The purpose of this paper is to map the contents given to the concept of knowledge management, its definition and practice, its use and implications and to point out the effect of the concept to organisations through system thinking. Many authors and practitioners have expressed their views and opines on developing soft system thinking. However the scope of the paper will be limited to the way soft system thinking is able to develop the intellectual capital of an organisation through human activities. In this context, the paper will highlight the convergence of ideas including system thinking, intellectual capital and social capital, communities of practice, information mapping and ‘balance scorecard’ that have propagated knowledge management over the past decade.
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To begin with, Reisman (1979) viewed systems as a set of resources organised to perform a particular task so as to attain desired results. The resources include personnel, artefacts and information. The “process of human dealing with the world” can also be recognised as a system (Checkland and Scholes, 1999). So system thinking is the systematic way of thinking and focusing on dynamic interaction and managing knowledge by individuals and the environment within which they operates (Reisman and Orall, 2005). Knowledge management can be linked to an open system whereby one exchanges its available resources with its surroundings (Reisman, 1979). However the openness and dynamism of the system is because of the human activities (Reisman and Orall, 2005) required in the process of enquiry (Checkland and Scholes, 1999). “Defining knowledge management is difficult because of its multiple interpretations” (Choi, 2000). However, Hansen et al. (1999) viewed knowledge management as a concept embedded with integrated move towards identifying, capturing, retrieving, sharing and evaluating the information assets of a business enterprise. These assets could be the workers un-capture tacit expertise and experiences, databases, documents, policies and procedures. Equally, Probst et al. (2000) express knowledge management as the whole body of cognitions and skills which individuals share and use to solve problems that will improve organisations performance.
Consequently the two fundamental forms of system thinking, “hard” and “soft” are the crucial intellectual distinction of a system (Checkland and Scholes, 1999). Reisman and Orall (2005) claim that hard system thinking and soft system thinking are complementary whereby both are applicable at different stages of solving managerial problems. In dealing with either ill/well-defined problem within an organisation, soft system thinking is the prerequisite for addressing managerial issues whiles the hard system thinking is often required in the latter stages of solving the problem (Reisman and Orall, 2005). Thus the former plays the major role in identifying and defining the right problem whiles the latter solves that problem the right way. Therefore an organisation’s ability to develop depends on how knowledge is managed. According to Sherif (2006) developing soft system thinking in an organisation requires the process of managing knowledge at the individual and group level (micro) and organisational level (macro).
Formerly organisations view knowledge in the traditional way whereby knowledge was considered as information and document that can be managed as objects. It was also regarded as little more than the sharing of documents and information on the intranet or through global databases (Cheuk, 2007). Knowledge unlike a raw material cannot be inventoried and stacked in warehouse to be use when required (Matesson, 2000). But knowledge as indicated by Nonaka (1994) as existing only in human brain turns to be information when stored in a computer, nevertheless when transferred to another person it becomes knowledge (Hicks, et al., 2006). Hence until information is processed by human minds to become knowledge, information is of little or no value (Ash, 1998). Infield (1997) claim that the processing of knowledge involves organising, structuring and filtering of facts and data to produce contextual information suitable for a specific community of users. The individuals’ attitudes and experiences as well as the working environment affect the transformation process. Moreover the whole process becomes valid based on the fact that the information and knowledge leads to an informed decision or action (Drucker, 1993). Knowledge and learning is not a linear process but involves system thinking. Therefore a “root definition” that captures the purpose of a good system involves input, transformation and output (Checkland and Scholes, 1990).
Furthermore, Guthrie (2000) claim that an organisation’s approach for tackling real-world problems depends on how its intellectual capital is controlled. According to Edvinsson (1997) Skandia, a major insurance company defined intellectual capital as “the possession of knowledge, applied experience, organisational technology, customer relationships, and professional skills that provides Skandia with a competitive edge in the market”. Stewart (1997) identified human, structural, social and customer capital as the operational elements within the framework of intellectual capital.
