FACULTY OF BUSINESS AND

SOCIETY

Module Title:

STRATEGIC SYSTEMS THINKING

Module Code:

ST4S39

Module Lecturer:

BERNARDO BATIZ LAZO

Student Name:

ONAIBE LAWRENCE

Student Number:

R1509D1016434

Assessment Title and Tasks:

“Before we measure something, we must ask whether we understand what it is we are trying to
measure.” (Gray et al, 2015)

Critically discuss the above statement in relation to effectively developing the strategic
knowledge base in YOUR organization.
 TABLE OF CONTENT

Abstract

Introduction

1. Knowledge Management/Environment

1.1 Knowledge and Its Meaning

1.2 Knowledge Management

1.3 Knowledge Management and Intellectual Capital

1.4 The Nexus of Knowledge Management

1.5 Organizational Learning and Knowledge Management

2. Intellectual Capital and Social Networks

2.1 Intellectual Capital

3. Understanding Community of Practice

3.1 CoP and Organizational Value

3.2 CoP and Power

4. Performance Management System

4.1 Performance Systems and It’s Challenges

5. Conclusion
 ABSTRACT

Knowledge makes up the competence base of any organization, the more knowledge-
intensive an organization is, the more relevant it becomes. Business system design relies
on the foundation of knowledge in value creation and its management is main in any
business system. Intellectual capital which is comprised of human, structure and
relationship capital is the interaction of social capital, human capital and knowledge
management. In community of practice, a group of people with common interest in a
formal setting share information together with experience that further better their
performance and responses in the workplace where management’s sponsorship is key
which counts for the power of CoP. In a performance system, there must be a distinction
between appraisal and measurement which clearly simplifies its challenges, and proper
synchronization between organizational-level and individual-level goals.
 INTRODUCTION

Organizational performance deeply relies on the modification or the betterment of

already existing and used parameters of performance measurement. For performance

to be measured, it must be understood (Gray et al., 2015). In this paper, I try to make

known or demonstrate how, firstly knowledge management plays a vital role in

performance measurement, how new information are known and used, and how quick

this new information is arrived at, and understand the environment in which knowledge

management will thrive. There is the need for intellectual capital which is a composition

of human, structural and relationship capital and the interconnectivity of all three is what

makes up the social network of an organization. IC is core in any organization’s asset

which is said by Itami (1991) as ‘’intangible assets’’. People with common interest in the

workplace engage is a sort of exchange of ideas which is a collective learning process

and this is referred to as ‘‘community of practice’’ by Wenger, E. (2004), which sees

how organizations can share and retain knowledge in a knowledge management

system.

The need to raise the stake of the performance or increase productivity of any

organization, performance management ought to be in place which is totally different

from performance appraisal which seeks to address a fundamental part of performance

issues and not the whole which is, how to measure the performance of these appraisals

and others in the parameters for measurement.

 1. KNOWLEDGE MANAGEMENT/ENVIRONMENT

1.1 KNOWLEDGE AND ITS MEANING

Competence base is the employees' professional awareness, used experience,

and organizational learning (this is a learning process were worthy ideas are

transformed into new forms of added value to the organization and stakeholders

(Dasgupta and Gupta, 2009)). Performance steps are known as how customers are

treated, and how the operations, processes, business development and logistics are

carried out, so, the more knowledge intensive an organization is, the more relevant are

these components. Every individual employee brings to the workplace his/her own

distinct set of experiences, education, background, skills, and outside interests that

increases intelligence and combine knowledge, this is competence base

Knowledge can be said to comprise of coordinated information; people and

organizational growth and innovation are the premise of continuous learning, nurturing

and meaningful use of knowledge (Rastogi,1999). The three classes of knowledge:

tacit, codified and encapsulated, sees their application in variant. Tacit knowledge which

is knowledge residing in an individual brain (Nonaka, 1994), as a member of an

organization, he uses this knowledge to performs his skills, since this knowledge

remains resident in the human mind (Choo, 2002); tacit knowledge is more valuable as

compared to codified or encapsulated due to the fact that it forms the basis for

derivation.

