Knowledge Management Via IT And Business Strategies Alignment:
B2B MSC Companies In Kuala Lumpur, Malaysia
Asleena Helmi, University Malaysia Sarawak
ABSTRACT:
The phrase “knowledge management” (KM) has often been reported in business press as “ the power of knowledge reshapes corporate fortune”. From an organizational perspective, knowledge management is the management of the organization towards the continuous renewal of the organizational knowledge base. While some researchers have suggested that some investments in information systems would yield further benefits in competitive advantage, others such as the IT economist Paul Strassman, concluded that there is no relationship whatsoever between computer expenditures and company performances. The confusion between knowledge and information has caused managers to spend billions of dollars on information technology investments that have often yielded marginal results. This paper explores the level of knowledge management by focusing on information technology and business strategy alignment among multimedia super corridor companies (MSC) in Malaysia. In this context the companies play a key role in paving new strategic and managerial innovations within the new knowledge-driven economy (KE) in Malaysia. The challenge therein lies in developing a new discipline and preparing a new group of knowledge professionals with a blend of expertise that has not been seen in previous business practices.
1. Introduction
The vital importance of knowledge in business has always been recognized but, up until now, organizations have not felt able to manage it because they understood neither the problems and the opportunities nor the strategies and solutions (Maureen, 2000). This picture is gradually changing as models, methods, tools and techniques for effective knowledge management are becoming available and as organizations realize the importance of knowledge and thinking to their capacity to adapt to the changing world. The key to achieve effective knowledge management is recognizing the difference between information and knowledge. This paper focuses on information technology and business strategy alignment as indicators of KM. Essentially because IT (i.e.: information) as a collection of integrated data is only a tool to acquire the best strategy (i.e.: knowledge) to plan and manage a company. Moreover the concern for strategic alignment and IT business value is related in that an organizations’ inability to realize sufficient value from their IT investment seems due in part to an absence of strategic alignment. Therefore, any attempt to measure or improve IT business value must consider the extent to which IS and business strategies are aligned. Hence the level of IT and business strategy alignment would indicate the level of KM amongst the B2B multimedia super corridor companies in Malaysia.
1.1. Why MSC Companies?
The sample population for this study is 92 companies within the business-to-business (B2B) categories that have acquired the multimedia super corridor status. The MSC companies were chosen as they have acquired an high level of venture capital in terms of leveraging on an educated and skilled workforce, and by investing in the right infrastructure and info-structure. In this context the companies play a key role in paving new strategic and managerial innovations within the new knowledge-driven economy (KE) in Malaysia. Within the KE environment, the concept of knowledge management is now increasingly recognized as an important source of economic growth and catalyst for comparative advantage. Essentially knowledge has always been managed, at least implicitly. However, effective and active knowledge management requires new perspectives and techniques and touches on almost all facets of an organization (Wigg, 1996). As such companies must attain a high IT-business alignment in order to achieve knowledge management. Paramount to implementing KM is recognizing the difference between knowledge and information. The challenge lies in developing a new discipline and preparing a new group of knowledge professionals with a blend of expertise that has not been seen in previous business practices.
1.2. Knowledge Management As A Business
Strategy
In order to adopt KM as a business strategy, a company must redefine its strategies, its organizational structure, and its performance assessments (Bertels, 1996). Based on experiences with guiding the companies who have reached this stage, the American Productivity and Quality Center (APQC) offers guidance, which indicates how various companies have successfully achieved KM. The following statements are guidelines, which indicates that KM has been successfully integrated throughout an organization:
¨ KM is directly linked to your business model.
¨ KM initiatives are widely deployed throughout your organization.
¨ All your managers and employees are trained to use your KM technologies.
¨ You methodically assess your KM strategy, identify gaps, and outline methods to close the gaps.
¨ You have a formal support structure in place to maintain KM.
¨ You have rewards programs in alignment with your KM strategy.
¨ Sharing knowledge is now the norm in your organization.
