Strategic Systems Thinking

Assessment 2: Strategic Practice

Student's Name: Kenroy Murray

Enrolment Number: R1903D8137939

Module Code: ST4S39-V1-14454

Teacher: Alicia Arribas

Date of Submission: 19 January 2020

Introduction

Knowledge enables individuals and organizations to carry out tasks and achieve their objectives

in an efficient and effective manner. Organizations that intend to excel and become successful in

their endeavors should seek to manage, measure and increase in the growth of knowledge of its

employees. According to Kumar and Kumar (2015), Knowledge Management (KM) “is

managing the corporation’s knowledge through a systematically and organizationally specified

process for acquiring, organizing, sustaining, applying, sharing, renewing both the tacit and

explicit knowledge of employees to enhance organizational performance and create value”. Lee

and Roth (2009) posit that knowledge management is a continuous process that comprises of

diverse happenings.

This essay aims to critically discuss the idea put forward by Gray et al, (2015) “Before we

measure something, we must ask whether we understand what it is we are trying to measure.” In

relation to the development of the strategic knowledge base in my organization. Furthermore, the

key areas that will be discussed in this essay are knowledge management, communities of

practice, performance measurement and its challenges, intellectual capital (IC) and social

networks followed by the conclusion.

According to Todericiua and Serbana (2015), a firm's IC is the sum of its Human Capital (HC),

Structural Capital (SC) and Relational Capital (RC). Hashim, Osman and Alhabshi (2015),

contend that few people will do physical work in this era. However, they will do more

intellectual work; this idea is really a definitive term for IC. Further, they argue that IC is

“knowledge that is of value to an organization”, also, KM generates IC. Kumar and Kumar
(2015) argue that KM is considered an antecedent for greater output and elasticity in both private

and public sectors

The methods used in this essay are research and critical analysis and exploration of secondary

data sourced from web-based research which includes journals, dictionaries, and articles

presented by scholars. Likewise, information was obtained from observation of the systems in

operation at my organization, and the approach utilized by managers to develop the

organization’s strategic knowledge base.

Knowledge Management/Environment

Asar-ul-Haq and Anwar (2015) argue that knowledge is the life force of an organization and has

been recognized as a critical component for an organization’s success due to the competition that

exists today and the constant change that occurs. According to Mohajan (2016), there are

primarily two types of knowledge: tacit and explicit. Tacit knowledge is basically implicit or

hidden knowledge formed in an individual's mind as “know-how and can be expressed as

innovation”. Explicit knowledge is prearranged data and information that can be stored and

disseminated. This knowledge can be easily coded, transferred and shared within the

organization. Also, it can be easily communicated, articulated and expressed in writing in a

theoretical way.

Edvardsson and Oskarsson (2013, p. 13) cited in Grimsdottir and Edvardsson (2018), argue that

KM is “developing, sharing and applying knowledge within the organization to gain and sustain

a competitive advantage”. Consequently, managing knowledge in an organization is as important

as other managed assets. Furthermore, It is my persuasion that “knowledge is power”, also,

through effective and efficient utilization of knowledge an organization can be successful.

Therefore, the compact definition of KM put forward by Kumar and Kumar (2015) and

Edvardsson and Oskarsson (2013) should be considered plausible. Moreover, organizations need

to know what they know and what they need to know in order to achieve their strategic

objectives. Additionally, KM should be given high importance in organizations that desire to be

successful.

(Drucker, 1999; Kogut & Zander, 1992; Nonaka & Takeuchi, 1995) cited in Asar-ul-Haq and

Anwar (2015), supports the notion that KM is of vital importance, as they also argue that

knowledge is the most predecessor for constant innovation and success. Similarly, Kumar and

Kumar (2015) argue that it is vital that organizations have a reasonable system in place to retain,

advance, organize and apply their employees’ capabilities in order to be ahead in the game.

Moreover, as knowledge increases and organizations grow, it is of vital importance that

knowledge is transferred among employees and retained in a strategic way. Therefore,

organizations should link employees who possess valuable tacit knowledge, or knowledge that

resides in their minds over time, based on their experiences, skills, and know-how (Asrar-ul-Haq

and Anwar, 2015; Mohajan, 2016), with employees who are less knowledgeable. The objective

is to allow knowledge sharing to take place through projects, collaborations, and socialization.

