ON SOME ISSUES ABOUT KNOWLEDGE MANAGEMENT SYSTEM IMPLEMENTATION

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1 ON SOME ISSUES ABOUT KNOWLEDGE MANAGEMENT SYSTEM IMPLEMENTATION HINCU DANIELA 1 AND LUBAN FLORICA 2 1 The Bucharest Academy of Economic Studies, Romania 2 The Bucharest Academy of Economic Studies, Romania 1 daniela.hincu@man.ase.ro 2 florica.luban@man.ase.ro Piata Romana, No. 6 Sector Bucharest ROMANIA Abstract The paper presents an integrated framework which explains that the success and the failure of the knowledge management systems have to be analyzed related to the IT strategy and business model definition, organizational control, organizational culture, knowledge representation, and cost and benefit perspectives. The implications of knowledge resource costs, knowledge transaction costs and human agents for the process of knowing in organisations are discussed. Keywords: knowledge management systems, knowledge sharing, organizational culture, economic approaches. INTRODUCTION Knowledge management as one of the latest change management approaches is mainly researched by business, management and ever more by the IT communities. The goal of knowledge management is to capture, store, maintain and deliver useful knowledge in a meaningful form to anyone who needs it anyplace and anytime within an organization. Basically, knowledge management is collaboration at the organization level. Knowledge management has the potential to revolutionize the way of collaboration and use computing. Although knowledge management is primarily process-oriented with strategies determined by the organizational culture, motivation and policies, knowledge management needs the right methods, technologies and tools for a successful implementation (Luban and Hincu, 2009). As information systems have proliferated in organizations, it has been a natural outcome to assume the increased potential of using modern information technologies such as Internet, intranets, browsers, data warehouses, data filters and software agents to systematize, facilitate and expedite firm-wide knowledge management. A knowledge management system could be defined as a technology system that uses information technology to create, organize and disseminate knowledge throughout an organization. At face value, it appears that such a task could be effectively managed by a purpose built system containing organizational information and processes effectively as they should. Some researches, into knowledge management suggests a variety of reasons why computer driven knowledge management has failed: the nature of knowledge (the value of knowledge is realized only when it brings a meaning into context), the culture of the organization (an organization is an artifact of personal experience and social relations and managing information at social level is not easy because people- centered information is unstructured, emergent and creative), how to effectively use technology to facilitate synergy within an organization s structure (one of the critical tasks of the 1

2 management is to coordinate different packets of knowledge through information exchange and sharing). In (Malhotra, 2004), it is shown that the failure of knowledge management systems is not so much a failure of technology, but a failure of strategy and process. Technology is simply a resource to enable the process to operate; if the process is well thought out then the supporting technology is more likely to be appropriate. In other words, if a better understanding exists of both knowledge and knowledge management strategies, goals and processes, then technology can be developed to meet those needs. Regarding the goal of knowledge management, organizations are implementing knowledge management systems with the assumption that the result will be increased organizational effectiveness, efficiency and competitiveness. KNOWLEDGE MANAGEMENT AND COMPETITIVE ADVANTAGE Many claim that knowledge is the most important source of competitive advantage and sustained superior organizational performance. However, the link between knowledge management and organizational competitive advantage is tenuous. In (Shin, 2004), it is shown that while knowledge management should not be considered a panacea for improving the competitive advantage of an organization, knowledge should be managed in an appropriate way because: While poor management can lead to inefficiency, management too hard can lead to stiffness, which will prevent the organization to cope with dynamic market changes; While poor management can lead to loss of knowledge (by the departure of valuable employees), management too hard can lead to budget overruns for knowledge management; While poor management can lead to messy organizational management too hard can lead to excessive dependence of certain sources of knowledge; While poor management can lead to repetition of costly mistakes, management too hard can lead to unwanted obligations. It results that knowledge sharing can have positive and negative effects on business organization. An integrated approache may reveal how can be reduced the factors that hamper the distribution of knowledge and how can be grown the factors favoring the distribution of knowledge in an organization. In (Malhotra, 2004), it is shown that to ensure a competitive advantage for knowledge management systems the developers must take into account two key features of economic practice: What can be done with data, information and best practices depends on the subjective interpretation of individuals and groups that transform these resources into action and performance; The results must be continuously re-evaluated to ensure that they are indeed the best performance of the business undertaking in relation to changing market conditions, consumer preferences, competitor offers, changing business model and industrial structures etc. In the following, it is presented a theoretically framework which explains that the success and the failure of the knowledge management systems have to be analyzed related to the IT strategy and business model definition, organizational control, organizational culture, knowledge representation, and cost and benefit perspectives. INFORMATION TECHNOLOGY AND BUSINESS MODEL It is recognised that the competitive survive of an organisation depends on its ability to redefine and to continuously adapt the goals and the organisational objectives and the manner of the organization to make the work. For example, a key issue for most organizations that have institutionalized the best practice is to ensure that such practices remain open to criticism, adaptation and replacement, so the 2

