Knowledge management and process performance

Knowledge management and process performance
The Authors
Colin Armistead, Colin Armistead is Professor at The Business School, Bournemouth University, Bournemouth, UK
Abstract
This paper is concerned with the relevance of knowledge management to operational managers within organisations. The consequences of taking a knowledge-based view of the organisation are examined, with examples drawn from different process types (knowledge-based manufacturing and service).
Article Type: Research paper
Keyword(s): Knowledge management; Knowledge process; Performance.
Journal of Knowledge Management
Volume 3 Number 2 1999 pp. 143-157
Copyright © MCB UP Ltd ISSN 1367-3270
Introduction
Those readers who have attended conferences on total quality management, business process re-engineering or lean and agile manufacture and supply chain management will remember discussions of how the experience of applying the techniques of each approach resulted in improvement in operational performance. Quality was more consistent, lead times and costs were reduced and delivery was made more dependable. A closer inspection of some of the examples may have led to a feeling that some of the early promises of each approach were not always delivered, but there was enough evidence across sufficient organisations that performance could be improved by using these techniques.
In contrast, a noticeable feature of the dozens of conference presentations on the subject of knowledge management is that they do not use the same hard measures of success consistently. Consequently, the question from an operational perspective is how can a “knowledge” perspective lead to improvements in performance? If we aim for a business process management perspective can the incorporation of ideas about knowledge processes lead to greater effectiveness, both for the organisation and operational processes?
Business process management
All activities within an organisation can be described in terms of processes. They have some stimulus, they bring about some change, and they use some resources. The inputs and outputs of the process can be described and, to varying degrees, measured. The origins of the process-based view of the organisation (business process management) are predominantly operational and predominantly concerned with managing flows of material people or information. Improvement of the process(es) has focused on attempts to change practices to be more responsive to customers and to improve performance in quality, time, speed and reliability, while reducing production costs. Approaches emerging in quality management and lean manufacture, tested across a range of manufacturing and service sectors, demonstrate that changing practices to manage flow could bring about radical improvement in specific performance dimensions, and, moreover, that managers could attain improvements in a number of areas simultaneously. The idea of having to manage trade-offs between time, quality, flexibility and cost was challenged, and seemed not to apply if the new practices could be embedded in the process. This view can be challenged as in the short term situations can get out of control with market turbulence which causes trade-offs to reappear, as I shall discuss later.
Two identifiable influences moved the process approach from the operational to the organisational level. First, total quality management was described in terms of being company-wide. The expression of an organisation as a set of business processes was incorporated into the models for total quality developed by representatives from large commercial companies. Most readers will be familiar with the USA Malcolm Baldrige Quality Award Model, the European Foundation of Quality Management Business Excellence Model or their national or regional derivatives. Processes are no longer only operational, but include strategic processes supporting the operational; for example, HRM and information systems.
The second influence was business process re-engineering (BPR), which brought many of the principles of flow and organisations from the material and manufacturing supply chain into other domains where the process flow was of people and information. The organisations involved were in the service sector, notably in financial services and health care. BPR has been discredited through an association with downsizing and the loss of “knowledge” from organisations. The idea of processes at the organisation level would now be familiar to most managers in large organisations and they would recognise a generic set of business processes associated with it.
However, problems remain with business process management (Prichard and Armistead, forthcoming). First, the number of organisations who have abandoned functions in the traditional sense and become completely process-based is negligible. Some form of matrix is common between function and process. Second, the ability to characterise all business processes by some form of mapping tends to fail for those processes where the flow of activity is difficult to describe. Third, management control, from a meta-level set of organisational processes through to sub-processes within each top-level process, presents problems of method and consistency. The notion of policy deployment, through some form of cascading of actions and the goals and targets, is sometimes referred to as “catch ball”. While simple in concept it is difficult to put into practice. Some organisations do overcome these difficulties and it is possible to extract from their experience suggestions for others on ways to improve their own practice (Armistead et al., 1999). However there are positive aspects to business process management. It does show an approach to link strategy to implementation within operational processes and a way of defining management responsibility in terms which are externally focused through process rather than internally driven in functions. Processes may be the channels for knowledge and also the users. It is in processes that the role of knowledge in organisational effectiveness will be demonstrated and the justification of a pragmatic meaning to knowledge management.