This notion is supported by Mohajan, (2016) who postulates that the transfer of tacit knowledge

necessitates more closeness and direct interaction between employees and their peers in

organizations.
Although tacit knowledge is complex since it resides in the individual's mind. Asrar-ul-Haq and

Anwar (2015) argue that some individuals hide their tacit knowledge. Organizations, therefore,

should create systems to facilitate the translation of tacit knowledge. Though Mohajan, (2016)

argues that it is a difficult task to acquire and extract tacit knowledge, while explicit knowledge

is easily accessible. A reasonable way for organizations to commence the translation process of

tacit knowledge is to allow experienced and skilled employees to create simple documentation,

explaining in detail how to perform tasks in a complete way. Furthermore, they could employ an

IC director as in the Skandia case (Bucklew and Edvinsson, 1999), to develop innovative ways to

create transfer, measure, store, disseminate and manage both tacit and explicit knowledge for

ease of access and employee learning.

My organization manages knowledge by utilizing a Knowledge Management System (KMS).

This system contains a knowledge base that stores questions and answers, and shares updates,

fixes and important documents with employees to improve their effectiveness and efficiency

while carrying out their tasks. A KMS makes it easier to manage and measure knowledge

effectively; also, it leads to further growth and productivity.

Furthermore, prominent authors such as (Nonaka, 1994; Kogut & Zander, 1996; Grant, 1996)

cited by Breznik (2018) argued that knowledge transfer is a source of innovation. This notion is

plausible; since, for example, Nonaka and Takeuchi (1996) argue that the constant competitive

advantage that Japan experiences are as a result of its talent for innovation and its willingness to

move on from their past inventions to create even greater things. Nonetheless, the transfer of
knowledge can be influenced by the trust, and culture of an organization (Intezari, Taskin and

Pauleen, 2017). Organizations, therefore, must regulate the information stored in their KMS to

ensure they are updated and competitive. Additionally, it is naturally impossible for

organizations to separate employees from their knowledge. Therefore, if an employee leaves

with his tacit knowledge and it was never transferred/shared/stored the organization is at a loss

because its value would have been diminished.

Moreover, despite the many books, journals, and articles, etc., that have been published on the

study of KM. Breznik (2018) argues that there exist numerous similar but also contrastive

definitions for the term KM. Abubakar et al. (2019), also argue that the literature and practice of

KM lack thorough results and examination on the effects of decision-making style on the

methods and enablers of KM on organizational performance. Likewise, Intezari, Taskin and

Pauleen (2017) argue that a number of KM literature expresses a variety of knowledge methods,

but there is little agreement on which of these methods are vital and to be supported by the

culture of the organization. Furthermore, they argue that KM studies seem to be opinionated

towards knowledge sharing; its developments are unclear and have produced misunderstanding

for both practitioners and researchers as to what are the fundamental knowledge processes.

Whilst I agree with Breznik (2018) that there are contrastive ideas of KM. I do not agree entirely

with Intezari et al. (2017) and Abubakar et al. (2019) because KM has also produced valuable

outcomes that have benefitted organizations. For example, Guruajan and Fink (2010) cited in

(Asrar-ul-Haq and Anwar, 2015) found motivation such as appreciation, praise, and financial

rewards boots employees to share knowledge among each other. Kumar and Kumar (2015), posit
that it keeps the organization competitive; it supports innovation in organizations (Breznik,

2018) and it is critical for an organization's success (Asar-ul-Haq and Anwar, 2015).

Communities of Practice (CoP)

According to Wenger-Trayner (2015) communities of practice are 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. Similarly, Lesser and Storck (2001) define a CoP as a group whose members regularly

engage in sharing and learning, based on their common interest. Moreover, the concept has been

applied in many businesses, spheres of life (Wenger-Trayner, 2015).

CoPs have great potential to develop knowledge and also enhance KM. When great minds come

together, I believe that great things can be achieved. New ideas can be birthed, problems can be

solved, and valuable tacit knowledge can be shared. Supporting this notion, Pyrko, Dorfler and

Eden (2017) argue that it’s the collaborative learning process of “thinking together”, that

fundamentally brings CoP to life. Furthermore, CoP can push strategy, produce new lines of

business and resolve problems (Wenger and Snyder, 2000). Basically, CoP aims to improve an

organization’s performance and its strategic approach towards solving problems, as well as its

effectiveness and efficiency.

CoP can be observed at my organization on numerous occasions when members of the technical

team meet to combine their ideas in order to solve technical issues. The teams frequently

populate the KMS with their experiences and strategic knowledge to resolve periodic problems.

This allows ease of access to information for resolving recurring problems. Similarly, Stemke
(2004) in the case of ChevronTexaco, explained that the company was able to drive operational

excellence (OE) through CoPs. They were successful because communities were able to share,

transfer and apply new ideas, innovations, and technologies in their respective domains.

