Knowledge integration in competitive advantage and related issues
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Published: Mon, 5 Dec 2016
In order to survive in the intensely competitive business environment, companies today have to seek innovative management practices that would optimize the utilization of the enterprise resources. While traditional competitive platforms such as cost management and production capabilities which were geared towards addressing served markets, today, the companies look within to their organizational capabilities (Grant, 1996). The traditional platforms of differentiations have become prerequisites to stay in business and no longer offer competitive edge that is sustainable. Today, knowledge is the single most important source of advantage in business and it resides within the individual members of the organization. To harness this knowledge and direct it towards the achievement of organizational goals, knowledge should be integrated in a systematic manner. Such integration goes hand in hand with organizational learning and knowledge management to build up organizational competencies. There should be proper mechanisms in place to integrate the knowledge to facilitate learning as well as to create capabilities and competencies within the organisation.
Overview of Knowledge Integration
The fundamental premise of knowledge integration lies in that the primary strategic competiveness of the organizations can be achieved through the enhancement of organizational capabilities and competencies aided by organizational knowledge and learning. As per Collins (1994) in a scenario where all the firms have access to similar resources, ones with strategic capabilities that can increase the efficiency of the input-throughput-output process will have the competitive advantage (Colligns 1994). In fact the knowledge based capabilities and competencies allow the resource to be activated properly to optimize the yield from the input – output process. However, for such integration of knowledge to take place, the organization should have a proper climate of Organizational development (OD), proper knowledge Management systems (KM) and geared towards being a learning organization.
Various Models of Knowledge Management and Integration
In Ikujiro Nonaka’s work on knowledge, differentiation between “tacit knowledge” and “explicit knowledge” is recognized and sharing of knowledge that have been learned is highlighted as the key to establishing competitive advantage stemming from the new knowledge which is created (Nonaka 1991). Tacit knowledge which is personal, context specific and subjective in its nature, needs to be shared by making it explicit in the form of codified, systematic, formal, and easy to communicate knowledge. In the same manner, explicit knowledge should be made implicit through the absorption of explicit knowledge by the work force. This involves internalization of manuals, rules and regulations, procedures etc (Nonaka & Takeuchi, 1995).
Another models of knowledge integration and learning is the model proposed by Meso and Smith (2000) which indicate that integration of existing knowledge as of primary importance to knowledge management (Meso & Smith, 2000). Their approach propose production of knowledge and gathering and conversion of existing knowledge into explicit and implicit knowledge as the crucial activities for any firm wishing to generate efficiencies through the knowledge residing within each area of the operations. Meso & Smiths model as discussed in (Alfrevic & Racici 2004) can be explained more clearly in the following steps:
organized gathering of existing knowledge from the environment
creation of new explicit knowledge
activities supporting the transmission and creation of new tacit knowledge,
formalization of tacit into explicit knowledge, and
creation of an information system for storage and transfer of knowledge within the organization
Garvin (1993) also acknowledge integration as an essential step in organizational learning and creating competitive advantages through knowledge. As per Garvin’s (1993) definition, a learning organisation is skilled at creating, acquiring and transferring knowledge and at modifying its behavior to reflect new knowledge and insights (Garvin 1993). Such learning is an important component of the knowledge integration process where knowledge held across the organisation is combined to create competencies that are hard to be replicated by competitors (Barney 1994). His model identifies five essential activities which a learning organisation performs including, 1) systematic problem solving, 2) experimentation with new approaches, 3) learning from own experiences, 4) learning from others, and 5) transferring knowledge quickly and efficiently throughout the organisation (Garvin 1993). The last two steps of this model is directly concerns the knowledge integration aspects which makes use of the new and existing knowledge which amounts to valuable resources that the organizations’ possess.
Grants Model of Organisational Capability as Knowledge Integration
Among the various models of knowledge management, Robert Grant (1996) propose The Knowledge based Theory of the Firm which focus on knowledge integration and recognize it as the core element which supports organizational learning and knowledge management in an organisation. According to his theory, the firm in fact acts as the mechanism for coordinating and harnessing individual knowledge (Spender and Grant, 1996). According to Grant, the integration of knowledge has to be achieved from steering the explicit components of knowledge through effective Knowledge Management (KM) mechanisms while the tacit component of knowledge can be influenced and promoted through the organizational learning environment. While managing the explicit knowledge within an organization can be achievable easily, it is the tacit knowledge which resides within each individual member which is acquired from hands on handling of the input-output process (Grant 1996). In developing competencies within this process, the need for integrating individual’s or groups’ expertise become important.
When organizations focus on creating such knowledge integration, they can achieve a higher status in the “capability pyramid” where complex cross functional capabilities requiring harmonizing of knowledge from different teams and individuals are performed with competence (Alfrevic & Racic, 2004). As per Clark and Fujimoto (1991), the integration process of knowledge in to organizational capabilities moves up a hierarchy as illustrated in figure 1 below. Higher level capabilities which requires broader range of integration and some competitive advantages are achieved across vertical hierarchies of the knowledge integration pyramid. For instance, the MacDonald’s efficiency in servicing their customers within few seconds of placing the order is a competitive advantage is an outcome of integrated expertise of tacit knowledge of many that are involved in various positions in the organizational value chain.