3 organisation not remain attached to the spiral of destruction, (Nadler et. al., 1995), to achieve the same thing better and better but with the effect of gradually diminishing profits, (Drucker, 1994). When new business models are defined, (Mathur and Keynon, 1997), the rapid change of the traditional concepts of industries, organisations, products, services, marketing canals, sale and distributions must be considered. On the other side, the designers of the knowledge management systems have to ensure a good concordance between the information architecture and business architecture such that the existent technological infrastructure does not constraint the evolution of the business model. A greater integration of the different information technologies may help an efficient knowledge caption. ORGANISATIONAL CONTROL Organisational control is imperatively in stable environment in order to pursue the realisation of some pre-defined actions and the obtaining some pre-specified results. But often, such a control could inhibit the innovation and the creativity. In an environment with radical changes, it is difficult that the control rules to remain valid for long time. The survival of an organization will depend on both the continuously evaluation of the hypothesis of the business logic and the performance indicator definitions such that these indicators to be aligned to the market changes, customer preferences, concurrent offer, economical models and industry structures. New dynamic business environment requires a model which assumes the existence of a small number of rules, some specific information and many degrees of freedom. In the project of such a system, knowledge users not only will define the problems and generate their own solutions, but will assess and review their processes to generate solutions. By explicitly encouraging the experiments and assumption re-thinking, this model can promote the creation of new knowledge and innovation. A challenge for managers in the current turbulent environment will be to foster employee involvement to create the vision of the organization. Since becoming more difficult to specify goals and long-term objectives, such employee involvement could facilitate development of strategies in real time, in agreement with the organization's vision and its implementation in real time. Employees as users and creators of knowledge must be autonomous roles of self - leadership and self - regulating, because they place so as to seize the dynamic changes in their immediate environment. Managers will need to encourage employees to work with incomplete information, based on their judgments and taking decisive action and to capture niche increasingly narrow opportunities. In the new economy, control of the employees will be ultimately self-imposed. Argyris (1990), defined the shift from the traditional paradigm in self-control as a "revolution of current management theory. Control systems for tracking and control of compliance with pre-defined goals are inappropriate for situations in which they are required for divergent interpretations of the complex economic environment and unstructured. We can say that existing systems designed to ensure compliance with the rules database do not facilitate detection and correction of gaps between entries, the logic and organization results, and what the organization needs to survive and become competent. SHARING KNOWLEDGE CULTURE In spite of the important advantages of the access to knowledge they need, often employees from the organisation do not want to share knowledge with their colleagues because of the fear to loss the inherent advantage in organisation. Although, for knowledge sharing sophisticated technology exists, the human behaviour may lead to a partial and ambiguous knowledge sharing. 3

