Assessment Topic: Why do some knowledge-based organizations perform well in terms of innovation but less well in terms of efficiency? To what extent can information systems help to redress this balance?
This work is submitted as part of the requirements for the MSc in Information Systems and Management. The work contained in this assignment is my own, individual and original work and has not been used in whole or in part for any other assessment on this or any other degree. I have read and understand the University rules on Plagiarism.
Innovation has become the significant focus in the contemporary world. There are those organisations that question on innovation and other organisations that emphasize on efficiency as a priority over innovation. Some knowledge-based organisations have sorted out the success for future sustainment is relied mostly on innovation, which might be creating knowledge or reusing existing knowledge in order to be efficient. The people in these organisations are skilled personnel's, experienced workers where the work performed is often intellectual and high in novelty (Alvesson, 1999). The end results (Carlile, 2004) of these innovations are anonymous and there is compulsion to revolutionize, as knowledge borders are larger across the organisation and it is not simply transferring the knowledge but to continuously collaborate with concerned groups in order to perform well in terms of efficiency. Innovation in knowledge-based organisations has fostered quite a lot of concerns in areas such as knowledge management, flow of information, managing people in organisation and also the structure of organisation.
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The most imperative of knowledge-based organisations is the 'knowledge' in organisational context such as consulting firms treats knowledge as their core asset. Consulting firms are using information technology to capture relevant information from various knowledge workers and thus converting into knowledge. The problem here is how better can technology support well in terms of knowledge management and is there any other way knowledge created can be managed and exploited into organisation. The subsequent glitch in knowledge-based organisation is flow of information, where community of practice plays a pivotal role. Most of the value is given to community rather than practice. The information flow in practice can sometimes be 'sticky' and at times 'leaky' as described by Szulanski (1996) and Wernerfelt (1984). The upcoming sections would discuss in deep about this issue and how the flow of information will be coordinated internally in organisation and also externally.
To assert the other issues faced by organisations is managing people and organisation structure, first, collaborating knowledge workers across business units to share knowledge so as to create value is the hardest part in modern world. According to Dodgson (1993), collaboration has critical concerns with respect to relationships among knowledge workers, when information is shared among these diverse workers there needs to be high-trust and mutual aims. Secondly, innovation can be structured in few ways like project or task based in an organisation, which can be bureaucratic or organic structure and innovation can induce new processes, new service and also new products which may indirectly cause change in organisation structure. The obvious issue is knowledge integration and knowledge regime narrowly associated with inter-organisational power dynamics such as authority, resources and discursive legitimacy.
Following a plethora of issues around innovation has caused apprehension to knowledge-based organisation in terms of efficiency and to address these issues in brief, there is need to adopt socialization, creation of virtual place, training and disseminating embrained knowledge (Blackler's framework, 1995 & Nonaka model, 1994), which can solve the incongruence in knowledge-based firms. While knowledge-based organisations needs systems in place that can handle the changing economic and competitive world market, information systems can play a crucial role to certain extent, if properly utilised and leveraged will steer knowledge-based organisations to become more competitive and sustainable in the long run.
Knowledge-based organisations function effectively in innovation, one of the reasons being the workforces, which has creative knowledge that enables organisations to achieve competitive advantage in the long term. These organisations, however, has some intricate problems in terms of resource allocation, standardisation, specialisation and repeated activities as the innovation is being dynamic. The literature on innovation is exceptionally wide such as an "object" with lot of constraints, which is built outside, blackboxed and delivered to the prospective clients creating competitive edge over other firms (Wolfe, 1994). Coombs (2003) and Miles (2003) described in nutshell that innovation is all about managing knowledge and knowledge work. In addition, the process of managing knowledge involves codification, articulation and experience accumulation in order to create and change the operational work in quest of innovation (Bjorkman et al., 2004; Zollo and Winter, 2002). Insofar as organisations are concerned about creation of knowledge now the focus shifts on weak link between innovation and knowledge, as capturing knowledge is hardly questioned in literature.
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Knowledge management strategies can ease the pressure on organisations; exploitation and exploration are the core activities in knowledge management (Levinthal and March, 1993). Exploitation particularly can avoid "reinventing the wheel" by efficiently using the existing knowledge whereas exploration on the other hand is all about knowledge sharing, which is an important factor for innovation and can induce new approaches in organisations. As explained by scholars, knowledge assets leverage innovation in business context and this emphasis organisation to protect their knowledge workers and knowledge work. It is also apparent that, ideas were evolved in research institutes or in the mind of single person, which would then be analysed and further developed as innovation. But in the contemporary world it's the interaction between large members of the groups in organisation and is solely dependent on knowledge, which is broadly distributed, therefore knowledge management is very important and central to organisations. Here, the focus is on codification and personalisation strategy, which can transfer knowledge to particular individual or group who will use to attain maximum efficiency in future projects.