Knowledge-based processes
Will taking a knowledge and knowledge management approach help to fill the gaps and open up new possibilities? Discussions about knowledge resonate with those of quality in the past. What is it? How can we measure it? How can we improve it in some form? Is it necessary for all those active within organisations to engage with it or is it the preserve of the expert few? The debate ranged from the philosophical, just as was the case with quality (Pirsig, 1976), to the highly practical (Deming, 1988). Any reading of the knowledge management literature shows that the same questions are being addressed about knowledge and the use of knowledge (Wigg, 1997; Teece, 1998). But are the answers being offered useful to the practical manager?
Knowledge management is discussed in a number of ways, including the economic level (Drucker, 1993; Kim and Mauborgne, 1997) which predicts a knowledge age to follow, and an industrial age where knowledge becomes the limiting resource, rather than financial capital. The level of the firm with a knowledge-based view (Grant, 1997; Davis and Botkin, 1994) proposes a shift from a focus on resources, as in the resource-based view of the firm (Grant, 1991; Prahalad and Hamel, 1990). The latter perspective focused at a strategic level on the notion of core competences which might give the firm sustained advantage over its competitors through their use in processes (Nonaka and Takeuchi, 1995). The meanings of knowledge and of organisational learning are aired (Leonard and Straus, 1997; Leonard-Barton, 1995), and measurement of knowledge as intellectual property or assets is advocated as an important component of management control systems for future organisations (Edvinsson and Malone, 1997).
The process and the sub-process level develops in more detail the notion of knowledge within and around processes. It includes discussion about the role of technology and people. It raises issues of differences between a knowledge process and the use of knowledge in business processes. It defines by description those business processes which seem to depend more on knowledge, i.e. knowledge-rich processes. The role of people within processes and where they will, and are able to, share knowledge with others is associated with the prevalent concept of the team (Roos and von Grogh, 1996).
Finally, the focus of attention becomes the individual and group, searching for understanding about how individuals learn and share their learning. The contexts for these activities are suggested to be increasingly dispersed in time and space and involve individuals from many cultures as groups are formed across multinational organisations and with partner organisations, arising through mergers, joint ventures, supplier or customer arrangements.
The prescriptions for managers from these discussions might be summarised as being a framework for exploration as much as a prescription for improving practice and, hence, performance. For example, seven key success factors were suggested by Skyrme and Amidon (1997) in their study of knowledge management in a range of organisations:
a strong link to a business imperative; a compelling vision and architecture; knowledge leadership; a knowledge-creating and -sharing culture; continuous learning; a well-developed technology infrastructure; a systematic organisational learning processes.
None of these might be new in anything more than the inclusion of the word knowledge. Perhaps the real understanding is in the detail of the subject. Within the knowledge management field it is accepted that processes, people and technology tend to come together to increase organisational effectiveness through learning. We can regard processes and knowledge as being incorporated into existing business processes or forming new processes. These are processes by which knowledge is created, captured and codified, shared and transferred, embedded and used, measured and valued. The knowledge management processes which have the greatest effect on operational processes are those for the creation of knowledge, transfer and sharing of knowledge and the embedding and use of knowledge.
If we are characterising knowledge processes in different ways, do they have generic features which can be used to describe them, measure their effectiveness and manage them? While not wanting to diminish the complexity of these processes for the reasons discussed earlier it is perhaps possible to use some simple presentations. The input-output model for processes provided a vehicle for thinking about processes, applied to knowledge creation, transfer and embedding processes (Figures 1,2 and3). The issues of knowledge in use is considered later in the discussion of knowledge in use in operational processes.