Nonetheless, challenges do arise when managing CoPs for organizational benefit. Goncalves

(2019) argues that micromanaging CoPs will hamper the flow of knowledge sharing. Moreover,

he suggested that in order to ensure that communities operate in the organization’s best interest;

citing a case study entitled “Building CoPs that Work”, researchers posit that for CoPs to be

effective specifically in the area of KM; the organization must give its commitment to the

community and members must participate (Corso and Giacobbe, 2005) cited by (Goncalves,

2019).

Also, a lack of support from the organization's leadership can pose a challenge for CoPs (Corso

and Giacobbe, 2005). Any initiative to benefit an organization that does not receive adequate

support from its leadership can be hindered. Ceran and Bahadir (2018) agree as they argue that

the leader's lack of time and failure to partake in the community impacts its growth and progress.

Also, though Wenger-Trayner (2015), postulates that CoPs aim to solve problems, request expert

information, discuss developments, etc. Wenger (2018) did not omit the fact that there are

numerous challenges that can arise when managing CoPs. Three of which they outlined are

smugness (excessive pride of one's accomplishment), elitism (displaying a superior attitude) and

exclusion (denying member(s) of certain privileges).

Performance Measurement (PM)

After CoPs are formed in organizations, it is important for managers to be able to measure

results/output and the benefits gained. This, I argue, can only be accomplished through PM.

According to Looy and Shanfagatova (2016), PM is a “multidisciplinary topic that is highly

studied by both management and information systems domains”. It is a subprocess of

performance management that focuses on identification, tracking, and communication of

performance results by utilizing performance indicators (KPI Institute, 2020). PM is very

valuable to an organization as it evaluates results and can lead to the improvement of CoPs.

Furthermore, standardized performance measures that have been created and can be utilized by

practically any business are Balanced Scorecards (BSC), ISO standards and Industry dashboards

(Infoentrepreneurs, 2009). The BSC was developed for the purpose of supplying managers with

additional and improved information for strategic decision-making (Madsen and Stenheim,

2015). It is utilized and recommended widely (Kopecka, 2015). ISO standards are: “documents

that provide requirements, specifications, guidelines or characteristics that can be used

consistently to ensure that material, products, processes, and services are fit for their purposes”

(www.iso.org/standards.html, no date). The Industry Dashboard is a single screen page

summary of KPI’s that supports spontaneous monitoring and visualization of business

performance information (Tokola et al., 2016).

KPI Institute (2020) argues that PM benefits an organization by providing feedback to improve

decision making at all levels; and can further be used for control, Self-assessment, continuous

improvement, and management assessment. Moreover, Infoentrepreneurs (2009) argues that it is

an important way to keep track of the progress of a business. I agree with Infoentrepreneurs’
idea because it is difficult for one to identify, track or measure what they do not understand.

Furthermore, KPI Institute (2020) confirms this notion as they argue that "If you cannot measure

an activity you cannot control it, and if you cannot control it you cannot manage it".

Fisher (2019) postulates that the starting point for PM is to ask: ‘What does value mean for each

stakeholder group, and how can we measure it?’ One other key question I believe should be

asked is “do we have an establish way to measure performance?" this is very important and can

pose a challenge if neglected. Nonetheless, when the measurement of success is developed,

progress can be determined. Therefore, Gray et al (2015) notion is one that is true and can be

validated.

The Challenges of PM

Worth (2016), posits that the best way to track your company’s performance is to pick your key

performance indicators or (KPIs). KPI’s are data used to map a business on its journey to success

and profits. Nonetheless, I have observed that there are challenges that arise with PM.

Infoentrepreneurs (2009) argues “one of the key challenges with PM is selecting what to

measure”. Worth (2016) further argues that if wrong KPI’s are chosen, the company may be

driven to financial shambles.

Below is a list of bad performance indicators outlined by worth (2016):

- Revenues: Only tracking revenue can hide a slowly rotting operation on its way to

failing.

- Total number of deliveries: Does not account for incomplete orders and bid orders can

mask problems.
 - Customer satisfaction: Considered a vague metric, unreliably compares you with

competitors.

- Units produced: This is meaningless because an inefficient factory can still churn out a

ton of product.

- Net profit: This can be misleading because poorly performing lines can hide behind star

products.

Another challenge of PM was observed when measuring the intelligence of an organization. The

question is, can one truly and effectively quantify the IC of an organization? The answer is yes.

