TOWARDS A SUSTAINABLE COMPETITIVENESS THROUGH KNOWLEDGE CREATION

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1 TOWARDS A SUSTAINABLE COMPETITIVENESS THROUGH KNOWLEDGE CREATION Chaabane Mohamed Department of Economics Sciences University of Boumerdes, Algeria ABSTRACT Using knowledge in your business isn't necessarily about thinking up clever new products and services, or devising ingenious new ways of selling them. It's much more straightforward. Useful and important knowledge already exists in your business. It can be found in the designs and processes for your goods and services, your files of documents (whether held digitally, on paper or both), the experience of your employees, and your plans for future activities, such as ideas for new products or services. The challenge is harnessing this knowledge in a coherent and productive way. Knowledge can be defined organizationally as an intellectual asset that adds a value to an organization. Opining on the core competency model (Hamel & Prahalad, 1994), we suggest that an organization can enhance its performance and improve its competitive standing by making a careful assessment of its intellectual bandwidth for knowledge sharing and creation. In this paper, the key enablers that influence the level of knowledge creation that occurs within an organization are identified. The paper lists the organizational characteristics that will help ensure the high level of intellectual bandwidth needed for knowledge sharing and creation. Field of Research: Introduction The organization in our days must be able to recognize changes in the environment that require new knowledge; therefore it ought to engage in scanning activities, both internal and external. The organization must also be flexible in order to respond and exploit these new opportunities (Cohen & Levinthal, 1990). It must be capable of applying this knowledge, thereby helping to ensure that it will gain a competitive edge or maintain its competitive standing (Cohen & Levinthal, 1990; Kogut & Zander, 1988; Zack, 2003). This requires that the organization be in a state of continual learning. This paper explores an organization s ability to create knowledge and increase its competitive standing. The intellectual bandwidth for knowledge creation model is presented and the key enablers that make up this model and influence the level of knowledge creation are examined. The author suggests that an organization can enhance its performance and increase its competitive standing by making a careful assessment of its intellectual bandwidth for knowledge creation. Knowledge is often thought of as the end state along a continuum from data to information to knowledge (Grover & Davenport, 2001). It is often hard to give a concise definition of knowledge, as noted by the following characterizations: Knowledge is information that has meaning and is always in a state of becoming. It results from taking information that is inert and static, and transforms it, giving it new meaning (Bhatt, 2000). Knowledge is a justified belief system that leads to action (Nonaka & Takeuchi, 1995). 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 641

2 Knowledge is personalized information residing in the minds of individuals (Alavi & Leidner, 2001). It is often easier to say what knowledge is not; for example, knowledge is not neat and simple (Davenport & Prusak, 1998). This last statement best sums up the fluid character of knowledge. Knowledge can be intuitive, such as knowing how much and what type of persuasion will be effective with one s partner, or it can be formally structured, as in DaimlerChrysler s Engineering Books of Knowledge. Tacit and Explicit Knowledge Knowledge resides in the minds of individuals and in organizations. It is frequently categorized as either explicit or tacit (Nonaka & Takeuchi, 1995; Polyani, 1998). Explicit knowledge can be codified, communicated without difficulty, recorded, written, and transferred into other formats or embedded in technology (Davenport & Prusak, 1998). Organizations make use of explicit knowledge in best practices, manuals, specifications and routine, programmed activities. Tacit knowledge, on the other hand, is content specific, abstract, and difficult to articulate because of its cognitive, intuitive and technical components (Alavi & Leidner, 2001; Bhatt, 2000; Nonaka & Takeuchi, 1995). Tacit knowledge is flexible, fluid and self-fortifying. It builds on an individual s experiences and mental models, combining them and giving new meaning as the context changes (Davenport & Prusak, 1998). This is why it is so difficult to teach someone how to ride a bicycle. Organizations need to be able to draw on the tacit knowledge found in individuals and transform it into tacit knowledge held by a group and, when possible, converted into an explicit form. This is a difficult task since tacit knowledge results from life experiences which include the social, cultural, emotional and cognitive backgrounds of individuals. Therefore, the ability to externalize this knowledge so that others might learn from it may not be possible (Nestor-Baker & Hoy, 2001; Polyani, 1998). Hence, organizations must provide the environment that will enable individuals to utilize their tacit knowledge and expertise to increase organizational performance and productivity. Managers need to provide the following conditions: the right amount of autonomy for participants; a certain level of creative chaos, redundancy, and variety to make the environment stimulating (Von Krogh et al., 2000, p. 179). Competitive Advantage in Knowledge Age Knowledge can be defined as that core asset that when properly employed results in new or improved products or services. These products and services help create organizational wealth, enabling the organization to gain or maintain a competitive advantage, that is, by employing strategies of differentiation, cost or specialization (Porter, 1998). Competitive advantage can be defined as profit above the industry average for a sustained period. It usually has as its foundation a core competency, that thing that the organization does better than its competitors do. In order to be considered core, a competency must meet the following criteria. It must provide customer benefits, it must be extendable and it must be difficult to imitate (Hamel & Prahalad, 1994). According to Forbes Magazine, the average age of organizations worldwide is less than 20 years, so their survival depends on their ability to engage in activities that can help ensure a competitive advantage. In today s rapidly changing global economy, innovation is the number one creator of organizational wealth (Baum et al., 2000). Innovation is defined as the creation or discovery of novel products or services. Knowledge, while a necessary adjunct to innovation, is not sufficient to ensure competitive advantage. An organization might be able to innovate but not properly implement the result or it might not choose the right product for the market. For instance, Polaroid Corporation, bankruptcy in 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 642