In the context of organisational effectiveness the knowledge creation process should be purposeful, i.e. with a client for the outputs. The process of creation requires innovative individuals, more often than not working in teams. These are networks of experts with access to knowledge technologies including those for knowledge capture, storage and transfer. Outputs from knowledge creation are in the problem-solving domain for unknown problems and new knowledge, for instance in terms of process improvement. Measures of the success of knowledge creation need to include assessment of the reliability of the knowledge, the extent to which it solves a problem, timeliness, acceptability within the organisation and readiness to exploit it should it lead to new opportunities, the cost of exploitation and potential value. Measures may also be in very concrete terms for research and development as the number of new patents. These ideas are illustrated on the micro scale by Ian Norton, a Unilever scientist/inventor who has broken the Unilever record for the number of patents associated with one individual. He ascribes his success to having a mind which likes to cross scientific borders. “It’s about being able to connect pieces of information from totally different areas. I seem to have this facility for fitting them together to find a new approach, thus solving a problem that exists” (Unilever Web site).
The knowledge transfer process has some of the aspects of creation in the sense of input being sources of existing knowledge. However emphasis is given to the role of individuals who facilitate the access and transfer of knowledge. They can often be identified at the hubs of groups or as individuals within networks and have been given different names, including knowledge brokers, gatekeeper, pulsetakers (Stephenson, 1998). Knowledge transfer processes are also important in supporting organisational effectiveness in the field of best practice, where there is a close association with knowledge embedding processes. Measures of success for knowledge transfer are concerned with the reliability of knowledge its timeliness, completeness and accessibility. Lastly there are measures of and cost of transfer. Many of the examples in the knowledge management literature are concerned with these transfer processes. The notions of communities of practice encourages the trust required for individuals to share knowledge with colleagues.
The knowledge embedding process is concerned with organisational effectiveness through the incorporation of knowledge into the fabric of the organisational process and into its products and services. In the latter case this is through the effect on customers. In a negative sense embedding might be seen as a way of reducing the mobility of knowledge through the loss of individuals to the organisation, occurring through “downsizing” individuals with highly marketable knowledge. An alternative view of embedding as benefiting knowledge in use is greater productivity from the use of the knowledge, and the development of process practice through the incorporation of best practice through benchmarking. The embedding process inputs access to knowledge through creation capture and transfer processes, with the will to use it through knowledge exploiters. Outputs from the process are in the domains of product- and process-designed learning in key stakeholder groups of employees, suppliers and customers. Measures for the process are concerned with learning at individual and organisational level, protection of the value of knowledge and the potential for knowledge productivity (Drucker, 1983).
Knowledge management and ownership
The term “oxymoron” has often appeared in articles about knowledge management. The domain of knowledge management rests with the researcher and those interested in organisational learning. If one takes a practical view that knowledge can be recognised, influenced and organised in some form, it sits within the managerial activity. If knowledge is to be managed, who should be responsible for this activity? Should there be a knowledge management function in organisations or, taking a process view, should there be a knowledge management function? If there is a knowledge management process should it be seen as a support process within a generic set of organisational processes, or should it be an integral part of any operational process? If the knowledge management process is free-standing what, precisely, is the role of the process? How does it differ from existing information system support processes? What are the skills and competences associated with the area, and from where would knowledge management experts be recruited?
Knowledge management as an emerging discipline has several academic and managerial disciplines contributing to it. On a scale between academic and pragmatic we might see philosophy, economics, social science and the physical sciences being academic, with the application of information and communications technologies being more towards the pragmatic end (seeFigure 4). Approaches towards learning and the encouragement of sharing and co-operative working would sit some way in between. This is of course an illustration of the problem of knowledge transfer. The academic group have different agendas, language and aims, and tend to be dismissive of the lack of rigour in the pragmatists’ descriptions of knowledge. The pragmatists might be unfairly characterised as information systems experts looking for new ways to promote their field. The “people” orientation of knowledge management engages behaviour and social aspects and the understanding of learning processes for individuals, groups and organisations. It also engages the fostering of innovation and creativity, from which the protection of intellectual property originates.
There is some indication of the role of knowledge management from its incorporation into other performance models, and the way those organisations with a commitment to knowledge management have tried to define the skills and competences needed by knowledge management experts. The European Foundation of Quality Management, in their revision of the business excellence model, have aligned knowledge management with people management, suggesting an human resource management ownership and skills base. However many recruitment advertisements for knowledge management experts emphasise information technology and systems knowledge, which might include expert systems, artificial intelligence and net-based communications. Both of these suggest skills bases and ownership outside the traditional operations domain.