Codified knowledge is mainly information (Boisot, 1998), they are said to be

explicit knowledge which has its origin from thought, reflection or experience which is
displayed as information using systems (Zollo, 1998). As the word literarily means

'Encapsulated' knowledge is knowledge embodied in physical artefacts; it can also be

said to be explicit knowledge embodies in artefacts (Gorga, 2007). This encapsulated

knowledge is not same as explicit, its knowledge is concealed from its users,

explicitness means observability, which makes the concealed nature of encapsulated

knowledge limits misappropriation (Teece et al., 1997) but explicit codified knowledge

makes it vulnerable to misappropriation (Teece, 2000)

1.2 KNOWLEDGE MANAGEMENT

The business sphere is a dogged place where an organization to have the

competitive advantage will be about the things it knows and how is uses it and also how

fast it gets to know something new, to always be a step ahead of the game

(competitors), this makes knowledge management and intellectual capital a cardinal

part of any organization (Prusak, 1996). Value creation in an organization is

synonymous with the nature and meaning, the role and knowledge rationality, the sole

and its sustainability, source and resource.

Let's understand a critical aspect in this organizational setting, the business

model or system design, the lasting successful performance of an organization is

dependent on how viable, cohesive and unique the nature of its design is (Slywotzky

and Morrison, 1998). In formulation of a business system design, knowledge is the

foundation of value creation and its management is the central core and driving force of

any business system; which bring to light knowledge management nexus which is a

clustered, non-static and supportive interactive pattern of its social capital, human

capital and knowledge management (Prusak,1996).

1.3 KNOWLEDGE MANAGEMENT AND INTELLECTUAL CAPITAL

The intellectual capital of an organization is the result of a nexus which is the

constituents of three components (SC, HC and KM) linking themselves in a strong and

operative way. Social capital of an organization is the distribution of its people to

function together spontaneously with commitment in achievement of a business goal(s);

its strength lies in trustworthy relationships based on help and care and sense of shared

destiny (Miller and Whitney, 1999; Hamel, 2000). Human capital is people constantly

enriched and enhance their knowledge and skills as individuals and as a team in

creating value.

knowledge management is the continual act to learn, acquire, create, improve,

distribute, utilize and apply knowledge for the organization's customer value proposition,

competitiveness and integrated activity system. KM is more about investigating,

designing, discovering, originating and devising. So, intellectual capital is the interaction

of SC, HC and KM which is an organization's comprehensive prowess and prospect for

value creation; even though some view it as a sum of customer capital, structural capital

and human capital.

1.4 THE NEXUS OF KNOWLEDGE MANAGEMENT.

The fundamental of an organization’s KMN is the expansion of skills, expertise,

innovation and capabilities, expanding the knowledge of the organization on current,

new and potential markets which sees KMN as a major driver of BSD (Business System

Design) in the way of performance feedback and in another light, monitoring the
environment. An organization depends on it KMN for the nature, range and rationale

productive possibilities and an organization grows or decline when its value creation

expands or contracts (Rastogi, 2000).

In practice, KM's essence and efficacy is dependent on the strength of its social

and human capital. KM practices involves several modes of learning: learning by doing,

by discovering and try-outs, by adaptation, by design, by improvement, by setting up

systems, by devising process and routines, by education and training and by searching,

sharing and teaching; which makes for the result of learning and knowledge, which in

turn produces the basis for understanding and choice, decision and action (Edvinsson

and Malone, 1997).

1.5 ORGANIZATIONAL LEARNING AND KNOWLEDGE MANAGEMENT

Innovation is core in organizational learning which is a learning process were

worthy ideas are transformed into new forms of added value to the organization and its

stakeholders; individual and social learning, knowledge creation and innovation are

products of the spiral of innovation. Learning is a continuous process were innovation

sustained requires that there is an approach that is systemic, and efficient management

whose basis in knowledge and learning, is any organization's competitive advantage

(Dasgupta and Gupta, 2009).

Innovation is basically acquisition of new knowledge which is part of a system,

but integral in the interrelatedness of the parts of the system; so, the ability to include

and integrate new knowledge with an already existing one, with the outcome of the

creation of new knowledge is vital to improvement and innovation itself. Be it radical or

incremental innovation, the question of the process is always how efficiency is achieved

due to the application of these new ideas to existing process. Due to the strategic

nature of organizations, learning should be focused on the interaction of the

organization’s environment, the levels of learning and its knowledge network, i.e. to say,

the strategic perceptive is characterized by building unique competencies for

competitive advantage (Yeung 1999).

Knowledge management is a system that seeks to advance a combined

environment that does not only collects but also shares existing knowledge, creates

opportunities that makes new knowledge and make provision the tools and approaches

required to try the organization's know-how in its bid to meet its strategic goals.

(Gorelick and Mousou, 2006).

2. INTELLECTUAL CAPITAL AND SOCIAL NETWORKS

2.1 INTELLECTUAL CAPITAL
IC is a non-monetary asset that has no physical substance but has value and can

generate future benefits. Itami (1991) calls it ''intangible assets which are invisible

assets'' and Hall (1992) says its ''intangible assets that are value drivers''. According to

Hall (1992), IC can be categorized into intellectual property (IP) and knowledge assets

but recent categories of IC has seen the adoption of Bontis (1998), Boudreau and

Ramstad (1997) as well as others as human, organizational and customer asset.