2. Literature
Review
2.1. Identifying Knowledge Strategies
In order to formulate knowledge strategies, understanding the four characteristics of knowledge becomes imperative for organizations within the knowledge economy. Firstly, knowledge is embedded in people’s mind and cannot be owned and controlled. Peter Drucker (1994) has argued that in the emerging economy, knowledge is the primary resource for individuals and for the economy overall. Ultimately most assets are subject to diminishing returns except for knowledge. In contrast, knowledge thrives on the concept of increasing returns on the resources deployed, since “knowledge shared is knowledge multiplied”. Network effects can emerge as more and more people use knowledge, which will simultaneously increase its value. Secondly knowledge can be a difficult asset to trade. Intellectual properties are hard to enforce when a knowledge artifact such as reports or a software program can be readily copied without detection. Finally the needs to cooperate with partners to generate knowledge and the uncertainty of the results often mean the exact distribution of value cannot be agreed. (Paramjit, 2000). Hence the value realized by the partners may differ even if each hold identical unrestricted rights to the knowledge.
2.2. Paradigm Shift In Organizational
Knowledge Processes
Greater proactive involvement of human imagination and creativity is needed to facilitate greater internal diversity to match the variety and complexity of the Net oriented market. Often characterized as “living on the edge of chaos”, this model is characterized by its relative lack of structure and lack of external controls. (Kalakota and Robinson, 1999). It is a model based on a few rules, some specific information and a great degree of freedom. Within the “edge of chaos” model, designers of organizational knowledge management systems can at best facilitate the organization’s “self-designing”. In other words, not only do organizations’ members define problems for themselves and generate their own solutions, they would also evaluate and revise solution-generating process. By explicitly encouraging experimentation and the rethinking of premises, this process promotes reflection in action and creation of new knowledge. (Hildebrand, 1999).
2.3. Leveraging The Right What, Whom And
When Of KM
The information processing view, evident in scores of definitions of knowledge management in the trade press and academic texts has often considered organizational memory of the past as a reliable predictor of the dynamically and robust business environment. Malhotra (2000) contends that this idea applies to an outdated business model. Information systems in the old industrial model mirror the notion that businesses will change incrementally in an inherently stable market, and executives can foresee change by examining the past. "The basic premise is that you can predict how and what you will need to do and that information systems can simplify this and do it efficiently," he says. The new business model of the Information Age, however, is marked by fundamental, not incremental, change. Consequently, businesses cannot plan long-term; instead, they must shift to a more flexible "anticipation-of-surprise" model. (Hildebrand, 1999). Thus, it becomes impossible to build a system that predicts who the right person at the right time even is, let alone what constitutes the right information.
2.4. A
New Group Of Knowledge Professionals
From a KM perspective, there is a need to develop and capture more
successful working methods and approaches including computer-based tools.
Clearly, the knowledge possessed by a person is a separator ``knowledge is
power'' and good education provides a considerable edge. (Wigg, 1996) However,
when working in the developing world, we have often found that people's mental
machinery their intelligence and attitude is a greater resource than what they
know and understand. Given that, and the increasing levels of education in many
developing nations, we have the potential that people everywhere can
participate in the knowledge economy on more equal terms than before. One key
learning area is that we need to adopt greater people-centric perspectives of
knowledge. To be viable, we need constant learning led by constant innovation.
Technology only goes so far it can only provide us with rudimentary reasoning
devoid of innovation and with rather concrete analyses of the past through
approaches such as knowledge discovery in databases. (Klien, 1998). In other
words, people are the real intelligent agents, those that see and act on new
opportunities that really are creations of the mind. It is those opportunities
that will bring the world forward. In spite of all present limitations, KM is
already very useful even when it is narrow in scope.
3. Research
Method
The research method for this paper was mainly conducted through the distribution of questionnaires to the ninety-two Multimedia Super Corridor status companies engaging within the B2B e-business category. A questionnaire containing 30 statements relating to e-business processes was distributed to the sample population. However only 60 questionnaires were completely answered. The questionnaires were sent via e-mail over the Internet and snail mail. Along with the questionnaire, the respondents will receive an introduction letter that explains the objective of the survey and explained several concepts of the survey. Following the code of ethics, respondents were assured anonymity and confidentiality.