This challenge was tackled by Skandia’s AFS as a case put forward by Bucklew and Edvinsson

(1999), where major sets of IC dimensions or categories were derived from which several IC

ratios were defined, computed and compared against a baseline. AFS leadership measured IC by

focusing on linking human capital to structural capital and producing sustained value.

Intellectual Capital and Social Networks

According to Encyclopedia.com (2019) “IC is the term used to describe the intangible assets

provided to an entity by its employees' efforts and also knowledge assets such as patents,

trademarks, copyrights, and other results of human innovation and thought.”

Edvinsson (1997) cited in Choong (2008) and Yang (2009) cited in Abdulaai, (2018) suggests

that intellectual property is comprised of three major elements, firstly, Human Capital (HC)

which speaks to existing people, their ideas, competence bases and knowledge level of people.

Secondly, Structural Capital (SC) which addresses intensive research and development (R&D),

and information technology implementations and thirdly, Customer Capital (CC) which speaks
to company brand name, customer base, and strong market position. Though earlier, Rastogi

(2002) argues that the IC of an organization originates from the combination of its SC, HC and

KM.

Social networks are online services or sites through which people create and maintain

interpersonal relationships (Merriam-Webster, 2020). Similarly, Jordan (2019) posits that social

network sites allow persons to interact and communicate with each other easily. Here we see a

clear link as to how social networks can improve CoPs, IC and KM, because persons do not have

to be at the same place to interact with each other; since through technology, communication and

learning is made easy.

I consider IC a force (knowledge) that allows organizations the ability for rapid adaptation to

environmental changes and competition while remaining competitive. Abdulaai (2018), agreeing

with this idea argues that IC is an incorporeal worth boaster in organizations that guarantees

benefits in the future. Despite the small difference concerning the element of IC in Rastogi

(2002) and Abdulaai, (2018) Numerous scholars agree that the organizations IC is made up of

SC, HC and CC for example: (Evans, Brown and Baker, 2015; Mention, 2013; Yıldıza, Meydanb

and Günerc, 2014; Hashim, Osman and Alhabshi, 2015; Todericiua and Serbana, 2015).

Therefore, it is necessary that there be constant innovation, monitoring, measuring and

development of IC in the organization, to ensure that they achieve their objectives efficiently and

effectively. This has been observed in my organization over time. The more knowledgeable

employees are, the more-effective they carry out their tasks. Mention (2013), argues that IC and
innovation are closely interweaved. Babai et al. (2016) argue that companies measure IC because

it helps with formulating business strategy. They further argue that through the identification and

development of IC the organization can gain a competitive advantage. Nonetheless, there are

challenges that exist when trying to measure IC. Though contradictory to his earlier idea, Babai

et al. (2016), cited the Statement of Financial Accounting Standards (SFAS) No. 142 who posits

that “IC is fairly a new concept and there is no agreement on how to measure it”. This notion

contradicts the reference to measuring IC at Skandia AFS mentioned earlier.

Furthermore, some organization utilizes the BSC to measure performance strategies which imply

the existence of IC (Encyclopedia.com, 2019). This is a challenge because a BSC can only make

inferences to the measurement of IC but cannot give a true measurement of it since IC is

intangible.

Since it is clear that IC may be of a competitive advantage to organizations due to the increase in

environmental competition, and scarcity of resources (Todericiua and Serbana, 2015),

organizations should invest in resources that will allow them to achieve their financial objectives

and also put them in a strategic competitive advantage as they look towards a successful future.

Rastogi (2002) also supports this notion as he postulates that without continual learning,

cultivation, and utilization of knowledge in a creative way, organizations and individuals cannot

progress and innovate. Furthermore, I argue that the main thing that makes organizations

successful in this competitive era is their knowledge, how they utilize it, and how fast they can

acquire new knowledge. This, therefore, means that KM, PM, CoP, and IC are naturally related

concepts that can be measured once they are clearly understood.

Conclusion

It is safe to conclude that KM is crucial for organizations and a clear understanding of the

knowledge they possess is very important for their success. Furthermore, understanding the

knowledge they possess will allow them to make strategic decisions and better measure

performance. Also, when organizations utilize the right KPI’s, they will benefit them by

providing feedback to improve decision making at all levels. Likewise, organizations should

consider it very important to develop a KMS and utilize CoP’s and social networks to ensure the

transfer of valuable tacit and explicit knowledge through training and employee collaboration.

Such knowledge is IC and will add value to the organization and improve its effectiveness and

efficiency. This key information is in line with the notion put forward by Gray et al., (2015).

When one decides to measure something accurately, they must first understand clearly what they

are trying to measure.

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