Generally, there is lot of literature, and associated practice, that contend with flow of information in knowledge-based organisations. This literature stresses the preponderance of "networking", especially where radical innovation is involved. Typically, networking promotes knowledge sharing among communities, often viewed as social communication process. "Knowledge is inherently sticky and must be given meaning through active networking processes which allow those involved to engage in negotiation and sense making" (Weick, 1990). Knowledge stickiness is the most complex issue in firm, where the linkage is internal to organisation and individuals are reluctant to transfer them. On the other hand, knowledge could be leaked where there is an undesirable flow of information, which might be valuable loss to the firm and added advantage to the competitors. However, the architecture of social networking would simplify the problems in this case and will provide individuals a window of opportunity to develop the practice of sharing knowledge. From this perspective, social networking is the juncture where all individuals from internal and external firm share their common understandings, where recreation and construction of knowledge happens through networking. The networks of practice in the firm may exhibit knowledge leak out, which might not be controlled as this will probably stop the inflow of knowledge from other organisations, for healthy competition with the competitors this kind of practice would be encouraged by organisations. While networks as communities has no structure and scope, it's the shared identity, practice and common thoughts that allow free sharing of information on innovations. Moreover, people in knowledge-based firms expect autonomy in their work, but the firm wants people to work in combination.
The primary focus with people management lies in collaboration, power and control as individuals come from different backgrounds, have different specialisations that will not enable them to create synergy and obviously knowledge creation would be stifled due to the knowledge boundaries. According to Carlile (2002, 2004), knowledge in multi-disciplinary teams can sometimes be hurdle to sharing knowledge and has three kinds of boundaries namely syntactic, semantic and pragmatic, which could be enthralled by transferring, translating and transforming. Moreover, groupthink makes people to take some unwise decisions in team because of power and extreme conformity pressures, as in the case of Challenger space shuttle explosion. Nowadays, the decisions taken by teams are very dangerous when compared to those taken by individuals. This incongruence in teams is related to power and control, thus effectively managing people requires channels to communicate, socialisation (Nonaka, 1994); assigning roles and responsibilities, bringing particular skills and know-how individuals together, reward systems, handing over the power and control to specific individuals. It is argued that trust is also one of the factors that can unite individuals in organisations, as task in novelty requires high level of trust to share individual's tacit knowledge. Autonomy makes knowledge workers to explore new things in work, which in turn generates novelty and management has to provide the enabling context to facilitate knowledge work. However, management cannot impose strict rules to these workers as it involves combination of project teams and may hinder the efficiency.
An innovation project in organisation involves professionals from various area of expertise, who come in and exit at different stages of project depending upon the requirement. As such, these professionals may not be fully involved in these kinds of projects as they don't share common goal and there is no shared practice, which could bond them together. Moreover, lack of time makes even more difficult for these professionals to transfer the learning to project members. It is also argued that though there are information systems and databases in place for project members to learn their lessons, with ample amount of time during projects, the willingness to use them differs a lot (Kotnour, 1999). It is evident that the problem is in fact with the actual practice and technology as such can only capture and transfer the knowledge and it is up to the project members to use it. Ironically, however, these types of projects can also generate knowledge as it brings professionals from different backgrounds to work for particular goal, which enables sharing knowledge to the wider organisation. Knowledge is abundant in organisations, professionals access this when a problem arises or when some project requires solutions, there is lack of awareness in organisations about the existing knowledge available. The reason behind this is organisations have nested learning structure, which creates boundaries across projects and processes. Indeed, organisations have to be decentralised sometimes and at times centralised to balance between innovation and efficiency. As CEO of Netscape said there is stage that firm has to be loosely controlled and at times tightly coupled to have balance in creativity and efficiency. Attaining balance is not an easy task. Few organisations have an explicit command and control hierarchy structure driven by process to get things done. Practice followed in organisations produces synchronization between project members that enables to explore knowledge. Practice without process is unbearable and process without practice produces loss in novelty. As a result, process and practice are mutually interrelated.
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EPC was a large pharmaceutical firm geographically distributed with high value, knowledge-intensive and its major part of business committed to continuous product innovation and selling drugs on time to market. Put simply, it developed drugs with traditional methods, which involved more revenue and time. The traditional methods were labour intensive and the process was to identify new targets and bind molecules with thousand if not ten thousands of candidate drugs. Importantly, the compound will undergo extensive process of clinical trials, which would determine the efficiency and worthiness of the candidate drugs.
In the meanwhile, EPC faced various challenges such as to retain workforce, knowledge sharing between individuals, to decrease cost activities on reinventing the wheel or off-target drug discoveries, time constraints on drug discovery, streamlining the process of clinical trials and communication across geographically distributed knowledge workers. One of the barriers has always been with the medicinal chemists having less knowledge in organic chemistry with most senior medicinal chemists on the verge of retiring. As one of the EPC manager pointed out that, if we lose these senior professionals, the firm would suffer to find the right balance between drug performance and valuable output. Another major barrier was faced by the research and development (R&D) to screen the compounds, which took enormous time and resources thereby decreasing the efficiency of the firm to deliver on time.
