In today's competitive business climate, the competitive advantage of companies seems to rely increasingly on strong relationships with employees, customers, suppliers and partners, and consequently the effective use of various knowledge resources is a key component in every successful organisation (Bashir, 2007). As KM has become critical for the success of companies, an appropriate KM strategy can help companies to capitalise these knowledge resources.
KM strategy is a plan of actions for the use of an organisation's knowledge assets, including creating, organising and applying such assets. It encapsulates strategic directions in managing knowledge activities and identifies supports required to facilitate knowledge activities (Hsieh, 2007). Generally, KM initiatives are implemented to support a company's purpose or mission, strengthening its competitive position and creating organisational value. It can be argued that the organisation's strategy is the most important framework for guiding KM in an organisation. Companies which know more about their products, technologies, customers and markets are likely to perform better due to the fact that they comprehend clearly the relationship between their intellectual capabilities and resources, and their competitive strategy (Alazmi, 2003). As a result, KM strategy needs to be aligned with the organisation’s business strategy.
According to Zack (1999), there is a gap between what an organisation 'must know' and what that organisation 'actually knows'. Actually, the 'must know' is considered as competitive knowledge built around a company's intellectual resources and capabilities; it is a strategic asset having the greatest impact on the key business performance of a company (Zack, 2002). Consequently, KM strategy is a high-level plan outlining the processes and support (organisational and technological) required in managing any knowledge gaps (Zack, 2002). Alazmi (2003) added that KM strategy represents how the company balances its competitive 'can' and 'must' to develop and protect its strategic position. Choi and Lee (2002) argued that congruence between KM processes and KM strategies is imperative in improving corporate performance. Holsapple and Singh (2001) suggested that it is essential to identify knowledge processes representing the unique and valuable capabilities of a company; consequently, knowledge processes should be guided by appropriate KM strategies.
C hapter 2 - K now ledge m anagement an d innovation
Several KM strategies have been suggested and described by researchers. Jordan and Jones (1997) explored the dimension of organisational knowledge and categorised KM strategy into two types: tacit-oriented and explicit-oriented. Tacit-oriented strategy highlights the sharing of knowledge through mutual interactions, one-to-one connections and social networks, whereas the focus of explicit-oriented strategy is to manage and store an organisation’s knowledge assets in a systematic fashion. Similarly, by investigating several management consulting firms, Hansen et al. (1999) suggested two types of KM strategy:
codification and personalisation. Codification strategy focuses on activities related to
codifying and storing explicit knowledge in a database and other accessible forms, in order to make it available to employees and individuals. In contrast, personalisation strategy highlights knowledge-related activities for sharing tacit knowledge between employees and individuals. However, companies should not rely on either explicit- or tacit-related strategy alone; both of them should be present in the organisation to some extent, depending on the organisational context.
Focusing on the dynamic of learning cycles, Zack (2002) proposed two strategic approaches for companies: conservative and aggressive. Adopting the conservative approach means the company tends to focus more internally and attempts to prevent transferring knowledge outside the company. In an industry characterised by conservative- approach firms, there is little knowledge flowing across the industry and little is available to be absorbed from the outside (Zack, 2002) and so the industry has slow learning cycles. Conversely, the aggressive approach underpins the importance of continual learning as a key to maintaining knowledge advantage. Rather than concentrating on preventing knowledge diffusion into the industry, the focus is placed more on maintaining capacity to learn and to absorb knowledge from the industry.
Two types of strategy were revealed in the study by Skyrme (1997). On the one hand, a company is likely to focus on making better use of knowledge already existing within the company. He added that frequently the knowledge needed for problem solving is elsewhere in the company but people do not know where it is or are not able to access it. The second major strategy is that of innovation, involving the creation of new knowledge and the turning of ideas into valuable produets and services. He added that the real challenge is not to lose creative ideas and to allow them to flow to where they can be used.
Chapter 2 - K now ledge m anagement an d innovation
Bierly and Chakrabarti (1996) indicated that there are four generic knowledge strategy groups: innovators, explorers, exploiters and loners. The classification is based on two dimensions of learning strategy: external-internal and incremental-radical. External learning occurs when knowledge is brought in from an outside source, while internal learning occurs when new knowledge is generated and distributed within the company’s boundary. On the other hand, incremental learning is required for exploitation of existing knowledge in which small changes are likely to take place, while radical learning refers to new exploration with radical changes. With regard to these two dimensions, innovators are the most aggressive learners as they effectively combine internal and external learning, as well as concentrate on both incremental and radical learning. In the opposite manner, loners are considered to be mostly ineffective learners because they are not able to integrate different streams of knowledge effectively. On the other hand, explorers keep a good balance between internal and external learning, but focus on incremental learning rather than radical learning, whereas exploiters place more emphasis on external learning and incremental learning.
In summary, each company should adopt a KM strategy appropriate to its specific knowledge entity and business environment; different situations can also require different KM strategies (Keskin, 2005). Choi and Lee (2002) suggested that generally three perspectives can be used in selecting the appropriate strategy: focused, balanced and
dynamic. The focused view suggests that companies should pursue one strategy
predominantly, the balanced view suggests that companies should strike a balance between two or more knowledge strategies, and the dynamic view suggests that firms align their strategies to the characteristics of their knowledge (Choi and Lee, 2002).