SIXTH WATER INFORMATION SUMMIT: BREAKING THE BARRIERS LET WATER INFORMATION FLOW!

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1 SIXTH WATER INFORMATION SUMMIT: BREAKING THE BARRIERS LET WATER INFORMATION FLOW! WATERWEB CONSORTIUM AND IRC INTERNATIONAL WATER AND SANITATION CENTRE SEPTEMBER 9-12 DELFT, THE NETHERLANDS 2003 KNOWLEDGE MANAGEMENT IN STRATEGIC DEVELOPMENT OF WATER SERVICES Osmo T. Seppälä 1 ABSTRACT: Water utility operations require very long-term considerations in their decisionmaking and management. Visionary management utilising futures research methodologies enables water services organisations to utilise new opportunities in their future operations and to manage uncertainties. Water utilities often do not manage well their knowledge and information processes that are essential for their performance and success. Water utilities have a lot of tacit knowledge with their experienced staff, but this knowledge cannot be easily shared and transferred. Utilities often do not effectively use modern knowledge management tools to handle even the explicit knowledge available within their systems and organisations. Knowledge management, visionary- and strategic management should be interlinked in the utility s decisionmaking and implementation processes. Water utilities need to increase their knowledge base on these management approaches and tools and start utilising them more effectively. The current situation and experiences on the utilisation of strategic-, visionary- and knowledge management tools in water services sector were surveyed. The survey included a literature review, an Internet-based Delphi survey, and personal interviews and questionnaires. The survey covered over 30 countries, but more detailed studies were carried out in Finland, Kosovo and Kenya. Short- and medium-term strategic management tools are already applied in many water utilities, but visionary and knowledge management tools and methodologies have not yet been widely applied. Most utilities are not well aware of these concepts, but in practice they apply implicit management tools that have features from known visionary and knowledge management methods. NEED FOR VISIONARY AND KNOWLEDGE MANAGEMENT Water utilities are typically engaged in long-term and continuous operations. However, their management styles and practices do not often adequately comply with the long-term nature of the operations and path dependence of the decisions. Moreover, most water utilities have traditionally not been futures-oriented, and in practice not very interested in the ethical basis of society as regards institutional arrangements of water services provision. 1 Tampere University of Technology, Finland

2 The need for strategic development, i.e. visionary development and management in water utilities arises among others from the following very long-term considerations: Safeguarding availability of water resources in the long-term Long-term investments (long lifetime of assets) Need to consider regional cooperation (e.g. supra-municipal) Irreversible and path dependent nature of decisions (e.g. long-term concessions, privatisation). Decision-making and management in an organisation can be (1) opportunistic, (2) strategic, or (3) visionary (Figure 1). Opportunistic or operative management focuses on the short-term operational activity at the present time or the near future (1-2 years). Preparing for future changes and challenges requires more long-term strategic planning and management (3-5 years). Visionary management is a long-term activity that focuses beyond the foreseeable near future (10-30 years or even more). VISION AND FOCUS VISIONARY MANAGEMENT STRATEGIC MANAGEMENT 0 +1 YEAR +3 YEARS +5 YEARS YEARS OPPORTUNISTIC MANAGEMENT Figure 1. Opportunistic, strategic and visionary management (modified from Malaska and Holstius, 1999). The main challenge of visionary management is to enable the organisation to utilise new opportunities in its future operations and to manage uncertainty. Water service organisations also need better leadership in order to commit their human resources to perform better towards known and shared goals and vision. Visionary leadership is especially important for policy-making organisations, but similarly for operational organisations such as water utilities. Water utilities also do not in practice manage well knowledge and information processes (communication, core competencies, change management), although these are the most central element for their performance and success. They often lack clear direction and purpose of strategic information collection, and they suffer from inefficient quantitative management of