3.1. Research
Analysis
The research analysis was based upon Tjan’s (2001) portfolio strategy, similar to the Boston Consulting Group’s matrix with its cash cows, starts, questionable projects and dogs to create an Internet portfolio. (Turban, 2002). The strategy was based on company fit and the projects viability, which could either, be low or high. These two elements combined create an Internet portfolio map. By creating the portfolio, the MSC’s would be able to identify and leverage its business process to invest in new e-commerce opportunities. Viability was assessed by four business strategies mainly: market value potential, time to positive cash flow, personal requirements and funding requirements. For fit, the following indicators of knowledge management criteria were used: alignment with core capabilities, alignment with other company initiatives, fit with organizational structure, fit with company’s cultures and values and ease of technical implementation.
With both elements, each EC initiatives are assessed on a scale of 1-5 (or on a qualitative scale of high, medium, low) and a weighted average score per criteria in percentages is computed. The various initiatives are then mapped on the Internet portfolio matrix, based on the two average scores. The Internet matrix is divided into four cells. If both viability and fit are low, the project is abandoned. If both are high, then the project is adopted. If fit is high, but viability is low, the project is sent to redesign. Finally if fit is low but the viability is high, the project should be considered for outsourcing or spun off.
|
EC Application |
Alignment with core capabilities |
Fit with organizational structure |
Fit with company’s culture and
values |
Ease of Technical Implementation |
Average |
|
|
E-marketplace |
70 |
75 |
85 |
90 |
80 |
|
|
Sell side |
45 |
40 |
45 |
38 |
42 |
|
|
Procurement |
90 |
80 |
80 |
90 |
85 |
Table 1: Viability of e-business strategies of MSC’s in Malaysia
|
EC Application |
Market value potential |
Time to positive cash flow |
Personal requirements |
Funding requirement |
Average |
|
E-marketplace |
62 |
43 |
32 |
50 |
47 |
|
Sell side |
70 |
65 |
45 |
72 |
63 |
|
Procurement |
82 |
78 |
68 |
80 |
77 |
Table 2: Core capabilities of MSC’s in Malaysia
|
Averages |
Fit (X-axis) |
Viability (Y-axis) |
|
E-marketplace |
80 |
47 |
|
Sell side |
42 |
63 |
|
Procurement |
85 |
77 |
Table 3: An alignment of viability and fit capabilities of Malaysian
MSC’s
(b) Spun off (a) Redesign
(c) Invest
Figure 1: An KM application portfolio- the case of Malaysian MSC’s
3.2. Global Market Penetration
From Figure 2 above, the
adjusted R-squared value is interpreted at an approximately 0.99 which suggests
that there is a high measure of fit or alignment between the two independent
variables on the least squares regression line. The quadrant (a) illustrates a high scale on viability and medium scale on
fit axis with regards to development of the global market penetration. Hence a
redesign phase is recommended whereby the MSC’s should capitalize on a high
degree of customer and competitor connectivity and use of information
technology. The developments of Internet-based applications to optimize
interaction with customers and build market-share are identified as critical
success factors. A way in which the MSC’s could implement such a strategy is by
creating e-commerce web sites with value-added information services and
extensive online customer support.
3.3. Outsourcing of Sales And Distribution
The (b) quadrant above (see Figure. 2) shows a medium scale on viability and low scale on the fit axis with regards to sales and distribution processes. This quadrant indicates a low amount of internal company, customer and competitor connectivity and information sharing. Therefore the recommended strategy is by outsourcing the business process which could improve efficiency and lower cost by using Internet and the Web as fast, low cost way to communicate with customers, suppliers and business partners. The use of e-mail, chat systems, discussion groups are some of the examples. A novel idea to increase customer participation is by creating and transforms a community site into a commerce site. The critical success factor would be by understanding and identifying a particular niche industry and its information needs. For example companies could engage in sell sample chips to engineers that fit into the decision-support process. The underlying notion is to build a community that relies on the site for decision support.
