knowledge e) Manage knowledge f) Disseminate knowledge Angel L. Merino, Cereal, Carolina Lopez, Nicolas and Ramona, and Saber Sanchez 2007) in their Journal titled “Knowledge Management Strategy Diagnosis from KM instruments use” provides an excellent argumentation for the deploy of KM systems in organization.
There are two categories of KM instruments, main technological and main non-technical. Under the technological lies decisions support technologies and and building an efficient communication throughout the firm. The non-technological category consists of spontaneous knowledge transfer initiatives, mentoring the teams and communities of practice. The first one encouraged informal knowledge exchange between the company’s human capitals. Next, mentoring bring long-term benefit to the company. Finally, teams and COP were not the same but both can develop the firm to a brighter future.
The challenge in the implementation stage is to integrate the exact components of the KM systems in order to meet the organizational requirements. Organization must develop IT and knowledge management strategies to improve business performance. Therefore choosing IT components is the vital process as to apply knowledge. Another system and process required for organization to manage the implementation stages is to develop performance measurement system. Various approaches can be used to measure organizational performance. One of the popular tools is Balanced Scorecard (BBS).
BBS was created from a research study conducted in 1990 and has since become a critical business tool for thousands of organizations around the globe. The origin of the BBS was developed by Robert Kaplan, an accounting professor at Harvard University, and David Norton, a consultant from the Boston area. In 1990, Kaplan and Norton led a research study of a dozen companies with the purpose of exploring new methods of performance measurement (Naive, 2002). The impetus of the research was a growing life that financial measures of performance were ineffective for the modern business enterprise.
Representatives of the research along with Kaplan and Norton confirmed that a reliance on financial measures of performance affected their ability to create value. The group scorecard, featuring performance measure capturing activities, throughout the organization such as customer issues, internal business process, employee’s activities and shareholder’s concerns. Kaplan and Norton summarized the concept in the first of three Harvard Business Review articles, “The Balanced Scorecard- Measures That Drive Performance. (Naive, 2002).
Over the next four years, a number of organizations adopted the BBS and achieved immediate results. Kaplan and Norton discovered these organizations were not only using the scorecard to complement financial measures with the drivers of future performance, but they were also communicating their strategies through the measures they selected for their BBS. As the scorecard gained prominence with the organizations around the globe as a key tool in the implementation strategy, Kaplan and Norton summarized the concept and the learning point in their 1996 book, The Balanced Scorecard.
Since that, the BBS has been adopted by nearly half of the Fortune 1000 organizations and the momentum continues unabated. So widely accepted and effective, the Scorecard according to the Harvard Business Review recently hailed it as one of the 75 most influential ideas of the twentieth century (Naive, 2002). Biker and Wagnerite (2003) as Kaplan and Norton (1992) suggested that four perspectives in BBS are the financial perspective, customer perspective, internal business process perspective and learning and growth perspective as shown in Figure 5.
Each of the perspectives consists of relevant goals, indicators and measures o achieve tasks. Source: Biker and Wagnerite (2003) Strategy evaluation is the final stages in strategic management. Managers desperately need to know when particular strategies are not working well. Strategy evaluation is the primary means for obtaining this information. The first activity is examining the underlying bases of organization strategy. Next, comparing expected results with actual results and finally taking corrective actions.
According to David (2005), the strategy evaluation is becoming increasingly difficult today because of the allowing trends:- a) A dramatic increase in the environment’s complexity b) The increasing difficulty of predicting the future with accuracy c) The increasing number of variables d) The rapid rate of obsolescence of even the best plans e) The increase in the number of both domestic and world events affecting the organization f) The decreasing time span for which planning can be done with any degree of certainty Most of the strategies agreed that strategy evaluation or control is very important for the organization to evaluate the problems or situation that effected the process of strategy implementation.
According to David (2005), strategy controlling included: a) Examining the bases strategy b) Comparing the results c) Taking corrective actions. Another purpose of strategy controlling is to close the gap between the process of formulation and implementation. In the case of analyzing knowledge gaps, organization must evaluate the link between business and knowledge strategies as shown in figure 6 on the next page. Figure 6: The Process of Articulating the Link between Business and Knowledge Strategies. Feedback source: -rattan (2002) .