3 information and knowledge. Water utilities usually have an enormous amount of tacit knowledge with their experienced staff, but this knowledge cannot be easily shared and transferred to colleagues and future generations. It has been assumed that water service organisations currently do not widely have in effective use the modern knowledge management tools to handle even the explicit knowledge available within their systems and organisations. In practice, there is a strong interlink between knowledge management, visionary- and strategic management in an organisation s decision-making and implementation. Also water service organisations need to learn to utilise these management approaches in order to fulfil their growing requirements in the future. KEY ELEMENTS OF VISIONARY LEADERSHIP AND MANAGEMENT The future-oriented and visionary leadership in a changing environment requires flexibility, adaptability, and strategic thinking. According to Wilson and Malaska (Wilson, 2001), Visionary management is a higher and more participatory form of strategic management. It is characterised by leadership of an organisation toward the successful achievement of a dynamic and shared vision of what the organisation can, and should, become. It is driven by a clear sense of tactics, and by a clear sense of the future forces and uncertainties in the business environment. By communicating the vision throughout the organisation, visionary management opens up new avenues of managerial and employee creativity, and brings forth an emotional commitment to action that makes future success possible. Visionary management essentially builds on the principles of strategic management especially on the shared core vision but it utilises more comprehensively the methodological tools of the futures research, especially the scenario working process. Visionary management involves a proactive approach to the organisation s operations and strategic planning. Visionary development includes developing new core competences, knowledge, skills and resources for the organisation. Visionary development has to be built step by step. When the development tasks have been defined they have to be prioritised and the strategically most important next steps are chosen (Figure 2).

4 VISION AND FOCUS VISIONARY TARGETS OBJECTIVES FOR FUTURE ACHIEVEMENTS NEXT STEP PRESENT STATE AND PERFORMANCE PRESENT RESOURCES, SKILLS AND KNOWLEDGE NEW SKILLS, KNOWLEDGE AND RESOURCES DEMANDED BY THE VISION VISIONARY DEVELOPMENT TASK Figure 2. Visionary development task (modified from Malaska and Holstius, 1999). The following futures research methodologies and tools are very applicable in the visionary management of organisations such as water utilities: Visioning process Visionary management workshops Technology foresight studies Systems thinking (such as Soft Systems Methodology, SSM). Scenario process Visionary scenario process (VIS). Scenarios are increasingly used as a strategic and visionary management tool. Nowadays scenario process is often used in integration with the strategy development process. In this integrated approach the use of scenarios, core competence trees and strategic analysis is combined (Godet, 2001). The objective is to define strategic targets and actions based on the organisation s core competencies according to scenarios that are applicable both to the organisation and its general operational environment. Although Godet s approach has been developed for business enterprises, it is very applicable also to water utilities.

5 KEY ELEMENTS OF KNOWLEDGE MANAGEMENT Knowledge management (KM) is a systematic approach to control the flows of knowledge. The aim of KM is to increase the performance through efficient utilisation of knowledge resources by creating a system that can deal completely with the existing organisation s knowledge. KM is dealing with two dimensions of knowledge in organisations: explicit (tangible) and implicit (intangible). KM means formalisation of and access to experience, knowledge and expertise. For a water utility, KM enables new capabilities, superior performance, encourages innovation and improves customer value. The essential dimensions of the knowledge management framework are described in Figure 3 and interpreted in Table 1. KM includes generating, exchanging, disseminating, accumulating, extracting and processing knowledge, with the use of various technological and socio-cultural tools. Technological tools, such as Information Technology (IT) tools are increasingly used, but social tools are still important especially in processing tacit knowledge. KM offers a long-term approach in utility management. It allows utilities to leverage their most valuable assets, collective know-how, talent and expertise. Only by focusing on these resources can water utilities be innovative and handle new threats and opportunities. The following knowledge management tools are among the most commonly applicable to water utilities: Decision-support systems (DSS) Intranets, Extranets, Internet Expert systems Artificial intelligence Cyber systems.