3 2001their industry leaders failed to recognize the impact that computer technology such as the digital camera, would have upon its industry. Innovation increases the chances that an organization will survive and it is essential to competitive advantage. Innovation is essential to competitive advantage and the chances of survival will be enhanced when the organization attends and responds to more and different stimuli. (Belardo & Belardo, 2002, p. 71) Innovation requires that the organization engage in continuous learning. To do so, it must acquire the knowledge needed to close what Zack (2003) describes as the strategic gap. Determining the knowledge needed to close this gap requires a process not unlike the knowledge management process described by Huber (1991), Nevis et al. (1995), and Belardo (2001). This process includes the following stages: identification, elicitation, dissemination and utilization. While discussion of these stages is beyond the scope of this chapter, it is necessary to draw attention to the identification stage because it is here that the knowledge needed to enhance competitive advantage is identified. It is in the identification stage that organizations determine and answer questions such as the following. What are our knowledge needs? Who possesses this knowledge? Where can it be found? From a macro perspective, identification is important because knowledge is essential for competitive intelligence which can help the firm determine strategy. From a micro perspective, identification is essential to successful knowledge management because, in order to get the right knowledge to the right person at the right time, it is essential that the organization know who possesses this knowledge (Belardo & Belardo, 2002, p. 28) The Relationship between Intellectual Bandwidth and Knowledge Creation The term bandwidth is normally associated with circuit or transmission capacity, such as 56 K or Fast Ethernet, while the transmission speed is dependent on the type of transmission media used, such as copper or glass. It is advantageous for organizations to be able to have the largest transmission capacity and the fastest transmission speed that they can afford to transmit large amounts of data, and bandwidth-hungry video, graphics and sound. Additionally, the extensive use of the Web for e- commerce requires the ability to produce images quickly and relies on secure, stable and swift communications. The concept of an intellectual bandwidth has been discussed in conjunction with an organization s ability to create value. The effectiveness with which an organization can create value is bounded by its potential intellectual bandwidth, which is its collective potential to acquire information, make sense of it, and take action with respect to a goal. (Nunamaker et al., 2001, p. 5). Opining on this concept and building on previous literature on knowledge creation, absorptive capacity, and innovation, the author suggests that any organization can gauge its potential to create knowledge by considering enablers influencing the rate of knowledge creation. These key enablers, are culture, leadership,, workers and technology and communication (Belardo & Belardo, 2002; Cohen & Levinthal, 1990; Von Krogh, et al., 2000). Culture Culture shapes the processes by which new organizational knowledge with its accompanying uncertainties is created, legitimated, and distributed. (DeLong & Fahey, 2000, p. 126) Culture is a reflection of the values and practices of the organization; it can serve to facilitate or restrict the flow of knowledge. While organizations may have difficulty distinguishing the true culture from the espoused culture, people learn quickly by observation what values and practices are acceptable, despite what is formally advertised by management (Schein, 1999). Strategies for change need to be grounded in a clear understanding of the true organizational culture and the mental models that shape beliefs. It is important that the models that shape individuals beliefs about the 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 643

