Knowledge Strategy Aligning Knowledge Programs to Business Strategy

The Knowledge Strategy Game Our Learning With the Model Knowledge Strategy Model PRICE $200 Conclusions Understanding Knowledge Strategy The Resource Strategy Model FOLLOW INSTRUCTIONS ON TOP CARD Topics: Understanding Knowledge Strategy Discussion? The Resource View of Strategy Knowledge Strategy Model Our Learning with the Model Conclusions Copyright 2000 – Origin 2

Basic Notions … Survival vs. Advancement (von Krogh, Roos, Slocum, 1994) · Survival – maintaining current level of success, mastering current markets and competitors · Advancement – Future success based on new markets, nonreplicability – requires knowledge creation How do you plan/design strategy? · Formal strategy and planning – Traditional strategy sets positions, targets, measures. Alignment means “follow the leader. ” · Learning and emergence – New thinking (not always in practice) shows strengths in org learning and preparing for conditions. Alignment means “Learn and collaborate. ” Copyright 2000 – Origin 3

Knowledge Strategy – What do we mean? · Tierney, (1999) “A company’s KM strategy should reflect its competitive strategy. ” With focus on creating value for customers, turning a profit, and managing people. (HBR) · Zack, (1999) “… the most important context for guiding knowledge management is the firm’s strategy. Knowledge is the fundamental basis of competition. Competing successfully on knowledge requires either aligning strategy to what the organization knows, or developing the knowledge and capabilities needed to support a desired strategy. ” (CMR) Copyright 2000 – Origin 4

Business and Knowledge Strategy Linkage between drivers: Business Strategy • Marketplace uncertainty • Growth vs. Profit strategy • Customer growth vs. retention • Leverage core competencies • Competitors and emerging products • Complementary capability • Alliances and mergers • Learning organization • Enabling knowledge creation • Learning from practice • Community development Knowledge Strategy as Pattern and Copyright 2000 – Origin Learning 5

Strategic Drivers Growth through share, market strength, distribution – external market focus Market Growth Customer Intimacy Forging long-term, deep relationships with customers – external focus, growing with customer success Operational Effectiveness Profit through productivity and cost control – internal development focus Traditional KM driver, but should not be the only one! Copyright 2000 – Origin 6

Strategic Drivers Expand - Enter Knowledge Strategy Business Strategy Enhance “Embrace” Product Innovation Knowledge Creation New Competency Process Innovation Knowledge Sharing Developing Learning Culture Business Innovation Customer Knowledge Integration Branding Knowledge Product Sales Time to Market Distribution Networks Pricing Strategy Patent & Product Leverage Process streamlining Supply chain mgt Accounting & Financing Customer retention Customer product needs Revenue growth Partnering / Alliancing Market Growth Copyright 2000 – Origin Operational Effectiveness Customer Intimacy 7

Resource Strategy Model Potential Entrants Suppliers Industry Buyers Porter’s 5 Forces strategic model (SWOT approach) breaks when applied to leverage of specific firms. Chaotic business dynamics now require we leverage unique strengths. Substitute Products Knowledge Resources Organization, Capabilities, Core Competencies A resource strategy addresses firm’s only competitive differentiation - renewable resources of knowledge, skills, and capabilities (Penrose, Zack, Teece, Quinn, Grant, Kogut). Copyright 2000 – Origin Firm’s Knowledge Strategy Customer Relationships Strategic Resources Networks, Partners 8

Resource Strategy. . . · Penrose theory (1959) - Firm’s only competitive advantage from superior adaptation - Superior coordination of internal resources (knowledge) - Explains diversification, uniqueness, culture · Uniqueness of firm gives it competitive strength - Diversification exploits imperfections in markets - Development of dynamic capabilities and market responses · In turbulent business environments: - Focus on what we can know – Resources: Strengths and Weaknesses Copyright 2000 – Origin 9

Resource-View of Strategy How does this show up in practice? · Collective Practice (Spender, 1994) - Routines and embedded practices - Tacit social knowledge, effective, yet unknown to individuals - Upside: Competitive cultures (e. g. , Microsoft, Cisco) - Downside: Ultra-stable processes can’t easily change Also: Founder-based cultures (start-ups) slow to change - Embedded values in organization resist new approaches · Organizational culture as an inimitable strength (Barney, 1991) - Beliefs, values, shared meaning - Culture cannot be exported or replicated - Social communities prevent overdependence on individuals Copyright 2000 – Origin 10

Dynamic Capabilities · Dynamic adaptability as organizational resource - Flexibility, Speed of response - Requires dynamic strategy · Critical knowledge and markets change rapidly - New business models - Internet economy Copyright 2000 – Origin 11

Dynamic Learning · Adaptive, dynamic learning fundamental to organizational competitiveness · Learning cycles key limiter of knowledge strategy - Core competency learning – Time to core capability - Dynamic learning cycle – Time to new capability · E. g. Asian economic recovery Honda’s entry into US motorcycle market - No “strategy” as plan at all! Entirely emergent … - Cultural learning, Acquisition of knowledge Copyright 2000 – Origin 12

Knowledge Resource Building Core Knowledge - Shared by all members of industry – No competitive value - E. g. , Internet technology, XML, Knowledge depreciation Advanced Knowledge - Differentiated, but accessible - Positioning of available knowledge - E. g. , advanced UIs for Web products, usability Innovative Knowledge - Significant, nonreplicable differentiation - Products, processes, and markets interrelated - E. g. , Intel’s lead in processors affords superior access to market and next-generation PC products Copyright 2000 – Origin 13

Where do you stand? Your Organization Innovator Innovative Leader Viable Competitor Advanced Laggard advancement At Risk Core “exit strategy” Core Knowledge Advanced Knowledge Innovative Knowledge Competitors Copyright 2000 – Origin 14