Figure 1 – Hierarchical Order of Knowledge Integration
Mechanisms for Knowledge Integration
With today’s highly advanced information technology and communication systems, the management of the explicit knowledge pose only few issues. Explicit knowledge within organizations can be codified, communicated, assimilated, stored and retrieved easily compared to tacit knowledge (Grant 1996). However the integration of tacit knowledge pose man many challenges to most organizations. Mechanisms for integrating knowledge proposed by Grant is two pronged and address this tacit knowledge aspect. They include “directions” and “organisational routines”. This model describes direction as a low cost and effective mode of communicating knowledge of an expert to a large number of organizational members who may be either non -specialists or otherwise specialists in other fields (Grant 1996). The knowledge is provided as standards, rules, and directives which the organizational members must follow strictly in-order to replicate a similar outcome. A franchisee manual of a fast food outlet or an auto lube operation can be a good example of how the expert’s knowledge (may be the founder’s itself) can be passed on to another group of persons. Such directives and standards etc, may not be the expert knowledge of one individual but a group of experts, cutting across the capability hierarchy.
The second element of the mechanism for integrating tacit knowledge is organizational routines. Since there is more to tacit knowledge than what you can codify as rules, directives etc. there is substantial knowledge loss when tacit knowledge sharing and integration is targeted to be achieved with directions. Grants points out that with an organizational routine, there is a mechanism where the choice of responses to a given set of activities is fixed in nature, routinizing the entire response to stimuli. This can help organizations achieve a ritual like routines to perform highly complex tasks, with seemingly easy and automatic behavior (Grant 1996).
These routines will help capture more intricate and subtle aspect associated with performing a task which cannot be translated in to explicit knowledge. Again, one can make use of the routine practices of McDonalds drive through to see such routine practices where the world over, in all McDonald outlets, the cashier will call out the order and once the customer reach the next window, the crew member hands over the meals while repeating the order. The routine response if they see a kid in the car would be to hand over some balloons. If one of the items are getting delayed, the crew member says, “please wait in the parking lot and we will bring it to your vehicle.” All these small elements and fixed reactions are modes of integrating expertise derived from various cross functional activities such as customer service, operations management, retail service queue management, relationship management and targeted promotion etc. which comes together to achieve the MacDonald’s competitive positioning of fast and customer friendly service.
Characteristics of Effective Knowledge Integration
According to Grant (1996) there are three main characteristics which make the integration of knowledge effective and capable of creating a sustainable competitive advantage. These include 1) the efficiency of integration, 2) the scope of integration and 3) the flexibility of integration. When we discuss efficiency of integration, the consideration is the extent to which the organization is capable of utilizing the specialist knowledge which is residing within members of the firm. Efficiency at which organizations integrate knowledge will depend on the level of common knowledge among the different specialists as well as the frequency and variability of the task performance. For example, a common language, a common organizational culture etc. can help maximize the efficiency of communicating and integrating knowledge across different functional areas. Similarly a high frequency of a task can result in repetition and improve the organization routines through which a part of tacit knowledge is shared and integrated (Grant, 1996). Finally the structure of the organization, especially with modularity in it is important to minimize the communication needed for maximizing the efficiency of the integration.
The scope of integration concerns the breadth of knowledge which is harnessed together through the integration process. The broader scope integrations bring advantage to the organization from two sources. One being that the “different types of specialized knowledge are complements rather than substitutes in production” (Grant, 1996 p. 381) and the other being the wide scope capabilities which organization as develop by bringing combination of capabilities and expertise from a wide variety of functional areas, the capability becomes a very hard to imitate or replicate by competitors.
Lastly the flexibility of the integration depends on the capabilities of the integration mechanisms in assessing new knowledge and reformulating or remodeling the exiting knowledge. As sustaining competitive advantage is the objective or the firm and this is continually compromised and eroded by competition in the hyper competitive conditions of today’s business, flexibility in knowledge integration is the next feature of effective integration of knowledge. Therefore platforms of competitiveness developed through knowledge integration needs to be continually renewed through innovation and developing new capabilities (Grant, 1996). This closely related with the Organisational Development theories proposed by Argyris and Schorn where organisations need to develop “double loop” learning, which involves modification of existing knowledge base and competencies of the organisation based on feedback received. k available and thus facilitate organisational learning (Argyris and Schön 1978). The flexibility in integration can result in either by bringing in and adding in new capabilities or by reconfiguration of existing knowledge capabilities.