Competitions among pharmaceutical industries were more intense to deliver the products before some other firm distributes it to the market. EPC recognised the market trend and embarked the only way to be more efficient in delivering the products is by reducing the R&D cycles, sharing knowledge and collaborating in research. EPC introduced strategies like network innovation, technology utilisation, collaboration with intra and inter organisations and decision making responsibilities given to each department. In addition, information system (IS) played major part providing list of gene information from databases, virtual collaboration between firms or research teams to analyse the design of chemical compounds, monitoring business activities in the firm and shortened the R&D cycles by screening thousands of compounds in few minutes. IS made sure of capturing the tacit and explicit knowledge from retiring medicinal chemists to codify into documents or database and disseminate information across the boundaries of the firm which would be incorporated into individual or group of individual's knowledge base. EPC structured in way that it merged IS and Knowledge management department that effectively promoted reusing existing knowledge, streamlined clinical trial process, minimised the time for drug discovery and repeated the activities with minor change in design of compounds that reduced the cost. Moreover, EPC management launched 'Reach-In' network for information flows and exchange of knowledge across the organisation. It implemented the cognitive and community network model that had discussion forums, all people connected to Reach-In network had user id and password whether it is intra or inter-company communication, database to store information, messengers to chat, file sharing facility and other applications to support the employees.
On the whole, the firm was able to deliver the significant products on time to market with appropriate usage of resources, distinctive exploitation of knowledge and capabilities. The Reach-In network and IS in particular helped groups solving problem, sharing of ideas, communities were developed with common values and forums made life easier of employees. As a result, EPC found the right balance between innovation and efficiency by introducing the right strategy at the right time.
Analysis of Issue
Recent assessments suggest that knowledge-based organisations face lot of risks when they try to balance between innovation and efficiency. Organisations often undergo changes to maintain its performance and knowledge workers also change their ways of working. From my view, the changes are capturing knowledge in more efficient manner, socialization in informal and formal ways, managing knowledge workers, introducing incentives, educating workers on knowledge management systems and structuring the organisation according to the emerging trend. In addition, IS has the capability to accept or discard new ideas and particularly plays a crucial role in decision making. However, the risk involved here is changing the work practices, strategy, time contraint and cost involved.
The opinion that IS in organisation can induce operational excellence or improved decision making is a controversial one. For instance, educational institutions recognise information's embrained in individuals is valuable for institution decision making. Each staff has certain information in memory that provides the history, context and basis for day-to-day decisions. IS implemented in this institution can improve or worsen the decisions of administration, marketing or finance department based on actual practice. However, the key components of implementing the IS in organisation would trigger adoption behaviour, structural arrangements, technology issues and change in business model. The organisation that understands these components while implementing IS should also consider workers skill, commitment from senior executives and redistribution of power or resources.
Importantly, information systems are one of the medium that integrates people, processes and technology to share tacit and explicit information in the form of knowledge management system. It is apparent that, codification would enable workers to retrieve information in few clicks or searches. Notably virtual place is where all information is dumped with the existing information, which can be accessed through Information communication technology (ICT). So, ICT will enable people to share the 'best practice' knowledge throughout organisation. On the other side, IS implemented in networking extends across several organisations, which cut through boundaries to transfer knowledge, supplying the right information to the right person that will enable him to make right decision. Indeed, networks link people from far side of the world through locally connected people to global networks for the transfer of explicit forms of knowledge. IS will authenticate and authorise when information is being shared between participants in network, thus enabling trusted networking without hindering organisation performance.
Having said all this, IS can also be part of shaping the structure of organisation, from vertical to horizontal or vice versa depending upon the market trend. To my way of thinking, organisations can be bracken into smaller stable subsystems according to the projects with independent processes connected via social network. ICT would link people across projects that can expedite both organic and bureaucratic organisations to be efficient and innovative at the same time. Moreover, IS introduces new business model into organisation that can decentralise business units, remove middle level managers in firm to be less hierarchical, reduce lead times while developing new products, intranets to access information's and provide global opportunities through partnerships. Managing people in this type of organisation for managers is a challenge to balance between autonomy and control. It is evident that IS can monitor the progress of each employee in the firm and can reward those employees who are doing exceptionally well. These rewards or incentives would encourage employees to do better, thus enabling them to perform well in future. Managers can use IS as tool for decision making that would achieve higher levels of efficiency and return on investments in business operations. The gamble here would be training workers about knowledge management systems, networking policies, new technologies and tools in IS.
In sum, measuring the value of knowledge-based organisations in term of its business success is preferable to measure value in terms of performance, utilisation of information systems, reusing existing knowledge and standardisation. If Knowledge-based organisations can properly utilise information systems in gathering, processing, storing, distributing, using information and associated technologies then it can help multi-disciplinary teams in operational and decision making activities. Although information systems are capable to balance between innovation and efficiency, it's the actual practice that matters here. People may have conflict while using the systems that may undermine performance, as it can be said information system under-utilised in practice. The main aspect here is people from distinct culture collaborate with different skills set, which takes time to adapt to these systems. However, if these knowledge-based organisations can recognise the cultural difference, different types of working patterns and thus strategically plan about using the information systems and careful resource allocation, can definitely to certain extent balance between innovation and efficiency.