Quick Case Example Client: A pharmaceutical company Business Problem: A drug a manufacturer sees investment in its Internet strategy as poor if not failed. Sales have not increased and new products are not being developed. Change Approach: Revisit strategy & customers, drivers. Changed from Growth to Customer Intimacy. Redefined the business, brand, and competitive premise. Transformation Occurred: 5 target customer groupings identified - doctors, patients, pharmacists, media and shareholders of the company. In the business of health not drug manufacture; promoted and acted on customer centric innovation and direction. Value Gained: Shored up market position by listening to the customer -- and redefining its advanced knowledge. More proactive, with focus on health and healthy living. Copyright 2000 – Origin 15

Knowledge Strategy Model Zack’s model “ 14 Steps” 1. How do you want to play the game? 2. What do you need to know? 3. What do you know? 4. What’s your internal knowledge gap? 5. What do your competitors know? 6. What’s your external knowledge gap? 7. What is your learning cycle? 8. What are your competitors’ and industry learning cycles? 9. What is your learning gap? 10. What is your internal strategic gap? 11. What’s your external strategic gap? 12. What’s your industry cycle strategic gap? 13. What’s your new current and future strategy? 14. What’s your knowledge strategy? Zack, M. (1999). Developing a Knowledge Strategy. California Management Review. 16 Copyright 2000 – Origin

How we adapted it … 1 Envisioning Business Strategy 2 Knowledge Valuation Creating Knowledge Strategy 3 4 Knowledge Pathbuilding Copyright 2000 – Origin Identified and developed a business strategy, and linked initial knowledge needs. This phase used strategy workshops and scenario planning sessions to develop the initial strategy. Analyzed the current state of the organization, diagnosing gaps, rate of learning, and other knowledge issues. The phase delivered knowledge maps and an organizational assessment. Analyzed impacts and developed strategies for addressing gaps and redesigning processes. Organizational design and development aligned knowledge work to the strategy. Designed knowledge architecture to support full participation. Coordinated plans, people, and information resources to integrate the strategy into organizations, systems, product lines, and business processes. 17

Creating Knowledge Strategy · Knowledge SWOT - Business + Knowledge - Strengths, Weaknesses, Opportunities, Threats · Strategic Scenario Planning · Shared models of potential future conditions · People remember stories; SWOT points fall away quickly. · Mapping to Core Practices · Mapping to Core Competencies · Four Knowledge Enablers Copyright 2000 – Origin 18

Knowledge Enablers Knowledge Resources What do we know and where is it ? Culture & Learning Practices What processes leverage that know-how? How do we participate with this know-how? Collaborative Technology How do we support this know-how? Copyright 2000 – Origin 19

Middle-Up-Down Management Top-Down - Middle sees organizational needs best - Top-down knowledge strategy authoritarian - Communities have limited access to big picture - Dynamic business conditions require view from the middle Recognition of: Opportunity for knowledge integration: Customers, Context, Constituents Strategically linked, Organizational Knowledge communities, local initiatives Bottom-Up Copyright 2000 – Origin 20

What we learned … 1 Envisioning Business Strategy Reviewed and redesigned our business strategy Linked initial knowledge needs to scenarios, across 6 critical business processes >> Rapid phase of strategy + assessment 2 Knowledge Valuation Organizational assessment of 4 knowledge enablers Assessed state-of-knowledge, networks, competencies >> Time-consuming phase, requiring qualitative research Creating Knowledge Strategy Strategic gaps identified against KS Priorities set by evaluating ranked impacts >> Direction for action planning & KM planning Knowledge Pathbuilding In progress – Client/Project knowledge network project underway … Process and practice relationships redefined Open sharing within communities 3 4 Copyright 2000 – Origin 21

Strategic Knowledge Applications Knowledge Resources Core and complementary competencies Organizational capabilities Structured and unstructured information Personal knowledge and unique skills Customer relationships Intellectual property Knowledge assets Collaborative Technology Infrastructure and standard systems Groupware and email applications Web-enabled portals and Internet applications Process management systems Copyright 2000 – Origin 22

Strategic Knowledge Applications Practices “Knowledged” business processes New organizational routines Embedded and specialized processes Practice communities “How things are done” Culture and Learning Core organizational values Personal values and leadership Organizational ecology Hiring and enculturation “How we see ourselves” Individual and group skill development Organizational learning Style of management, work, engagement Copyright 2000 – Origin 23

Knowledge Strategy Toolkits Alignment with Strategic Priorities: · Strategy Design – Scenario Building · Cultural Assessment …. Readiness assessment · Knowledge Framework to embed Business Plan · Portfolio of Knowledge Management Projects · ‘Value from Knowledge’ Plan · Business review process · Knowledge Pathbuilding Copyright 2000 – Origin 24

What we learned … · Not enough to visit strategy once. - Business strategy must be dynamic and ongoing. · SWOT is simple and efficient, communicates well. - However, scenarios create a shared vision of possible business – in practice, are much more actionable. · Initial knowledge strategy develops quickly. - Take advantage of momentum and use initial findings. · It’s the rest of the process that takes time! - Not about strategic planning, but about knowledge creation and sharing in the domain of business strategy. · Work parallel efforts, using multiple disciplines. - Knowledge strategy requires broad participation. Copyright 2000 – Origin 25

Discussion Questions · What’s been your experience? - SWOT, scenarios, planning workshops … · Where do things get stuck? - How do you get the organization unstuck? · Should you assess knowledge strategy readiness? · What drivers push knowledge strategy? · What drivers obviate it? When should you wait? · What are your enabling conditions? · What are you waiting for? Copyright 2000 – Origin 26