6 DEVELOPMENT AND CHANGE MEASUREMENT TOOLS AND METHODS KNOWLEDGE MANAGEMENT FRAMEWORK KNOWLEDGE CONTENT ORGANIZATION AND MANAGEMENT CONCEPTS Figure 3. Knowledge management framework (Tuomi, 1999). Table 1. Interpretation of the knowledge management dimensions (Tuomi, 1999). Framework Dimension Concepts Development and change Organisation and management Content Measurement Tools and methods Interpretation An integrated set of constructs for understanding knowledge and its management in organisations Migration and co-existence of knowledge frameworks, processes, tools, and behaviour Integration and institutionalisation of formal, informal and knowledge processing structures; knowledge management roles; organisational institutions, including incentive structures, knowledge sharing policies, and culture Characteristics and typologies of the products of knowledge processes Valuation of knowledge content, capabilities, and potential opportunities for their utilisation; measuring knowledge processes, and locating areas of improvement Methodologies, organisationally tailored communication packages, information systems

7 CASE STUDIES ON THE USE OF STRATEGIC, VISIONARY AND KNOWLEDGE MANAGEMENT IN WATER UTILITIES Experiences on the utilisation of the management tools (strategic-, visionary- and knowledge management) in water services sector were surveyed in selected countries. The survey included (1) literature review, (2) Internet-based Delphi survey, and (3) personal interviews and questionnaires. Internet-based Delphi surveys on Knowledge Management and Visionary Management Internet-based Delphi surveys were made between March and May 2003 to assess the current situation in utilizing various management tools and techniques in the water services sector. The Delphi survey had 24 questions in eight thematic areas: Current use of management practices Applying visionary management tools Applying other strategic management tools and concepts Applying knowledge management tools Participation in professional networks Innovations Future needs and demands for VM and KM VM and KM in other organisations. The Delphi survey was addressed to about 150 water experts in over 30 different countries, but only 23 experts responded (15 %). Delphi surveys were complemented by personal communication with selected water utilities. Many utilities use several VM and KM applications, but in an implicit manner and often not knowing the theoretical basis or terminology of concepts. For instance, in Finland the biggest water utilities have during the last five years started preparing their strategy documents, applying some visionary techniques such as visioning and scenario process. Most commonly strategy processes have included application of Balanced Scorecards (BSC), Critical Success Factors (CSF), Business and Corporate Plans, etc. Many water utilities are using management information systems (MIS), decision-support systems (DSS), and various IT-based solutions, including artificial intelligence applications and expert systems especially in their treatment process control. Almost all interviewed water utilities have applied performance indicators (PI) and have participated in benchmarking (BM) activities. Field studies in Kenya, Kosovo and Finland Water utilities in Kenya, Kosovo and Finland were further interviewed in order to assess their current understanding and use of management tools. Most of the methodologies and tools of strategic, visionary and knowledge management have not yet been widely applied in the water services sector. Short- and medium-term strategic management tools are already applied in many water utilities. These include management information systems (MIS), decision support systems (DSS), benchmarking (BM) and the use of performance indicators (PI), and development of balanced scorecards (BSC) or corporate scorecards (CSC). Currently the most widely used tools are performance indicators (PI) and benchmarking (BM) procedures. Balanced scorecards (BSC) are emerging in water utilities, but very few practical applications were found in the countries included in the study. Most utilities are not well aware of VM and KM concepts, but in practice they yet apply implicit management tools that have features from known VM and KM methods.

8 Details and results of the field studies will be published in the Journal of Infrastructure Systems (ASCE, USA) in late 2003 or early 2004 (Seppälä et al, 2003).

9 ACKNOWLEDGMENTS The authors wish to thank all participants of the Delphi surveys and managers and staff of the water utilities contributing to the information and results obtained during the study. Jenny and Antti Wihuri Foundation (Finland) is acknowledged for the financial support. REFERENCES Godet, M., Creating futures: Scenario planning as a strategic management tool. Economica. London, UK. 269 p. Malaska, P. and Holstius, K., Visionary management. Foresight. The Journal of Futures Studies, Strategic Thinking and Policy, 1(4), Seppälä, O.T., Rodiqi, I., Nyangeri, E.N. and Hukka, J.J., Leadership and Knowledge Management in Water Services. Manuscript of an article to be submitted to Journal of Infrastructure Systems (ASCE). Tuomi, I., Corporate knowledge: Theory and practice of intelligent organizations. Helsinki, Finland: Metaxis. Wilson, I., The uses and power of vision. In: Stevenson, T., Masini, E.B., Rubin, A. and Lehmann-Chadha, M. (eds.). Proceedings of the Methodology Seminar in Futures Studies: The Quest for the Futures, Turku, Finland, June 12-15, 2000.

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