4 organization include a firm conviction that it encourages experimentation and risk-taking and does not punish failures, because it realizes that all are essential parts of new competency development (Belardo & Belardo, 2002; Zack, 2003). Chaparral Steel is an example of an organization that recognizes that not all experimentation leads to successful outcomes. Individuals are not penalized when their efforts fail; the information is used as a learning tool. While culture has a significant influence in the management of knowledge, the ability of an organization to put together teams of individuals with diverse but complementary experiences can serve to ignite sparks of creativity where they might otherwise lie dormant. Socialization and activities where individuals can informally share knowledge with teammates and other colleagues is vital (Brown & Duguid, 2001; Davenport & Prusak, 1998; Von Krogh et al., 2000). The development of micro-communities and virtual communities, which allow individuals to meet across geographic regions and functional titles, is essential to the development of knowledge. Some Culture Characteristics as Enablers for Knowledge Creation Diversity is fostered, including diversity in learning styles, and is exemplified in core competency training. An atmosphere of trust permeates the organization. Ethical behavior is the norm and expected at all costs. Experimentation and risk-taking are encouraged and openly supported. Mistakes are considered opportunities for learning and improvement, are openly discussed and solutions are shared. Customer input at all stages is encouraged and solicited. Periodic assessments are done within the organization to assess its capability to foster innovation and knowledge creation. Leadership Knowledge creation is often chaotic and disorderly but if managed correctly can result in the creation of new skills and competencies (Bhatt, 2000). Leadership plays a critical role in identifying the knowledge that an organization will acquire and use and should define the organization s mission in terms of knowledge (Zack, 2003). Leaders determine whom the organization listens to externally and to what degree this knowledge is disseminated within the organization. Leaders must understand the difference between the overt demonstrations of organizational behavior and the inherent thinking that leads to such demonstrations and develop the strategic architecture to reengineer the organizational genetic code, as it were (Hamel & Prahalad, 1994). They must also examine the basis for rewarding employee performance and a fine balance must be struck between rewarding units or teams for the sharing of knowledge and rewarding individuals in cases where their tacit knowledge leads to innovations. Jack Welch of General Electric Corporation and Leif Edvinsson of Skandia Insurance Company, Ltd are examples of leaders that helped make these organizations innovation forerunners. Some leadership characteristics as Enablers for Knowledge Creation Fosters the view of the organization as a knowledge-based organization. Creates a clear, concise positive vision that is articulated throughout the organization. Identifies knowledge gaps and develops processes to close these gaps. Champions innovation and strategically aligns knowledge management activities with organizational performance and goals. Creates the right context to foster dialogue and communication across job functions. 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 644