3.4. Efficiency In Procurement
With quadrant (c) in Figure 1, both
the viability and fit axis illustrated a high scale. Therefore a continued
investment in procuring technology is encouraged. This quadrant indicates that
the MSC’s in Malaysia has high initiation for internal connectivity and
pressures to substantially improve its business processes. Within industries,
which exchange higher volume of information and involve distributed team
projects, then higher-end collaborative networks such as teleconferencing would
be ideal. Moreover the higher percentage (90%) given from Table 1 above
indicates that the knowledge professionals within the MSC’s have a fast
learning curve and adaptation of collaborative applications such as enterprise
resource planning (ERP) in procurement activities. In this scenario, the
widespread of internal Internet-based technologies such as intranets and
extranets has substantially improved information sharing and collaboration
within the business and its trading partners.
4. Implications
of KM
Figure 2: A model of KM in Strategy Alignment (Turban, 2002)
4.1. Identifying
EC Opportunities
From Figure 2 above, the outcomes of
the knowledge management in the model is identified as the alignment in
creating an application portfolio, strategic guidelines, strategic plan and
resource allocation. When these elements are aligned together, the level of
information symmetries would be enhanced for both the primary and support
activities within the companies supply chain management (SCM). One of the main
impetus in today’s market is collaborative network. Industrial giant
corporations such as General Motors, Ford, General Electric and Standard Oil
were impressed with the idea of virtual integration. In response to their high
transaction costs in building and maintaining linkages outside their corporate
boundaries, they sought to link the disparate elements of the value chain under
common ownership. The focused processes
across the supply chain made it seem cheaper to make than to buy supplies.
(Kotler, Jan and Maesincee, 2001). More importantly, the processes had reduced
the time and shorten the cycle time required to consolidate transactions and
coordinate activities across the various business activities. From this
perspective, the MSC’s in Malaysia could possibly benefit by emulating their
western counterparts above by focusing on building collaborative network
amongst one another.
4.2. Cultivating
Knowledge Professionals
The new digital economy today demands
a new kind of executives, one who freely share ideas and expertise across the
organization (the horizontal part of the “T”) while remaining fiercely
committed to business unit performance (the vertical part). These new blend of
expertise are known as T-shaped managers. (Hansen and Oetinger, 2001).
Nonetheless despite their best efforts, most companies company continues to
undermine their greatest asset in the knowledge markets: the wealth of
expertise, ideas and insights of their employees. By not capitalizing on these
wealth of knowledge, companies would lose the opportunity to improve
performance or identify new business opportunities altogether. Hansen and
Oetinger (2001) maintained that effective T-managers would benefit companies of
almost any size particularly in large size organizations where operating
business units have been granted considerable autonomy. Although such working
conditions spurs innovation and promotes sensitivity to local market
conditions, it can also lead to competition between units, which may deter,
rather than share expertise. Hence only by encouraging collaboration, a
T-shaped management system can be a powerful counterbalance to such negative
behavior. In other words, though a T-shaped management system is favorable, it is
a working culture that needs to be cultivated within an organization.
4.3. Re-evaluation
Of Performance Measurement
Traditionally financial incentives have often been the basis of measuring performance. However developed financial incentives without scrutiny could encourage the hoarding of knowledge and other counterproductive practices. For example linking an annual bonus solely to a sales representative volume growth could create unhealthy competition within a company’s sales force, which in extreme cases damage the overall performance. Instead within the knowledge economy, incentive systems should promote a broad range of corporate objectives and successful companies tend to incorporate KM among them. Incentive plans can also include coveted office space and other obvious status symbols as well as the opportunity to travel and to receive more challenging assignments. (Hauschild, Licht and Stein, 2001). In this context, the MSC can be seen as measure of cultivating knowledge management since it is a status, which attracts world-class companies and facilitates knowledge transfer of leading-edge technologies. This Malaysian government project also offers other non-financial incentives that could potentially generate high value-added and spillover effects for the Malaysian economy.