4 In Shin et al. (2001) and Shin (2004), it is shown that this aspect could be remedied by a high-level strategic approach that aims at changing organizational culture so that knowledge sharing becomes second nature. A favourable culture could contribute to motivate individuals to share their knowledge and to absorb any knowledge received, to minimize ambiguity of context and transferred knowledge and to facilitate the flow of knowledge between source and recipient. In an organization, knowledge is obtained through an iterative process of generating ideas, produced by continuous investments in innovation and ideas validated by experimental tests (Hoof and Huysman, 2009). Since such investments and tests are costly it is unlikely that the organizations to want to share the results of distribution. On the other hand, revenues from large companies that possess the superior knowledge and carry unique products or better products, demonstrates the importance of organizational culture favorable distribution of knowledge. KNOWLEDGE REPRESENTATION For knowledge management, no methodology for storage of knowledge is the most important aspect, but the processes taking place. First, knowledge must be made information or data when they are stored in the knowledge base and then to become again knowledge when they are accessed by human users. In (Luban, 2005), it is shown that if there is good understanding of knowledge, strategies, goals and of the transformation processes then the appropriate technologies for these processes can be developed. However, the detection of unexpected changes in economic environment depends on the ability of human operator to get a grasp of data and information available to make the necessary corrections. ANALYSIS OF MANAGEMENT KNOWLEDGE SYSTEMS FROM COST PERSPECTIVE Efforts to develop knowledge management systems can be analyzed from the perspective of the resource of knowledge, the cost of transmitting knowledge and opportunistic behavior of employees (Shin, 2004). Resource-based perspective helps to identify the costs of acquiring knowledge and the benefits expected according to the characteristics of knowledge. Perspective based on transaction costs or transmission of knowledge can be used when studying the constituent elements of the structure of communication of knowledge and helps to identify factors that increase transaction costs of knowledge between the constituent elements. Perspective based on employees helps to find the ways of distribution of knowledge so that the costs of opportunistic behavior of agents to be reduced. Generation of additional revenue by using various specific knowledge gained through implementation of knowledge management systems depends on both the extent to which it would be difficult for competitors to acquire such knowledge or to find the substitute knowledge and the extent to which income generated may be retained by the organization that has implemented such systems. KNOWLEDGE RESOURCE BASED PERSPECTIVE Resources could include patents, skilled human resources, research and development, organizational knowledge of customers. The costs for development knowledge management systems can vary quite a bit and include hardware and software investments, adaptation time required for employees and organizational restructuring. The object of spending substantial budgets is to generate rents from the use of knowledge, which can be gained by implementing knowledge management systems to the extent that it is hard for competitors to imitate the knowledge, and rents are retained by the company. 4

5 In order to create new knowledge by combining knowledge from one domain area to another, organizations may attempt to externalize or codify it. Considerations is needed to decide whether to invest in detaching knowledge from sources and to share knowledge easily by externalization because knowledge made widely available could easily be acquired by competitors who could obtain at little cost to themselves the improvements in performance. To avoid this situation, organizations may operate with a high degree of tacit knowledge. However, sharing such tacit knowledge needs costly methods like apprenticeship. The organization must decide whether to stay at a high degree of tacit knowledge and reduce the risk of knowledge sharing or to accept the advantage of widely spread knowledge by specific knowledge-sharing efforts and admit related risk. TRANSACTION COSTS The knowledge management infrastructure is a medium facilitating knowledge sharing in organizations, but it does not, itself, provide an effective knowledge transaction process that influences the ease of searching, storing, distributing and applying knowledge. Transaction costs include those associated with searching, storing, distributing and applying knowledge (Shin, 2004). To minimize internal transaction costs, organizations should identify factors that keep such costs high. By removing barriers of this kind organizations can realize greater benefits from knowledge-sharing. In (Shin, 2004) and (Shin et al., 2001) it is suggested that knowledge-sharing could be influenced by: knowledge transferred, source, recipient and the context in which knowledge-sharing takes place. AGENCY COSTS Agency theory deals with the relationship developed in situation when one party (the principal: the company) delegates work to another (the agent: the employee). It is not easy to coordinate the gap between the principal and the agent, because the agent want to improve both financial welfare and non-financial terms like satisfaction, while the principal focuses usually on financial welfare. In addition, the agents take a risk adverse decision, because they cannot diversify their employment, while the principal is able to diversify the investment across various assets. The principal tends to be risk neutral. In (Shin, 2004), several methods to minimize agency problem are discussed: monitoring the agent s behavior, contract based on the agent s behavior or outcome, motivation. Monitoring requires significant costs. Because knowledge resides in the individual and is difficult to protect legally, an individual always has a latent incentive to reject knowledge-sharing and to sell knowledge by leaving an organization. Also, empirical evidence on the motivational effect of compensation is inconclusive. The researchers in knowledge management conclude that knowledge sharing only works if the culture of the organization promotes it. Central to the idea of knowledge management is an organizational culture that actively encourages and rewards the sharing of knowledge. CIRCULAR PROCESS OF KNOWLEDGE Acute need of systems for knowledge management in organizations is determined by a number of social economic and technology factors that include shortening the life cycle of products, employment facilitation and increased work arrangements at home and the number of virtual teams. In the process of knowledge in an organization, individual knowledge is developed to meet the social system in which the individual is employed. The individual knowledge becomes collective knowledge of the social system through interactions between the individual and system. Social systems are seen as systems of interpretation of knowledge. 5