Human and organizational asset cannot be overemphasized in its importance in

IC because of its fundamental role it plays in any organization (Edvinsson and Malone,

1997; Stewart, 1998); customer asset can/is a result of both human and organizational

asset.
 Organizations fit differently into the environment in which they operate, therefore,

its key to understand that an organization's success in a highly competitive environment

is to employ distinctive and specific resource that fits the organization (Porter, 1999)

and as a sustained process is, the competitive advantage will be effectively channeling

these distinct intellectual assets adequately (Seubert et al, 2001) which further

translates into superior performance (Hitt et al 2001). In a view, competitive advantage

connects between intellectual capital and organization's performance (Barney, 1991); so

it’s safe to say according to Porter (1985) that competitive advantage is the ableness to

earn in returns on investment on a consistent basis above the average for the

organization, and this advantage is dependent scare and hard-to-imitate resources

which resides within an organization (Barney, 1991). In overview, intellectual capital

envelopes resources and capabilities that are valuable, rare, poorly imitable and non-

substitutable presenting an enduring competitive advantage and a better performance

to the organization ((Barney, 1991; Prahalad and Hamel, 1990).

Social network is vital in organizational learning, where learning is a social and

collective output that is achieved via conversations, practices and networks of social

connections (Brown & Duguid, 1991) for intellectual capital to thrive, knowledge which is

at the forefront must be actively instrumental through active social exchanges and

collaborations among several players embedded in the network (Cohen & Prusak, 2001;

Lave & Wenger, 1991). So, in the organizational environment, understanding the

uncertainty of play is key because when an organization can't influence important

uncertainties, an adapting strategy may be preferred in hedging out competitors or in

staying in the top of the game.

 3. UNDERSTANDING COMMUNITY OF PRACTICE

Community of practice is a concept that provides a useful perspective on

knowing and learning, and is a useful key to improving their performance.

Understanding of this concept is vital, community of practice is a group of people that

share a common concern or passion for a thing they do and make to learn how to better

it through an interactive process in a shared domain of human endeavor on a regular

basis (Wenger, et al 2002). In characterizing community of practice, there must be

factors that makes it achieve its purpose. Members or participants of CoP share a

domain of interest and implies a commitment to the domain, so, a shared competence

that separates members from others (Wenger 1998). The community makes up the

engaged joint activities and discussions by members which help each other in sharing

information, the community helps in building relationship that enables learning from

each other, this CoP does not mean work on a daily basis but on a regular basis. and

also, a characteristics factor is the practice where participants are practitioners that

develop a shared collection of resources i.e. hands-on experience, stories, tools, ways

of mitigating recurring problems. (Wenger, 2000)

CoP which is also known in some organization as learning networks, thematic

groups or tech clubs, they develop and modifies organization from group activities

through variety of activities which includes problem solving, requests for information,

seeking experience, reusing assets, coordination and synergy, discussing

developments, documentation projects, mapping knowledge and identifying gaps.

(Wenger, 2004). One fundamental of CoP is how penetrative it is through formal

structures and recognizes engagement in practice and the informal learning that follows.
With the need of knowledge management, which focuses on information systems with

disappointing outcomes, organizations see this concept of CoP adopted in their

business in recognizing the critical asset that knowledge plays and the relevance to

manage such strategically. There are some vital roles this plays in organizations

strategic development of capabilities, CoP helps practitioners take collective

responsibility in knowledge management that is required with a proper structure,

thereby creating a direct link between learning and performance which is basically on

the practitioners of the CoP; the dynamic nature of CoP sees knowledge creation and

sharing as explicit and created connections across organizational and geographic

boundaries (Wenger, 2001). CoP in itself is a shaping tool that (will) provides a new

mindset for development work.

3.1 CoP AND ORGANIZATIONAL VALUE

In CoP, community is seen as the engine that develops the social capital which is

resident in CoP that leads to behavioral changes which in turn positively influence

business performance (Lesser and Storck, 2001); which is vital to see CoP as a

strategy in improving organizational performance.

Accepting the relevance of CoP on how it affects performance is important in part

since the prospect to overcome the inherent problems of a slow-moving hierarchical

structure in a fast-paced implicit economy. In ripping the benefits of CoP in

organizational value, reduction in the learning curve of new practitioners to be up-to-

date with organizational memory, the quickness in response time to customers’ needs

and inquires, reduce rework by sponsoring organization in the ability of its members to
more easily reuse existing knowledge assets, and birthing new ideas for products and

services have significant effects on the value chain of any organization.