4.4. Leveraging
KM Technologies
Essentially KM technologies consist of three integrated components namely enterprise resource planning (ERP), supply chain management (SCM) and customer relationship management (CRM). (Cunningham, 2001). The prices for the high level of integration of data related to business processes was paid in terms of the agility and flexibility required for adaptation. Nonetheless the KM technologies have its share of shortcomings. The earlier ERP models developed by companies such as SAP are still evolving to develop better external information flow linkages in terms of CRM and SCM. The challenge for the MSC’s lies in terms of ensuring the adaptability and flexibility of information interfaces and information flows- both internally and externally which are essential features for coping with the dynamically changing and competitive business environment. Technology will likely play an enabling part in these activities. However, knowledge management is in danger of being perceived as so seamlessly entwined with technology that its true critical success factors will be lost in the acquisition of tech-savvy merchandises. In short human beings must take central role in knowledge creation and not information technology per se.
5. Conclusion
The effects of better KM will not always be positive and desirable. Consumer
companies, political parties, and others, wish to gain greater understanding of
how to influence their customers through advertising, sales tactics and some
even through misinformation and propaganda. On the other hand, we also see an
emerging availability of reliable expertise knowledge, insights, information,
and explanations for direct access by consumers to give them understanding and
insights to counter undue influences. It is already clear to advanced
management teams that they need to manage knowledge-related activities
systematically and explicitly. They have numerous options and we see many
different approaches to applied KM. As the world gains further experience, we expect to see strong patterns
of what works well and what may be questionable or only apply in specialized
situations. The stakeholders of the MSC’s in Malaysia need to realize
that a new competitive battleground is emerging where knowledge and information
technology is the ammunition. The new digital age will bring about difficulties
for ``old guard'' management teams who rely on tangible and visible aspects of
work and on conventional wisdom. A new blend of knowledge professionals will be
the next team management, which must be met by local undergraduates and skilled
workforce. Clearly there will be greater differences between those that act
proactively and those who follow. In other words, new advances in KM, and adoption of broad KM practices, will bring
about great possibilities for creating new economically important products and
services. In
conclusion, it becomes imperative for companies in the digital economy to
strategically align their knowledge management technologies and skills as a new
method in reaping and sustaining competitive advantage.
References
Bertels.T, “The Scope of Knowledge Management”, The Knowledge Management Forum, Blackwell, London, 1996.
Cunningham. P,“E-Commerce
and E-CRM: Planning a Successful Strategy” Queensland University, Australia,
2001.
Drucker, P.F. "The Theory of Business," September/October, Harvard Business Review, 1994.
Hansen. T and Oetinger. P, “ Introducing T-Shaped Managers: Knowledge Management’s Next Management”, June/July, Harvard Business Review, 2001.
Hauschild. L, Licht. P and Stein. M, “ Creating a Knowledge Culture”, McKinsey Quarterly, Number 1, 2001.
Hildebrand. C, “ Does KM= IT?”, CIO Enterprise, Sep, 15, 1999. [URL: http://www.cio.com/archive/enterprise /091599_ic.html]
Kalakota, R. & Robinson, M. e-Business: Roadmap for Success, Addison Wesley, Reading, MA, 1999.
Klein, D.A, The Strategic
Management of Intellectual Capital, Butterworth-Heinemann, Boston, MA, 1998.
Kotler. P, Jan. T, Maesincee. K, “
Marketing Moves: A New Approach to Efforts, Profits and Renewal”, Harvard
Business School Press, Boston, 2001.
Malhotra. Y, “Knowledge Management for E-Business Performance: Advancing Information Strategy to ‘Internet Time’, Information Strategy: The Executive’s Journal, Vol.16 (40, 2000, pp. 5-16)
Maureen. P, “Marketing Lessons from e-failures”, McKinsey Quarterly, Number 4, 2000.
Paramjit, S.T, “Multimedia Super Corridor: Introducing a New Economy in Malaysia”, ASEAN Roundtable, 2000.
Tjan. K, “E-Commerce: Business, Technology & Society”, Blackwell, London, 2001.
Turban. E, “Electronic Commerce: A Managerial Perspective of E-Commerce”, Prentice Hall, New Jersey, 2002.
Wigg. K. M, “On the Management of Knowledge”, The Knowledge Management Forum, Blackwell, London, 1996.
Contact The Author:
Asleena Helmi, Faculty of Economics and Business, University Malaysia
Sarawak (Unimas), 94300 Kota Samarahan
Sarawak www.unimas.my
Tel: 082-671000 (ext:338); Email: hasleena@feb.unimas.my