6 In (Shin et al., 2001) it is proposed a classification in three classes of knowledge involved in the process of knowledge, namely: instrumental knowledge (knowledge of automatic type), social knowledge (knowledge of a conscious and collective type) and codified knowledge (objectified knowledge). The root of the instrumental knowledge is in the individual skills and experience. Relations and personal cognitive abilities determine how fast are built and how substantial are the necessary knowledge to solve a problem. Social knowledge is created through social communication between individuals and groups. They include operational routines and practices that are accepted as justified knowledge that can be transferred through work in a particular context. Codified knowledge is like information. When contextual information of a social knowledge component is evaluated to solve a problem and its value is measured for problem solving, social knowledge becomes codified. Such knowledge is then ready to be applied in decision-making processes or in other situations. Shin (2004) shows that the ultimate goal of knowledge management is to facilitate circular knowledge of instrumental knowledge to codified knowledge. To facilitate the process of knowledge instrumental transformation in social knowledge, organizations should focus on important factors in terms of employees. By management of opposition behavior to the distribution of knowledge, organizations can facilitate employee participation in the process of organizational knowledge. Factors related to the costs of transmission of knowledge can contribute to the development of social knowledge as they are related to how the employees can be helped to become aware of what knowledge they need and then to take to solve a given problem. Factors that determine knowledge resource costs will affect the decisions of organizations that produce codified knowledge and then store the encoded knowledge in the knowledge base and documents. CONCLUSION Practice and research in knowledge management is concerned with the development and use of systems for facilitating the creation, distribution and application of individual and collective knowledge. This paper is an overview of the factors that promote or limited development of systems for knowledge management and the factors influencing the costs and benefits. It is discussed the complexity of the implementation of knowledge management systems and it is examined this issue from different perspectives to facilitate a better understanding of existing approaches in this field. It results that an integrated approach may reveal how can be reduced the factors that hamper the distribution of knowledge and how can be grown the factors favoring the distribution of knowledge in an organization. These factors are presented as problems to be solved to ensure the success of knowledge management at an organization. The main argument relates to how the systems for knowledge management can contribute to sustainable and competitive survival of an organization in a dynamic environment characterized by rapid and radical changes. REFERENCES Argyris, C., (1990). Integrating the Individual and the Organization. New Brunswick, NJ: Transaction, Drucker, P.F., (1994). The Theory of Business, Harvard Business Review, September October, Hooff, B. van den, Huysman, M., (2009). Managing knowledge sharing: Emergent and engineering approaches, Information & Management 46, 1-8 6

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