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Strategic Systems Thinking two
Typology: Exercises
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Introduction In today’s world, knowledge is an important factor when describing corporate strategy and it is part of the features an organization must possess to demonstrate its competitive power in market. A Company can build on its employee knowledge as part of intellectual property or work on its existing knowledge to enhance and realize organization strategy goals. The important of knowledge reflects in organization productivity and efficiency and for this reason, organization knowledge is a key part of strategic process. Jay (1999, P.2) cited Brooking’s and define “Organization knowledge as the collective sum of human-centred assets, intellectual property assets, infrastructure assets and market assets”. In an attempt to link organization knowledge and practise, it becomes important to explore the possibility of measuring knowledge and all other intangible value or asset an organization possesses to set standard reference for performance measurement. Setting performance metric will help organization leader or executive know how well the organization and its employees are doing to meet the targeted organization strategic goals. Community of practice, performance measurement, intellectual capital and social network are all knowledge base corporate strategists that drives organization values which result to efficiency and organization goals. Michel J (1995) quoted Lord Kelvin as once said, "if you cannot measure it, it does not exist". There is no doubt that measurement is so important that management might not even exist without it but before engaging in measuring any feature, we need to understand and have enough knowledge about it. “Knowing what to do is not enough; the challenge for managers is to figure out how to do what they know needs to be done” (Pfeffer and Suttoon 1999, P. 83), one of the ways to figure out how to do what is required is by first understanding and knowing what is required. This is in support of Gray et al (2015) saying “Before we measure something we must ask whether we understand what it is we are trying to measure.” This essay will give descriptive narration of knowledge and value creation creative with exemplary examples of organizations that have successfully use knowledge base strategies to actualize there organization goal and objectives. Knowledge Management /Environment The study of the fundamental principle and practice of strategy and value creations signifies the important of knowledge in an organization. According to Johnson, Scholes & Whittington (2011) “Knowledge is awareness, consciousness or familiarity gained by experience or learning” and when it denotes organization strategic capacity or practice the words organization knowledge is used. Meeta and Gupta (2009) quote Grayson and O’Dell (1998) definition of organization knowledge” as what people know about customers, products, processes, mistakes, and
Figure 1: Nonaka and Takeuchi (1996) SECI Model As shown in the figure above Nonaka and Takeuchi (1996) divides SECI model into four part, Socialization, Externalization, Combination and Internalization. Socialization covers the transfer between tacits knowledge and this can be achieved through guidance and imitation. Externalization is the articulation of tacit to explicit knowledge, this particular part of SECI model is important and at the same time questionable because it is difficult to achieve as it require transforming codifying expert knowledge into easily understandable form for the benefit of the organization. Combination is connection between explicit to explicit knowledge and is the most easiest to achieve. The makeover of explicit knowledge to tacit knowledge in SECI model is called internalization this involves modifying the existing employee tacit knowledge by internalizing explicit knowledge through learning. Knowledge is a vital part of Knowledge management, the socialization and interaction of different type of people having different knowledge is what lead to knowledge management. The clarity on what type of knowledge an organization require, where this type of knowledge can be found, transferring and storing the knowledge and making sure that an organization strategy support suitable environment in the creation of knowledge are all what knowledge management entails. An organization that want to standout in knowledge management practice should have right organization culture that will serve as the core for right processes and environment where people can detect, learn, share and innovate the right knowledge to support organization strategic plan. Although, the role of technology in achieving knowledge management is still an open debate. However, when technology is design and align to support organization processes and culture it will be a valuable tool in conveying codified knowledge. In support of Gray et al (2015) “Before we measure something we must ask whether we understand what it is we are trying to measure” knowledge management entails understanding of organization existing knowledge and formation of fresh knowledge to develop key knowledge asset. Intellectual Capital and Social Networks Cimaglobal (no date) cited Marr and Schiuma (2001) definition of Intellectual capital “as the group of knowledge assets that are attributed to an organisation and most significantly contribute to an improved competitive position of this organisation by adding value to defined key stakeholders”. Intellectual Capital is the value created by an organization that are invisible or intangible, this value can be earned true the relationship or trust between organization and its customer inform of customer relationship or through employees knowledge. Intellectual capital include human capital, relational capital and structural capital. Unlike intellectual property that include intangible creation of unique human mind, intellectual capital is broader and it does not necessarily possesses
uniqueness or patent right but organization possess it. Intellectual property according to Audiopedia (2018), “is a concept or nonphysical entity which is being created and have some uniqueness” examples are protected organization privileges or innovations like patents and trademarks Human capital is the value contributes to the organization by the employee that can be used to solve organization problem, it include the employee ability and expertise. The second classification of intellectual capital is relational capital that describe the relationship of an organization with it customer or suppliers it can be inform of goodwill or inform of contactless services render to customer or third party, like licenses. The last on the list is structural capital that is also organization nonphysical structures like the developed software, intellectual property and processes. Intellectual capital may not necessarily be patentable but it is possess by organization or company and everyone sees it as something that give a company it a competitive edge. According to Audiopedia (2018) “Creating, shaping and updating the stock of intellectual capital requires the formulation of a strategic vision, which blends together all three dimensions of intellectual capital within the organisational context through exploration and exploitation, measurement and disclosure”. The measurement of organization intellectual capital is very important since it framework is helpful in in accessing organization wealth. Intellectual Capital assist the organization in