Strategic knowledge management in operational processes
Previous work on business process management (Armistead et al., 1999) identified knowledge management as one theme from a research study. Operational processes comprise processes concerned with the understanding of markets, the development of strategic plans, the design of services and products, marketing and sales, the production of goods and the delivery of services, invoicing and post-sales support. Each of these processes is potentially knowledge-rich but the nature of the knowledge will be different.
What would seem to be the consequences for managing these processes if various propositions from the knowledge-based view of the markets and the firm are adopted? At the economic level, if knowledge is the limiting resource, how would it be measured, controlled and traded? Will the experiments in a global knowledge exchange of the type being proposed by the NatWest bank be the way in which the value of businesses is measured? This all seems a little too far into the future to satisfy the pragmatic operational manager.
At the level of the organisation, benefits are perhaps potentially more immediate, although there are a number of views. Nonaka and Takeuchi (1995) present a managerial view of a knowledge management company expressed in terms of knowledge vision, knowledge crews, high-density interaction, leveraging product development, empowering middle managers, hypertext organisation and a network with the outside world. Grant (1997) in proposing the knowledge-based firm in which knowledge is the overwhelming productive resource, argues that there are different types of knowledge which vary in their transferability. Individuals are the primary agents for knowledge, and most knowledge is subject to economies of scale (once created it can be deployed with low marginal cost). These two authors discuss knowledge in Polyani’s terms of tacit and explicit knowledge (1962). Spender (1998) takes a pluralist view and usefully reminds us that a consideration of knowledge is not something new. Barnard (1938) describes the function of the executive as to bring together three different types of knowledge to create the organisation, the material, social and individual subsystems that make up the firm. Spender himself draws on social, from within the organisational context, and individual dimensions and relates each to tacit and explicit categories (Figure 5). The firm is seen as a self-organising system which can use its cultural knowledge as much as the hard knowledge to accommodate the uncertainties within its environment.
Managers are often catholic in their choice of ideas so it may be possible to accommodate the spread of views by starting from a position where all resources are considered to have a knowledge component. Investigating where strategic or core competences lie within the firm’s processes has, in a resource-based view, focused attention on the physical resources and the way in which they are used. A knowledge-based approach would encourage physical resources to be associated with knowledge. For instance the competences associated with the construction of Formula One cars in firms in the south of England are not in the physical technology used to design and build cars but in the know-how and experience of the people. A knowledge analysis would require this knowledge to be described in some detail: not an easy exercise but worthwhile if the firms were wishing to attempt to protect their intellectual property.
An exercise to understand competences as knowledge involves four steps:
Identify core competences at the level of the firm and the processes they are associated with. Identify the resources which are associated with each competence. List knowledge associated with each resource using, in the first instance, a tacit and explicit categorisation. Make sure there are no other sources of knowledge which have been overlooked.
This analysis can be incorporated within a strategy process because it enables a number of other questions to be investigated.
What knowledge is needed for the organisation to compete? Does the “inventory” of knowledge from the competences analysis match the market needs? Could other organisations get access to the mix of knowledge? Could the knowledge be lost? Can the knowledge be protected? Will the knowledge give sustained advantage?
This form of analysis moves us away from a financial assessment of value towards contributions that knowledge processes make to the outputs from operational processes, services and goods.
Knowledge management and operational processes
The strategic analysis of knowledge as a key resource is helpful as a starting point for a more detailed understanding of how a knowledge-based perspective of process management might lead to improvement in process capability in terms of practice and performance. Now a more detailed assessment is needed.
