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In order for us to be able to fully comprehend the process of developing competitive intelligence in a knowledge-based organization it is necessary to have a clear understanding of what the concept of the "knowledge-based organization" constitute.
Manager's power base is their comparative level of knowledge. Their function shifts from supervising assistants to supporting colleagues. The people's management information system reports capability utilization, value added, knowledge flows, staff attitudes as well as customer image. This information is obtainable for everyone on the innermost network. Managers no longer administer people or even knowledge, but the gap in which knowledge is formed. This space is both the insubstantial culture and the tangible environment, for instance the office;
The organizational culture supports knowledge sharing so people are known publicly and rewarded for sharing;
Top management distinguishes trust as the bandwidth of sharing that have made funds in trust building one of their topmost priorities. Gathering of knowledge and information as ways of career advancement is aggressively discouraged and the best knowledge personnel are salaried more than their bosses;
The unfasten culture typical of knowledge-based organizations is more encouraged by the design of the office. The top managers do not conceal on the top floor, however have their counters on similar floor as the knowledge workers, for the reason that they used intensively for knowledge formation; they are no longer unfilled symbols of power engaged by bosses who are hardly ever there. The coffee machine is known as a generator of creative bumps into, so it is in the center and not put away in a corner.
Now that we have some clarity on the way knowledge-based organizations manifest themselves we can establish the need for competitive intelligence within these organizations.
Analysis - compare/contrast with Sveiby (1999) 'Strategy formulation in knowledge intensive organizations. Alternative Article reference/s: Analysis - compare/contrast with Sveiby (1997) 'The invisible balance sheet'
A knowledge-based strategy formulation should start with the competence of people which can produce value in two directions: by transferring knowledge from internal and external resources and then converting it into useful knowledge for the organization they belong to. The strategy-formulation issues are troubled with how to utilize the leverage and keep away from blockages that stop the allotment and creation of new knowledge. The importance to value creation lies with the efficiency of such transfers and alterations (Sveiby, 2001). Drawing on the findings discussed in the previous paragraphs it is evident that NTBFs' most precious assets, namely knowledge and competencies as well as the way these are formed across the boundaries of the organization in order to create value, need special consideration when formulating a NTBF's strategy.
The first perspective focuses on the peculiar nature of knowledge as the key resource of companies. Accordingly, a knowledge strategy is seen as the set of choices and plans that determine the firm's knowledge base (Bierly and Chakrabarti 1996). This calls for a strict relationship with the deliberate KM programmes of the organisation (Sveiby 2001; Kim et al. 2003; Wenger 2004), and the knowledge strategy practically becomes the KM strategy. This view can be applied to companies whose KM structure or plans are significant, and are integral part of the business and, consequently, of the competitive strategy.
With research developing awareness of the social elements of knowledge there is a concomitant recognition of the need to utilise research methods to better understand the tacitness of knowledge. In repositioning the focus more clearly on the tacit elements of knowledge, the aim of research may be to improve the management of knowledge itself. Practitioners appear to have recognised social elements of managing knowledge in such work as Sveiby (2001).
Service-oriented knowledge-intensive companies have some common distinctiveness: their products are intangible, i.e. they don't consist of goods but of multifaceted problem-solving services; the production process is non-standardized and extremely dependent on teamwork; the bulk of their employees are well-informed and creative people; their customers are dealt with individually as well as the products are rather modified to them rather than vice versa (Sveiby, 1997).
This is because even though intellectual capital is the most important asset class, it is to the largest part not mentioned on the balance sheet. Sveiby  argues that the capital and investment of the knowledge company does not show up in the balance sheet because we do not know how to account for it. A 'true' balance sheet of a KIE, according to Sveiby would include such issues as the investments and value of education, recruitment, research and development. Still KIE have to "bet on knowledge" even when the cost benefits can not easily be measured.
Especially for the category of talent-intensive KIE the customers are the primary stakeholders of the performed activities and are often treated individually. According to Sveiby (2001), the dominant business logic of the KIE in relation to its stakeholders is in short: attract the personnel; attract the customers; match the capacity and the chemistry of the personnel and the customer. Connections and collaboration, and the consequent focus on stakeholder relations, are an important source for adding value and corporate performance.
Compare/contrast with Sveiby (1996) 'The knowledge organisation'
Karl-Erik Sveiby 1996 article on knowledge organization. The Knowledge Organization belongs to a subgroup within the service sector. Service sector is not a distinct phenomenon but rather a range of company types vary from those organizations totally modified to their customers to organizations that have sophisticated and packaged their production. The latter have further commonalities with manufacturing companies.
As a driving force in the field of economic resources, do the rising levels of education and professionalization of jobs play an important role. Many service industries but also manufacturing industries and even agricultural industries have a heavily increasing demand for workers who use their heads more than they use their hands. With all educational institutions, like schools and universities, being more and more accessible, the amount of educated people has drastically risen this last century. So, changes in the workforce have lead to the situation that over 70 percent of all workers in developed economies are information workers [Sveiby, 2000].
Karl Sveiby, however, highlights that human approaches to knowledge sharing can be slow and are often unconscious. He argues that we must find new innovative ways such as interactive-media rather than rely on "information" to efficiently transfer knowledge. He suggests the open-plan office as one such innovation. (Sveiby 1996).
Polanyi also emphasised the functional feature of knowledge, i.e. he considers knowledge as a tool wherein we either act or gather innovative knowledge (Sveiby 1996) (Sveiby 1997). Sveiby outlines three main theses in Polanyi's concept of knowledge.