the delivery of better quality, which in turn increase customer satisfaction and productivity and make more value for the organization. A very good example of intellectual capital advantage in an organization was outline by Leif Edvinsson Director of Skandia AFS intellectual capital department, Skandia adopt systematic approach to make intellectual capital tangible by using features like performance procedures and competence base. The primary focus of the AFS intellectual capital department was to focus primarily on way to recognise and measure the organization important hidden value and measure the performance of this values buy using balanced scorecard. According to Maylun (2015) intellectual capital has help the AFS division of Skandia “to have sizable savings and 30% growth rate in their new business, also increased speed of strategic learning, systematic focusing of leadership, and increases in valuation of the company over the book value”. Communities of Practice/Interest Wenger (2002) definition as cited in Simon and Nancy (2009) define “Communities of practice (CoP) or learning network as groups of people who share a concern or a passion for something they do and learn how to do it better as they interact regularly”. CoP are different from other type of group, like working group and project team as they are mostly voluntary and self-selecting .They are formed around shared learning interest or passion in a specific domain of knowledge rather than organization objectives. Lave & Wenger (1991). It is through the process of
Figure 2: Performance Management and Performance Measurement Relationship Performance Management (PM) are those activities that consistently ensure goals are being met in an efficient and effective manner (Audiopedia,2017), it focus on the organization, employee and unit performance and ensure alignment with the organization strategic aim and priorities. Performance Management assist supervisor to compare organization business progress with organization strategic goals. Armstrong and Baron (1998) cited by Audiopedia (2017) defined it as a “strategic and integrated approach to increase the effectiveness of companies by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.” The process whereby an employee’s individual goals are combine with organization strategic goal to increase organization revenue and productivity is called self-propelled performance process (SPPP).This can be practice by an organization system or a section of the organisation likes departments or units. In order to get the current organization performance status and to measure it success rate with respect to strategic goals and objectives there is need to set a performance indicator. Performance indicators complement organization Key performance indicators and as well as support the employees in aligning with organization strategy objective. According to David (2015) Key performance indicators (KPIs)” are those indicators that focus on the aspects of organizational performance that are the most critical for the current and future success of the organization”. It is different from performance indicator because is more crucial and important to the organization business. Key performance indicators are financial and non-financial processes practice by organizations to show the extent of wish they have accomplished their strategic goal. Performance Management Performance Measurement
One of the important of performance management is for the workforces of an organization to measure how they have performed compare to organization KPI target over specific duration set by the performance evaluator. A good practice of performance management implementation is exercise by Essex Police in an attempt to simplify and improve citizen experience about Essex police operation and to reliably deliver performance across it various department .The performance management framework is called “plan on a page” and this has bring a great rigor to how the world perceived performance management. Essex police operation introduced Key performance question (KPQs) that serves as the intermediary step between their agreed strategic goals and the established KPIs. The Advanced Performance Institute (API) pioneered kPQs to improved performance measures. As pointed out by Gray et al (2015) saying “Before we measure something we must ask whether we understand what it is we are trying to measure.” KPQs pointed out the necessary features an organization should know before executing it strategic objective, it provide better way of choosing right performance indicator and also assist in feeding performance setting to KPIs. Gilmartin of Essex police department mentioned that the KPQ “provide clear alignment in understanding the nature of the problem rather than shouting loudest.” Because of the implementation of this performance framework, Essex police have been able to efficiently initiate bail management to offender and this has helped in resolving crimes and bringing culprits to justice. There are some challenges with performance measurement implementation facing organization nowadays. These challenges include and not limited to lack of performance reward to employees and organization resistance to performance measurement according to Bourne and Neely (2003) “The resistance to any new performance measurement system may come from the lack of understanding, insufficient training, and, sometimes, the fear of personal risk”. In addition, De Waal and Counet (2008) also ascribe the challenges with performance measurement to “unclear strategy, lack of a performance measurement culture, organisational instability, and the low priority accorded to the performance management system) Conclusion Knowledge is no doubt the bedrock of an organization strategic practice, one of the most effective way for an organization to share and transfer knowledge is through community of practice. Although, it is very difficult to measure the value of knowledge possesses by organization because of it intangible nature except it is converted to tangible value through application of intellectual capital. Knowledge is an important factor that make organization realise its strategic objective and effective performance management supports the development of organization knowledge base. In order to realize effective performance measurement, we must have adequate knowledge and understanding of what want to measure. This will yield excellent result on chosen performance indicators and
Maylun, B. (2015) ‘Intellectual Capital at Skandia’, Ernst & Young Center for Information Technology and Strategy. Meeta Dasgupta and Gupta R.K. (2009) ‘Global Business Review’, Innovation in Organizations: A Review of the Role of Organizational Learning and Knowledge Management, 10(2), pp. 203-1224. Sage Journals [Online]. Available at: http://gbr.sagepub.com/cgi/content/abstract/10/2/203 (Accessed: 22 October 2019). Michel, J. (1995) ‘Performance measurement and performance management’, International Journal of Production Economics, 41(1), pp. 23-35. Science direct [Online]. Available at:https://www.sciencedirect.com/science/article/abs/pii/092552739500081X (Accessed: 17 October 2010). Pfeffer, J. and Suttoon, R. (1999) ‘Knowing "What" to Do Is Not Enough’, TURNING KNOWLEDGE INTO ACTION , 41(2), pp. 83-108. Sage Journals [Online]. Available at: http://cre.sagepub.com (Accessed: 22 October 2019). Simon, H. and Nancy, w. (2003) Communities of practice: linking knowledge, policy and practice. odi [Online]. Available at:https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/1732.pdf (Accessed: 24 October 2019).