5 Recognizes and advocates environmental boundary spanning. Develops and champions a reward system that recognizes and rewards information sharing and discourages information hoarding. Workers - Knowledge Creators Knowledge workers cannot be bullied into creativity or information sharing; and the traditional forms of compensation and organizational hierarchy do not motivate people sufficiently for them to develop the strong relationships required for knowledge creation on a continuing basis. (Von Krogh et al., 2000, p. 4) The capability of an organization to build on existing knowledge is affected by an organization s intellectual capacity, which is largely a function of the level of prior related knowledge (Cohen & Levinthal, 1990; Kogut & Zander, 1992). It is important that the organization employ individuals whose experience will enable them to recognize and assimilate new sources of information, produce something unique and innovative or contribute to team productivity. Knowledge creators are knowledge workers; they are individuals who have a role in seeking out knowledge sources. Knowledge creators recognize the potential of information to be reused in novel ways and are able to create new or improved products and services by working individually or in groups with other knowledge creators. Gatekeepers are knowledge workers who play an important role in the organization, for they constantly span the external environment for sources of new information. Organizations that realize the importance of having individuals who function as gatekeepers and individuals who can absorb this information and see new possibilities will actively seek these characteristics in those they employ. They will provide intellectual sustenance needed to allow this potential to develop more fully among their employees (Davenport & Prusak, 1998). They will foster an environment that facilitates relationship formation and collaboration. Siemens s Xenia, City of Knowledge, is an example of a vehicle for people to meet and exchange ideas and solutions. Some Knowledge worker Characteristics as Enablers for Knowledge Creation White spaces competence based opportunities are explored (Hamel & Prahalad, 1994). Creativity, experimentation, flexibility, and curiosity are qualities desired in knowledge creators. Employees possess the necessary technical skills, experience and expertise. Opportunities for socialization, collaboration and team-building are ubiquitous Technology & Communication The mere presence of technology won t create a learning organization, a meritocracy, or a knowledge creating company. (Davenport & Prusak, 1998, p. 142) One of the biggest misconceptions about managing knowledge is the belief that technology plays a salient role in the success of any knowledge management initiative. Getting the right information to the right people at the right time is important, and technology is a key enabler in disseminating information throughout the organization. However, technology is limited in its ability to facilitate teammaking, elicit tacit knowledge or build trust (Belardo & Belardo, 2002; Davenport & Prusak, 1998). As knowledge creation has more to do with relationships and community-building than databases. Investments in information technology alone cannot make the knowledge-creating company happen (Von Krogh et al., 2000). 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 645

6 Technology should be used to design systems to support collaboration and communication, and to facilitate the flow of information throughout the organization. There are knowledge management tools and technologies that support the identification of new knowledge opportunities, such as sophisticated GroupWare, Web retrieval software and recommender systems (Resnick & Varian, 1997; Stenmark, 2001). However, unless the information system is user-friendly and is perceived as beneficial, there will be little incentive to use it (Davis, 1989). The right technology can increase business performance by bringing about reduced work-coordination costs, streamlined work processes, and increased interorganizational relationships (Sambamurthy et al., 2003). Communication should be multi-dimensional, that is, formal, informal, social, oral and written, and it must initiate at all levels within the organization. The ability to express and share ideas must be encouraged and fostered. When people trust that what they say will not result in negative criticism or retribution, they will feel free to communicate their ideas (DeLong & Fahey, 2000). When communication is encouraged and varied opportunities to foster dialogue are facilitated by the organization, people learn to understand each other and develop the relationships which are so important to the sharing of tacit knowledge (Belardo & Belardo, 2002; Davenport & Prusak, 1998; Von Krogh et al., 2000). Some Technology and Communication Characteristics as Enablers for Knowledge Creation Opportunities for individual dialogue across the organization are identified and facilitated using technology. The physical environment and technical resources encourage information sharing, collaboration and virtual communities. Information flows are multi-directional. Technology is user friendly, flexible and open. Recognition of diversity is supported in language translation tools and communication methods. Conclusion The organizations have to invest their resources in the development of new core competencies. E- commerce will continue to support organizational restructuring of core competencies, the creation of new ones and boundary expansion. The development of a strong knowledge strategy as a key component of corporate strategy will become fundamental to the process of knowledge creation and competitive advantage (Zack, 2003). Organizations will need to identify the specific knowledge strategies that will contribute to their organizational goals. Continual innovation will be the motto for those organizations desiring to remain competitive; those who do not or who cannot marshal their internal resources effectively to enhance their performance will not survive. Knowledge creation does not occur by chance; it must be carefully orchestrated. Organizations wishing to improve their knowledge creating ability must value the factors that support innovation and place less reliance on technology to resolve problems or create opportunities. Organizations must develop the characteristics necessary to become a learning organization and remain in a perpetual state of learning: from the external forces that influence its operations and from the internal forces, which shape who listens to whom and what. Organizations need to develop the leadership characteristics, culture, and technology that will support an innovative organizational personality and employ individuals with the experience and expertise needed to enable the desired state to become a reality. Moreover, they must identify the constraints to organizational innovation and develop methods for overcoming them. Organizations must continually reassess their intellectual bandwidth for knowledge creation. 2013, Langkawi, Malaysia. (e-isbn ). Organized by WorldConferences.net 646

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