Finally, Grant’s model of integration address the basic alternatives of knowledge integration which firms have in terms of internalization within the firm, market contracts and relational contracts. While market contracts may not prove to be most efficient means at knowledge integration but suited for transfer of knowledge when that knowledge is contained within a product. Relational contracts such as strategic alliances may on the other hand prove to be more efficient means of knowledge integration that takes place at external level (Grant, 1996).
Issues faced in Knowledge integration
Having analyzed the knowledge integration models and mechanisms of establishing such knowledge based capabilities, the issues and challenges involved with the same merits attention as these will need to be addressed for effective achievement of competitive advantages. One of the key issues in knowledge integration lies in the different ways in which people involved or the experts view the power of holding tacit knowledge as exclusive knowledge. Even if people indicate willingness to express their tacit knowledge to be made explicit, to what degree will the disclosure take place and the degree to which tacit knowledge can be converted to explicit knowledge with minimum knowledge loss is a key issue.
Another issue involved as pointed by Clark and Fuijimoto (1991), the key issues faced by cross functional teams is not in the formation of them but their ability to access the relevant and pertinent knowledge and then integrating this knowledge efficiently and flexibly. Problems in integration includes wider level scopes of integration involving diverse people and their tacit knowledge. Unless commonality in vocabulary, conceptual knowledge and experience of the experts involved within the integration model is present, the efficiency of communications of “directions” and organizational routines can be significantly low. Therefore, the problem with wider level integration lies in that level of common knowledge is low between diverse people and this renders the communication and knowledge integration process ineffective.
Finally, the transferring knowledge should happen efficiently throughout the organisation to ensure learning from knowledge integration take place with maximum impact. Variety of mechanisms such as written, oral and visual reports, site visits and training programs can be utilized for this purpose and further encouraged through linking of incentives to such activities. However the risk of valuable knowledge reaching competitors outside the organisation is a key concern. The cultural resistance, incompatible organizational structures, power play and organisational characteristics may also have varying implications on the effectiveness of transferring of new knowledge across the organisation.
Importance of Knowledge Integration in Sustaining Competitive Advantage
Integration of knowledge and resulting higher level, broad scope capabilities may be the crucial source of the firm’s competitive success. As per Buble & AlfireviÄ‡, (2002), this is particularly relevant because, knowledge integration focus on integrating not only the explicit knowledge, but also the tacit one, which resides in employees. Since knowledge of tacit knowledge is intricately linked with the expert human capital of the organization, by setting up mechanisms to extract and disseminate such tacit knowledge through the integration process, organizations can sustain their competitiveness even in the absence of a particular expert within which the knowledge resided. This is why integration of knowledge is a key factor in sustaining competitive advantages.
The knowledge integration allows the firms to harness capabilities and expertise residing within different cross functional sectors and through the vertical value chain of the input-output process so that they can produce various capabilities which are hard to match, imitate or replicate. This is when the company can be said to have successfully generated a competitive advantage which is difficult to be imitated in terms (Barney 1996). Therefore, knowledge integration no doubt plays a key role in achieving more sustainable competitive advantages.
It is worth to note that knowledge in its proprietary form can become quickly obsolete in today’s fast phased technology based industries (Levin et al., 1987). Therefore, knowledge integration and mechanisms and capabilities of generating and integrating knowledge efficiently and flexibly is the real competitive advantage than the knowledge itself. For example, companies such as 3M are in the forefront of the industry due to the organisation’s capability of reconfiguring the knowledge as well as the generation of new knowledge. 3M practice many policies, which facilitates creation of a learning organisation. The 15% rule at 3M allows employees to engage in experimental projects of their own choice. 3M also provide financial assistance through its Genesis Grant program for its engineers who wish to pursue their projects commercially (Lucas 2004). 3M’s continued susti8nance of competitive advantage of innovation and new product development is directly attributed to the knowledge integration mechanisms in place.
As per Grant’s model (1996), one of the key features of success knowledge integration lies in the flexibility of the integration. This involves repeatedly reconfiguring and modifying existing knowledge to find new and competitive innovations. This also involved learning from past experiences and reviewing of successes and failures through systematic assessment and recording the lessons learnt in a form which is accessible to employees for future practices. This translates the tacit knowledge of trail and error involved in the experimentations in to explicit knowledge. Such knowledge integration provides organizations competitive advantage over others since they learn from not only success but also from failures. Companies such as IBM and Boeing have ensured the knowledge acquired through their past failures is instrumental in developing and launching subsequent successful products.
In conclusion, it is rather evident that organizations need to manage their knowledge and apply it, modify it and reconfigure it efficiently and across cross functional divisions to come up with various unique capabilities that allow them to acquire competitive advantages in the market place. The process in which the organization achieve such capabilities through knowledge management lies in effective knowledge integration where both explicit as well as tacit elements of expert knowledge is extracted, codified, embedded in to routines, translated in to manuals and efficiently and effectively disseminated across the organization. In implementing such a mechanism, organizations will face many challenges and issues but by surmounting them, the firm will benefit by achieving competitive advantages that are hard to imitate and replicate by competitors.
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