We need to start perhaps at a simple level. A common approach to a description of an operational process is to describe it as an input/output system with a transformation of conversion processes changing the state of some of the inputs. There are three conversion processes, namely those concerned with improvement or a change of form, as in manufacturing; those which involved aspects of care and counter the effects which might cause harm, as with audience control; and processes which involve transfer or change of place, as with transport and telecommunications systems. These conversion processes act on inputs which are a combination of physical materials, data information or knowledge and people as customers, clients or patients etc. Some resources are needed to carry out the conversion and these comprise material, facilities, equipment, people and information systems. Outputs from an operational process are products and services for customers at an internal or external interface. This is a resource-based model and the simple representations (Figures 6,7,8 and9) form the underpinning for all types of process mapping.
What, though, if we try the knowledge approach? Terminology will change for both inputs, conversion processes and outputs. The improving process might be seen as one of embedding knowledge in the product. The care-taking process would involve preserving knowledge. The transfer process would remain the same. Inputs would be knowledge embedded in materials; knowledge of the customer, the form, the expectation of data and knowledge itself. Those resources used in the conversion processes are, in this model, the knowledge held by staff, knowledge of the process and knowledge of the product and service to be delivered. Outputs from the system are a changed form of embedded knowledge in products or people and the knowledge about the way the system is operating.
What is being proposed might seem at first sight rather clumsy, as it forces a knowledge interpretation onto an existing framework, or naïve in its treatment of the complexities of knowledge. However, once set in the context of a real process, the richness of the picture starts to emerge. Let us consider a simple process: a taxi contacted by telephone. In the resource model inputs are passengers, information on the location and time of pick-up and the destination and expected time of arrival. The conversion process would be classified as transferring and the outputs expressed as a satisfied customer. Resources used would be taxis, drivers, maps, telephone, a computer system decoding and scheduling etc. and perhaps garage facilities.
The knowledge model addresses customer knowledge with an holistic approach to gain an understanding of the needs, condition and expectations of the passenger. The conversion process involves a physical knowledge process about preserving and embedding knowledge of the service in the customer. Outputs relate to knowledge of the condition of the passenger and their view of the service provided and whether they would use the service again. Outputs could also be new knowledge about route approaches to the service which emerge from any conversation with the driver. The knowledge-based capabilities to provide the service are embedded in the technology of the vehicles and the knowledge of the drivers: data-based capture and organisation of customer knowledge from passengers used or predicted expectations from other profile indicators. This might appear very fanciful for a taxi service. Gaining the level of knowledge indicated would be costly and could be regarded as intrusive by passengers, so it might be discounted on cost alone. If we were dealing with an executive taxi service the context would change and potential benefits of the knowledge model would be more apparent. It might be expected that the capability to perform well would be measured against service quality and customer service, dependability to keep arranged times and the ability to respond quickly to changes requested by customers.
This knowledge-based process approach corresponds with that suggested by Wijnhoven (1998) who considered a value chain of knowledge. The knowledge equivalent of a material supply chain, from supplier through a manufacturing production through into a distribution chain, is the basis of a model applied to a variety of operational processes in manufacturing, public administration and consultancy. The details of the simple input-output model are incorporated at the higher level of the supply chain. We can see this for a company making speciality chemicals where increasing customers is seen as the solution to problems rather than examining the quality of the chemicals. The knowledge model captures the changing emphasis, as shown inFigure 10.
An obvious but important aspect is the interrelationship between knowledge being created, captured and stored at the key points. This raises issues of ownership, access, comprehension and perceived reliability. Reliable knowledge, Butler and Gill (1997) suggest, is judged by three parameters: scientific, passing the test of interrogation for cause and effect; social, being assessed through argument and discussion in social groups; organisational, against accepted procedures. They tend to use the term reliable to incorporate consideration of validity as well. The separation of social and institutional is useful at the level of the process and elaborates the idea referred to earlier of individual and social (Spender, 1998). The same authors suggest that the creation of reliable knowledge involves cycles of search, expectation of future outcomes and trust building.
It might be argued that these ideas are not new but the context for organisations is such that the need is greater and the means through technology is available. The development of information and communications technology supports the knowledge processes to a greater extent than previously (seeFigure 11). There are four types of technology to be considered: databases; decision support tools and artificial intelligence; GroupWare including email and video conferencing; and intranets and extraneous. Changes in each of these domains have resulted in databases which have increased in scale, more powerful decision support tools, and a greater dispersion of the use of GroupWare and net technology. The twin aspects of capability and dispersion of technology make collaborative working possible while separated in both time and space. The notion of richness and reach are crucial. A rich mix of knowledge can be made available through multimedia whereever it is required and by anyone whom has access. There are issues about the appropriateness of channels for knowledge depending on whether the tacit or the explicit component is the greater. The channels which are available through the use of IT are the ones which are likely to lead to higher performance in knowledge management.