3.2 CoP AND POWER

So far we have seen that CoP can drive strategy, generate new lines of

business, solve problems, promote the spread of best practices, develop people's

professional skills and help companies recruit and retain talent but in the organizational

front, CoP is basically for 'forward-thinking' companies, because in holding together the

passion, commitment and identification with group's expertise, it last for as long as there

is interest in maintain the group. Though CoP are fundamentally informal and self-

organizing, they benefit from cultivation which requires the managerial input to quickly

identify such communities and their strategic capabilities, provide enabling

infrastructures that support such communities and measure its value through a non-

traditional method and the good way to go about that (measuring the value) is to listen

to the stories of practitioners who can clarify the complex relationships among activities,

knowledge and performance (Wenger and Snyder, 2000).

In new organizational frontier, CoP blossoms in organization that thrive on

knowledge, knowing and understanding how they function is vital to organizational value

and performance, and know that they (CoP) exist for knowledge management and

development and the future of such community requires managerial effort to develop

them and integrate them into organization so that their full potential can be leveraged

(Wenger and Snyder, 2000).

 4. PERFORMANCE MANAGEMENT SYSTEM

Performance management is a natural process of management that contributes

to the effective management of individuals and teams to attain high levels of

organizational performance which is the overall purpose of PM - achieving high

performance by its people and the organization (Wenger, 2011). One major challenge in

understanding performance measurement is the substituting PM for performance

appraisal which is the systematic description of an employee's strength and weakness

which is an important component of performance management, PM is much more than

performance measurement (Halachmi, 2005)

The human capital of any organization is an important edge and source of

competitive advantage, where the goal of PM is to achieve human capital advantage.

High performance is an outcome of the right application of behavior, and the effective

use of the required knowledge, skills and competencies; its significant to know that PM

must examine how these results are achieved which will provide for information required

to consider what needs to be done to improve these results. PM systems are vital in

helping top management achieve strategic business objectives where the organizational

and individual goals are linked with the PM systems enforcing behaviors that are

consistent with attaining organizational goals - it’s like a feedback system for

performance development (Bilgin, 2007).

4.1 PERFORMANCE SYSTEMS AND ITS CHALLENGES

The challenge of PM is the failed relationship between organization-level and

individual-level goals, and to ensure that is averted so that strategy cascades down the

organization, a conscious effort must be made to relate the strategic plan with individual

performance (Rao, 2007); so the challenge of PM is not how effective it is but how one

seek to use it in the organization because the PM system serves various purposes in

the organizational settings: there is the administrative purpose which enables

management to measure staff performance for promotions and salary adjustments, staff

retention and the rest of HR duties, also, informational purpose which informs

employees where to improve on and on a strategic purpose, it provides the organization

what aspect of the work are important, and with such information, the organization can

know areas that needs to be developed which can be seen as developmental purpose

of PM systems, and there are several purposes of this system. The major factor of PM

system is unique to any organization, how it wants to use it because every organization

is unique with their mission, purpose and goals, so also in the areas of applying the PM

systems (Armstrong & Baron, 2005).

PM is a continuous process, when introduced in an organization, it becomes part

of the organization, in setting a PM system, there are components that must be in place:

the prerequisites which are two in nature, firstly, the need to have a good knowledge of

the mission and goal of the organization and also, a good knowledge of the job

description; there is the performance planning and performance execution which must

be closely related to each other because if execution does not follow the planning, the

whole process has failed and this applies to the other components of the PM systems;
performance assessment is vital to know the effect of the already implemented

performance measures and a performance review will indicate the areas where it

succeeded and failed, and with the performance review and re-contracting, there is

room for another go, that will 'better the good'. These six components all have important

roles and if any of these is badly implemented, the PM system falls apart (Aguinis,

2013).

5. CONCLUSION

Coordinated and processed information is perceived to be knowledge where

competence is cardinal to its usage in organizational learning, so, value creation has its

foundation in knowledge as an entity of an organization, and the business system

design is core in this and also the management of knowledge as the driving force. As

fundamental as that is, intellectual capital sees its functionality as critical in trying to

make for a non-monetary asset of the organization. There is not only a crucial role

community of practice plays in our organizational performance but its timely nature to

affect operations positively can be taken advantage of the more by management and

organizations.

Also, performance measurement can be a tool for business development in the

now when applied rightly because it tends to see not just the improvements but also the

flaws that can be checkmate for improvement, and expand the reach and influence of

operations by any organization.

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