Despite the ambiguities surrounding Knowledge Management more and more organizations start to realize its strategic potential for coping with the turbulence of the new corporate environment. Within the knowledge era, it has become widely recognized that the intangible assets of an organization will be key to both its ability to create competitive advantage, and to grow at an accelerated pace (Sveiby, 1996).
Knowledge management practice has been developed to address the problems of knowledge work within knowledge intensive organizations (Sveiby, 1992). Initially, the challenge was to manage the functional aspects of knowledge by categorizing and making it available. However, knowledge is a social process, which mainly involves the interaction of people. People gain knowledge through learning and also translate their knowledge into firms' routines and competences, job descriptions, plans, strategies, and cultures. In knowledge intensive companies the competitive advantage lies mostly in the effective use of human resources.
The view that knowledge management is vital to achieving business success is a general theme in literature on the subject. Sveiby (2001) defines knowledge management as "the art of creating value from an organisation's intangible assets".
According to Sveiby (2004), there are four basic methods to classify measurement models for intellectual capital:
ô€‚ƒ Market capitalisation method - The difference between market capitalisation and stockholders' equity is calculated.
ô€‚ƒ Return on assets method - Tangible assets and the annual financial figures are compared to the industry average. Above-average earnings are then used to estimate the value of intangible assets.
ô€‚ƒ Direct intellectual capital method - Components are identified and valued.
ô€‚ƒ Scorecard method - Various components of intellectual capital are identified and reflected in terms of scorecards and graphs.
Many practitioners suggest that Intellectual capital consists of three elements. Sveiby (1997)
ô€‚ƒ Human capital, which includes experience the know-how, capabilities, skills, and expertise of the human members of the organisation
ô€‚ƒ Structural capital (or organisational capital), which includes the systems, networks, policies, culture, distribution channels, and other "organisational capabilities" developed to meet market requirements as well as intellectual property
ô€‚ƒ Relational (customer) capital, which includes the connections that people outside the organisation have with it, their loyalty, the market share, the level of back orders, and similar issues.
Sveiby (1997) 'Manage knowledge workers vs. Sveiby (2001) knowledge-based theory of the firm
A knowledge organization is one whose competitive advantage exists in the capabilities of its employees (Sveiby, 1995). Knowledge organizations are firms that don't typically produce tangible goods, but as an alternative trade their services to clients.
Knowledge companies use highly educated people whose profession it is to solve troubles for their customers. Their production procedure is intangible, it could be advertising, specialist nursing care, financial or legal advice, management consulting, programming, teaching, systems design, energy conservation, etc. The main production resources are the information of the staff and their creativity in discovering customized solution. They create their money from promoting knowledge so they must find methods to value and assess their intangible assets.
The advice and solutions of experts in the knowledge companies have a huge impact on all other industry divisions, but the true and full range of their production is imperceptible in official statistics. The deficiency of reliable statistics in this district is well-known. A large amount of the knowledge companies would be labeled Property and Business Services in the certified statistics (Sveiby,1995). The division of professional services or business services is then a rough pointer of how far the "knowledge society" has built on. Business services are the fastest growing business division in Australia like those of countries all over the world. Still, the business services sector is an inadequately researched sector (Sveiby, 1995).
Staffing of knowledge workers is the management´s most significant investment decision, and perhaps its principal strategic tool. A knowledge company´s employment of new staff can be equated to an industrial company´s investment in innovative machinery. By tactical recruitment, the management can together modify the company´s business idea and augment or reduce its capability and other intangible assets. This proposes that from a knowledge perspective, importance on the candidates´ knowledge or requirements, and their ability to improve their personal knowledge, and that of the company ´s other employees is dangerous. A income buys access to a person´s time, as well as his or her potential to improve the firm´s ability to augment the yield from all its knowledge. This denotes that a person´s salary is less significant than the knowledge he or she can add, the revenues he or she can produce, and the customers he/she can bring to the association (Sveiby, 1997).
Knowledge, and other IC components, serve two vital functions within the enterprise (Sveiby, 1997). They form the fundamental resources for effective functioning and provide valuable assets for sale or exchange. From business perspectives, explicit and systematic knowledge management has not been of general concern until recently, and as a result, availability of competitive expertise
has been haphazard. This is now changing.
As we improve KM-and as our competitors improve-we must continue to develop of our KM practices. These efforts, which become increasingly sophisticated and demanding, must build upon the historic roots of knowledge-related considerations. In addition we must pay attention to developments in technology and people-centric areas like cognitive sciences. In other words, we must rediscover the power of past thinking as well as understand opportunities that lie ahead.
Our present focus on knowledge, particularly for KM, is often explicitly oriented towards commercial effectiveness. However, there are up-and-coming realizations that to attain the level of effective behavior necessary for competitive excellence, the entire person must be measured. We must integrate motivation, cognition, feeling of security, personal satisfaction, and many other factors.(Sveiby, (2001)
The present KM focus is not driven by commercial pressures alone. A practical, often implicit, aspect of KM is that effective people behavior required for success rests on delegating intellectual tasks and authority to knowledgeable and empowered individuals. KM also represents an evolution of the move towards personal and intellectual freedom that started with the age of enlightenment and reason over 200 years ago. One notion was that through appropriate education, humanity itself could be changed, its nature altered for the better. As other social movements, this has taken a long time to penetrate, particularly into the conservative ranks and practices of management.