If we regard reliability of knowledge as being associated with an explicit and a tacit element, it seems likely that the sense of validity of knowledge and its transfer will tend to build from the scientific through the organisation to the social. The increased richness of the multimedia approaches will perhaps offer a greater opportunity to explore tacit knowledge. This might also help with identifying or “mapping” knowledge, which is not easy and is time consuming.
Application of knowledge management and changes in operational contexts
If a knowledge-based view is to be useful it must help with some of the key performance indicators of quality, dependability, responsiveness and speed of delivery, flexibility and cost. We might expect that these would help to address three important areas in the operational scene:
increasing turbulence in markets resulting in greater uncertainty variety; reduced tolerance for trade-offs in performance; network organisational structures involving many parties with differing cultures.
Each of these will be considered in turn to illustrate the possible benefits of a knowledge-based approach.
Increased market turbulence
One of the effects of increases in market turbulence is the fragmentation of markets and the increase in diversity or variety of products and services which the operational processes have to cope with. These factors lead ultimately to the concept of mass customisation (Pine, 1997), the delivery of products and services to meet individual specifications at a price which might otherwise be associated with a more standardised offering. Mass customisation needs a knowledge-rich environment for success. Gilmore and Pine (1997) have suggested that customisation can be based on the content of the service or products and on the way this is presented to the customer. A number of situations are common in mass customisation: the customer has an extravagantly wide range of choices (ordering the customised bike of their dreams) (Westbrook and Williamson, 1993); a service fits customer needs (made to measure clothing); a service is provided for the customer who does not want to be involved (weekly delivery and collection of washable nappies); materials are replenished business to business or to the customer’s home (anticipating need for washing powder based on analysis of previous purchasing patterns). Each of these processes is knowledge-rich, either in the sense of capturing customer knowledge or embedding knowledge in the product and process. In the former case the knowledge can be built into relationship databases for future access. In the latter, gained access to the choices on offer is either through the use of decision support tools, seen used in the choice of a car, or with the help of the expert. The selling of business solutions might involve physical components but the value is the knowledge of customer needs and the access to product and process knowledge through a mix of channels, relying on expert knowledge. Mass customisation represents a projection of the knowledge world where the physical form is often secondary to the knowledge of peace of mind, because the service is provided to meet the needs of the customer, whether that be a consumer or business to business relationship. Mass customisation will force those organisations which might not see knowledge management as being important to them now to reappraise their capabilities. Knowledge-rich organisations, including consultancy, need to extend their understanding of knowledge processes which are required to deliver customisation. In particular it will mean reassessing knowledge processes and demonstrating the reliability of knowledge, and increasing the speed of processes to allow a greater number of iterations of possible customer solutions before a final service is decided on.
Implicit in these approaches is the need to learn. Benchmarking is used as a process for attempting to transfer and embed knowledge between organisations and between different parts of the same organisations. This is not always successful and a greater understanding of the factors involved may be reached using the knowledge processes discussed earlier (Wareham and Gerrits, 1999).
Reduced tolerance for trade-offs in performance
The idea of trade-offs in operational performance dimension has been re-examined in recent years (New, 1992). In the manufacturing environment for world-class companies operational processes are expected to perform well against measures of quality in consistency, speed and dependability of delivery and flexibility to cope with changes to order, while at the same time improving productivity. The same could be said of service businesses, although the ability to buffer the effects of market turbulence with material management strategies is reduced. Consequently there is an increased exposure to the risk of failure through some elements of performance failing, i.e. trade-offs appear, if only short term. We can see that this effect is increased as the variety within the process increases leading to possible increases in task complexity (what is done in the process) and output (what is achieved). We can add to this expression of complexity the increasing involvement of many parties in the production and delivery of services, so increasing the connectivity dimension. Finally, the margin for failure becomes less and the criticality of the process becomes greater for a number of reasons.