Nonaka (1994) identified educational background, professional training and creativity of the knowledge workers and motivation from the leadership as the keystone for an organisation to become competitive in the dynamic business environment. Employees’ are willingly to share information and experiences with each other when there is a supportive environment promoting an organisation’s knowledgebase which also fosters teamwork (Rezgui, 2007). Kennedy (2005) argue that the dynamic business environment resulting from human activities makes it vital for organisations not to work as individuals but as part of a team or community who share a common meaning or understanding in achieving a task of every situation. So the creation of strong social ties and relationships is found among members of the communities who have common history and culture. This helps organisation to manage to bridge social capital to gain access to critical resources (Rudie, 1994).
On the other hand, Rastogi (2002) claim that in fact knowledge is the quintessential resource available to enterprises which can provide value creation in this capricious and highly competitive business environment and those who fail to effectively utilise their intellectual capital may decline or die in their operating industry. Citing example despite the rich pool of resources, IBM’s precipitate decline during the late 1980s. The root cause of IBM’s downfall was its failure to respond quickly to the smaller and cheaper computers from their competitors that challenged its mainframes. Thus failure to counter earlier by using their knowledgebase capital to create client-server computing and shift from centralized processing that was losing sales in the market (Kehoe, 1995). In support of this, Kotter (1996) claim that organisation that perform poorly are attributable to complacent managers that resist innovation and such organisation is characterised by poor communications, lack of vision and strategy and employees disempowerment.
According to Cheuk (2007) managing knowledge in an organisation must begin with building/creating community of practices and virtual teams which provides a platform to facilitate genuine dialogue between staffs. Citing example, the British Council has adopted an overall business strategy contend/focus on knowledge management in its worldwide offices. The strategy break up the barrier of sharing relatively little contact between the UK and overseas staff to more collaborative shared documents using the website. This was achieved through social networking whereby its global leaders shares project implementation between managers in different regions/countries. Hence knowledge management processes encompass business processes, people and technology through which knowledge is created and captured, shared and transferred, embedded and used, measured and valued (Collin, 1999). Therefore knowledge is a firm’s most powerful engine of production (Marshall, 1965).
Information and communication technology which is identified as a means of sharing and managing knowledge is capable of penetrating into boundaries of various organisations (Coe and Bunnell, 2003). Teigland (2000) base on research conducted in internet communities’ claim that individuals within such communities that exhibited the characteristics of communities of practice may interact but physically have never met.
However, Roberts (2007) argue that the rapid technological change which is transforming the competitive landscape of the business environment is making communities of practice complex. The traditional community of practice used to be a slow community which requires a degree of trust and mutual understanding to develop overtime. But in this modern era, groups may emerge and dissolve quickly depending on the organisation of the individuals. But despite the difficulty in developing and sustaining the communities of practice, some organisations take important role in the creation of and transfer of knowledge (Roberts, 2005). Lindkvist (2005) cited example in the film industry, whereby individuals come together to temporarily achieve a particular project which is to create a film and disperse. These individuals mutually share, repertoire and transfer knowledge which provide opportunities for new members to learn and overtime become full participants. So in these current business environment, membership of a community of practice is been sustain since its seen to be vital in the lives of certain workers (Roberts, 2007).
Lave and Wenger (1991) stated that community of practice emerges when an organisation set up a team assigned for a particular project, the team members then begin to interact with each other by way of sharing knowledge. The table below characterises the human activities in a community of practice through their social interaction. So the management’s contribution is to facilitate the development of the community of practice.
Table 1: the characteristics of communities of practice (Source: adopted from Roberts, 2006)
However the pattern has changed over recent years. According to Wenger et al. (2002) managers of organisations have developed the interest in sustaining communities of practice as being part of the knowledge management strategies to bring about value creation and performance improvement (Lesser and Storck, 2001). In support of this, Smends and Alvesalo (2003) based on research concluded that communities of practice has hugely influenced the transfer of knowledge and information in virtual organisations.
Hence improving the effectiveness and efficiency in knowledge-intensive work requires the way in which people search for knowledge, learn from it and use it to solve problems with their business partners through sophisticated technologies (Cross et al., 2001). According to Wasserman and Faust (1998) it will be more suitable for an organisation to adopt a social network approach whereby every company is characterized as a set of relations among them. Thus identify the individuals as actors and the relations as the ties of social or relational network. The opportunity to interact and foster relationships between individuals in organisation relies on the physical and social distances (Zupan and Kase, 2007).
In support of these Nahapiet and Ghoshal (1998) claim that building a collaborative relationship can add social capital to the individuals and the organisation as a whole. Similarly, authors such as (Laury, 1987; Coleman, 1988) claim that the focal point of social capital is relationship, which is the main resource for social actions. In this context, the authors viewed social capital as “the resources embedded in social networks of relationships”. So the actor’s social relation to other people lies on the structural dimension which its effect glow from the information, influence and solidarity it makes available to actor (Adler and Kwon, 2002). Thus social capital encompasses both a network and the assets that can be assembled during the network (Burt, 1992). Social capital also affects the economic performance of firms (Baker, 1990), geographic regions and countries (Putnam, 1995).Therefore social capital is recognised as acting as an engine for the sharing, continuous learning, innovation and adaptation to market opportunities (Peredo, 2003).
According to Blair-Lay (2001) “who you know often has a real deal to do with what you come to know”. Hence members belonging to a particular network can gain access to information and opportunities. However the structural dimension shapes the actions of the individuals within that community (Bourdieu, 1977). Individual culture also affects how knowledge is shared, therefore inculcating the element of trust (Dasgupta and Gupta, 2009), effective communication to catch and examine ideas among the employees (Fliaster and Spiess, 2007) and care in organisational relationships (Krogh, 1998) would stimulate the creation of knowledge and innovation. Equally, collaborative innovation is greater among organisations that share knowledge with its suppliers and usually gain the advantage in delivering customer value (Mei and Nie, 2007). In support of this, Rastogi (2000) stated that “social capital of a firm denotes the orientation of its people to collaborate spontaneously and with commitment in support of its business goals”. Hence social capital equally affects both human capital and knowledge management whiles providing support for the firm’s intellectual capital.
Nahapiet and Ghoshal (1998) considered the structural, relational and cognitive dimensions of social capital in their quest of the role of social capital in the creation of intellectual capital, stating that the three clusters are highly interrelated. This is illustrated in figure 1.
Figure 1: Social Capital in the creation of Intellectual Capital (Source: adopted from Nahapiet and Ghoshal, 1998).
According to Coleman (1998) structural dimension is concern with properties of the social system and its pattern of linkage whereby the existence of network created for a purpose benefits other purposes. On the other hand, relational dimension depicts the sort of personal relationships people have developed with each other in regards to respect and friendship which influences their behaviour (Cranovetter, 1992). In support of this, McKenzie and Winkelen (2004) stated that the key components in this cluster is the issue of trust and trustworthiness demonstrated in one’s obligations and expectations and encouraging identification with norms. This ties is built through social interactions.
Furthermore Cicourel (1973) viewed cognitive dimension as resources that provides shared representation through shared language, codes narrative and common etiquette. Nahapiet and Ghoshal (1998) continue to argue that the cognition dimension of social capital influences the actor’s ability to combine knowledge to create intellectual capital as shown in the figure 2.
Figure 2: conceptual roots of intellectual capital (Source: adopted from Roos et al., 1997 cited in Martensson, 2000)
Chapman (2002) argues that in order to deal with organisational complexity, soft system methodology must be employed to holistically view problem situations. In support of this, Checkland (1999) stated that soft system methodology approach also complements strategic framework which focuses on achieving clearer understandings towards performance improvements and control of change-related issues.
While individual thinking and reflection is legitimate (Checkland and Holwell, 1998), Jacobs (2004) suggested that wider involvement of actors is a crucial prerequisite for effective improvement initiatives. However Jacobs (2004) stated that the best way of tackling organisational problem is through system thinking whereby managers, customers, groups and partners share ideas to solve problems viewing the “feedbacks” as well. And this can be achieved through continuous learning. Users of soft system methodology can use a conceptual model of depicting a ‘problem situation’ such as sketch of “rich pictures” (Pidd, 2003).
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The conceptual model which supports ordered questioning through rich picture is the focal point of organisational improvement (Wilson, 2001). Checkland (1999) stated that “a rich picture is not simply an isolated brainstorming exercise, but an aid to analysing a problem situation through ordered thinking and reflection”. On the other hand, ‘root definitions’ evolve from the rich pictures through which actors think of ‘making sense’ out of (Pidd, 2003) in tackling problem situations to better ‘explore the real-world situation’ of conceptual models (Checkland and Holwell, 1998).