The process may be multistage so that overall high performance for the process overall relies on high performance from each stage, for instance 95 percent performance for each of ten stages leads to an overall performance of about 60 percent.
The outcome of the process might be critical in being life-threatening so reliability is vital. Alternatively customers may be increasingly sensitive to failure or sense of trade-offs. The tendency for the risk of failure of the appearance of trade-offs is a non-linear function of complexity, connectivity and criticality (seeFigure 12). The situation may be made worse by the tendency for there to be an increased uncertainty about what is required and how it might be achieved (Snowden, 1998).
A knowledge-based approach to operational processes should help to reduce the effects and allow complexity to be managed more effectively through the knowledge processes which, as with mass customisation, allow a greater understanding of customers, embedding more knowledge into process, products and services, and through the use of decision support tools.
Connectivity is only a problem when there are risks of failure and processes for accessing and transferring knowledge and the use of appropriate technologies are demonstrated in many examples of knowledge management successes. The same may be said of criticality. The sharing of medical knowledge allows surgeons with extensive experience of an operation to help others without that experience. Reliability in processes comes through embedding knowledge in process capability in the technology and people.
Finally, sensitivity of customers to failure can be dealt with more readily when the reasons for it are understood – hence another role for detailed customer knowledge.
Network organisations
Operational processes in network organisations are likely to be the theatre for mass customisation and be subjected to the performance problems of the previous sections. Knowledge management plays another role where the network is defined more in terms of knowledge flow than for the value created. Other flows of materials or people are less important. Those organisations, including Amazon.com and Cisco Systems, which have grown from the use of the Internet, are examples. They display the productivity of knowledge increasing the yield from what is known (Drucker, 1983). Knowledge is given and gained from customers through the processes for delivery of tangible goods.
These examples signal changes in what operational processes might mean as the level of direct contact with customers is reduced, i.e. all communication is through ICT. What are the dimensions of customer service when many of the broad performance criteria of, say, access, speed and reliability, are satisfied by technological capability? We might suppose that the value will increase from the quality of the knowledge, in the sense of the presentation of information in ways comprehensible for the customers.
We can turn this idea into the virtual organisation where connectivity between individuals, possibly in different states of time and place, are subject to the social phenomena associated with sharing and helping. At the same time the possibilities for working collaboratively in knowledge-rich environments, or sabotaging this approach, will increase. At an operational level these raise questions about the appropriateness of performance measurement systems which reflect the customer and internal process interfaces.
Conclusion
We are only starting to try to understand what taking a knowledge perspective really means for those managing operational processes. Knowledge processes involve some form of effective collaboration to extract the best from available knowledge. Regarding knowledge as the source of competitive advantage which can be held by a business forces us to continue to look for robust methods of measurement. It also forces an examination of the operational processes within the organisation. The knowledge processes described in this paper can be brought into the operational domain in ways helpful to those working in the process. If this can be achieved the application of knowledge management will apply to a wide range of organisations, not just those which might be classified as knowledge-rich.
Knowledge-based management should help operations managers to see their relationships with suppliers, customers and the rest of the organisation in a different way. It will introduce new measures of customer service and of efficiency, which reflect the use of knowledge rather than physical resources. It will allow managers to cope with the factors that can make it difficult for processes to achieve existing performance measures by helping to reduce those effects which lead to failure. Intuitively knowledge processes should contribute to the demands of managing in turbulent markets, where novel solutions are needed in circumstances where there is often uncertainty about the nature of the solution and which means to achieve it. It is unlikely that the increased variety in customer solutions can be achieved without knowledge management being a pre-requisite of mass customisation.
Potentially, a knowledge perspective should help those managing operational processes to understand the knowledge-based capabilities they need, especially when customer demand is tending to increase rather than decrease the level of customer. A knowledge approach will inform and guide the design of products and service and the processes to produce and deliver them, will help in the planning and control of the attainment of performance and will enable improvements to be made.
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