Kaufmann and Schneider (2004) stated that researchers have developed various models which are capable of measuring and managing intellectual capitals. Some of the models were constructed for external reporting purposes whiles others are meant to control the intangible resources within a firm. According to Kaufmann and Schneider the model constructors were based on four schools of thoughts. The first school by (Edvinsson, 1997; Edvinsson and Malone, 1997) about Skandia Navigator suppose that transforming human capital to structural capital should be the primary responsibility of the management. The authors advocated for providing supplementary information to the annual financial report while focusing on agents within the firm. The second school is based on a developed model known as the Intangible Asset Monitor by Sveiby (1997) which provides strategic information of a firm regarding growth, renewal, efficiency, stability, and risk relating to each category of intangibles such as employee competence, internal and external structures.
The third school is the model Stewart (1997) advocated for which is known as Calculated Intangible Value which is centred on quantifying the excess return on tangible assets (ROA) in terms of human, customer and structural intellectual assets, so that the reports generated can be compared to other firms. The Balanced Scorecard model developed by Kaplan and Norton (2004) is the fourth school of thought. This involves sets of financial and non-financial measures to indicate four perspectives including financials, customers, internal process and learning and growth. According to Kaufmann and Schneider (2004) the four perspectives holistically provides the strategic way of measuring company performance which goes beyond the financial perspective. Kaplan and Norton (2006) re-emphasize that the scorecard provides a management system which assist in the clarification of the organisation’s vision and strategy.
Furthermore the development of the Balance Scorecard as strategic performance management tool in helping managers to monitor the direction of change and the achievement of results by linking their actions to the conceptual framework (Kaplan and Norton, 1996). According to Jacobs (2004) “the Balanced Scorecard defines performance objectives under financial, customer, internal business process and learning and growth perspectives” that focuses on achieving the vision of an organisation. So the feasible improvements to problem situation in the real world as the basis for an action plan for change, is for soft system methodology users to revise their conceptual models through the process of iteration and reflection back on problem situations (Jacobs, 2004).
Collin (1999) argued that knowledge-base management reflects the use of knowledge to improve upon the efficiency of customer service rather than physical resource. Knowledge shared promotes innovation or design of new products, the process of manufacturing and delivering them (Armistead et al., 1999). Collin (1999) argue that “processes are no longer only operational” but include strategic processes that serves as the keystone to the operational activities such as the human resource management and the information systems. And moreover business process re-engineering (BPR) which involved the movement of material from the upstream to the downstream has shifted to the process flow of people and information.
McKern (1996) claim that powerful forces such as globalisation, changes in consumer demands, new technology, changing economic and political structures is continually affecting business processes and human resource strategy and that organisation are beginning to reckon their employees as the only sustainable competitive advantage they possess (Black and Synan, 1997).
Managing knowledge in an organisation requires the ability to protect and utilize existing knowledge resources as well as facilitating the mobilization and expansion of other new knowledge resources. The knowledge resources are obtained from managing the tacit knowledge residing in the human mind explicitly (Duffy, 2000) by separating it from the knowledge workers (Kreiner, 2002). However, Tavakoli and Lawton (2005) claim that the speed and economic transfer of knowledge within the functions and levels of most firms is usually restricted by organisational inertia.
Kikoski and kikoski (2004) argued that the keystone for an organisation success is by creating suitable condition that encourages and promotes individuals to verbalize their optimum tacit knowledge. This results in problem solving and the creation of new knowledge bringing about continuous improvement in business procedures leading to innovation of new products and better customer services (Alwis and Hartmann, 2008). This is evidence by the social network researchers Cross et al. (2002) who conducted a survey and found out that 85 per cent of managers success on projects was attained based on the information shared from their personal dialogue.
To conclude soft system thinking helps its users to gradually develop learning process which will make them to understand any occurred or foreseeable problems. And the only way of developing soft system thinking in an organisation is by putting in place the necessary organisational structures that will facilitate the sharing of knowledge among the individuals and their surroundings and put information into action in a manner that will improve organisational performance.
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