Knowledge Value Chain

The model consists of knowledge infrastructure (knowledge worker acquirement, knowledge storage capacity, customer/supplier relationship and COOK and management), the process of KM (knowledge acquisition, knowledge innovation, knowledge protection, knowledge integration, and knowledge dissemination), and the interaction among those components resulting in knowledge performance. Further to the discussion of knowledge value chain (C.V.), the following viewpoint was proposed: KM guides the way a corporation performs individual knowledge activities and organizes its entire C.V..

It was suggested that competitive advantage grows out of he way corporations organize and perform discrete activities in knowledge value chain which should be measured by the core competence of corporation. This article also provides a cross-reference for e-commerce researchers and practitioners. Knowledge and knowledge management Knowledge vs. information Knowledge refers to an observer's distinction of ' 'objects" through which he brings forth from the background of experience a coherent and self-consistent set of coordinated actions (Selene, 1987).

Through the process of distinction, individual pieces of data and information become connected with one another in a network of elation. Knowledge then is contained in the overall organizational pattern of the network and not in any of the components. Knowledge is more than information. Information is data organized into meaningful patterns. Information is transformed into knowledge when a person reads, understands, interprets, and applies the information to a specific work function. Knowledge becomes visible when experienced persons put into practice lessons learned over time.

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One person's knowledge can be another person's information. If a person cannot understand and apply the information to anything, it remains Just information. However, another individual can take that same information, understand it and interpret it in the context of previous experience, and apply the newly acquired knowledge to make business decisions or redefine a laboratory procedure. Yet a third person may take the same pieces of information, and through his unique personal experiences or lessons learned, apply knowledge in ways that the second person may never have even considered.

Information is a component part but not the whole of knowledge (Michael, 1982). Knowledge itself is a much more all-encompassing term that incorporates the concept of beliefs based on information (Dressed, 1981). It also depends on the commitment and understanding of the individual holding these beliefs, which are affected by people's interaction and the development of judgment, behavior and attitude (Berger and Lackawanna, 1967). Journal of Management Development, Volvo. 19 NO. 9, 2000, up. 783-793. MAC university press, 0262-1711 Journal of Management Development 19,9 784 Tacit vs. explicit Tacit knowledge is that knowledge which cannot be explicated fully even by an expert and can be transferred from one person to another only through a long process of apprenticeship (Poland, 1962). Payola's famous dictum, 'We know more than we can ell", points to the phenomenon in which much that constitutes human skill remains unarticulated and known only to the person who has that skill. Tacit knowledge is the skills and 'know-how" we have inside each of us that cannot be easily shared (Limit, 1999).

In fact, both of the definitions have the same meaning. In contrast, explicit knowledge is relatively easily to articulate and communicate and, thus, transfer between individuals and organizations. Explicit knowledge resides in formulae, textbooks, or technical documents. Analogous to the tacit and explicit dichotomy, Goff (1989) sakes a distinction between embodied or action-centered, skills and intellective skills. Action-centered skills are developed through actual performance (learning by doing).

In contrast, intellective skills combine abstraction, explicit reference, and procedural reasoning, which makes them easily representatives as symbols and, therefore, easily transferable. The conceptual distinction between tacit and explicit knowledge also appears in Reed et al. 's (1996) discussion of causally ambiguous competencies. They describe tactics as residing in the inability of even a skilled individual to spell out explicitly the session rules and protocols that form the basis of performance. Obduracy (1991) conceives of tacit knowledge as existing in individuals or groups of individuals.

He refers to such knowledge in individuals and social groups as embedded knowledge. Similar distinctions between explicit and largely tacit knowledge in organizations have been made by Scribner's (1986), Monika (1988), Huddled (1994), and Bonn (1994). Explicit knowledge is the knowledge that can be easily captured artificially through manuals and standard operations, and then shared with others either through Hough courses or through books for slandering. In an organization, tangible knowledge takes the form of Job procedures as well as the company's philosophy and strategy.

Knowledge management Information is becoming ever more important in our economy, and most corporations see that knowledge can confer competitive advantage. But corporations are already flooded with information, and most of us have more of it than we can handle. Knowledge management (KM) tries to resolve the troublesome paradox (Anthem, 1998). A common definition of KM is: 'The collection of processes that govern the creation, assimilation and leveraging of knowledge to fulfill organizational objectives".

KM is an emerging set of organizational design and operational principles, processes, organizational structures, applications and technologies that helps knowledge workers dramatically leverage their creativity and ability to deliver business value. In fact, KM is about people and the processes they use to share information and build knowledge (Hanley, 1999). Marshall (1997) considered that KM refers to the harnessing of ' 'intellectual capital" within an organization.

KM theory discusses accessing and using all information within an institution, enabling individuals to apply pertinent information to what they already know, in order to create knowledge. The theory recognizes that knowledge, not simply information, is the greatest asset to an institution. It includes the strategies and processes for identifying, capturing, sharing, and leveraging the knowledge required to survive and compete successfully into the twenty-first century (Gatchis, 1999). KM focuses on 'doing the right thing" instead of ' 'doing things right".

In our thinking, KM is a framework within which the organization views all its processes as knowledge processes. Knowledge value chain model Differences among competitor value chains are a key source of competitive advantage. In competitive terms, value is the amount customers are willing to pay for what a corporation provides them. Value is measured by total revenue, a reflection of the price a corporation's product commands and the units it can sell. A firm is profitable if the value it commands exceeds the costs involved in creating the product (Porter, 1985).

Creating value for customers that exceeds the cost of doing so is the goal of any competitive strategy. Value, instead of cost, must be used in analyzing nominative position since corporations often deliberately raise their cost in order to command a premium price via differentiation. Employing Porter's value chain analysis approach, we developed a knowledge value chain model. Knowledge value chain consists of KM infrastructure and the KM process's activities and knowledge performance. These infrastructure components and activities are the building blocks by which a corporation creates a product or provides service valuable to its customers.

Knowledge performance can be measured in two categories (van Burden, 1999). One is financial performance. However, financial assessments such as ROI are particularly difficult to make for KM activities. The other is non-financial measures including operating performance outcomes and direct measures of learning. Examples of operating performance measures include lead times, customer satisfaction, and employee productivity. Learning measures include such items as the number of participants in communities of practice, employees trained, and customers affected by the use of knowledge.

All the non-financial measures can be regarded as the reflection of core competence of corporation. The KM process's activities are listed along the bottom of Figure 1 . In any corporation, the KM process can be divided into the five categories shown in Figure 1. KM infrastructure supports the KM process activities. The dotted lines reflect the fact that customer/supplier relationship, knowledge storage capacity, and knowledge worker recruitment can be associated with 785 786 Figure 1. Model specific KM process activities as well as support the entire chain.

COOK and management are not associated with particular KM process activities but support the entire chain. Components of KM infrastructure Knowledge worker recruitment The term knowledge worker refers to the worker who possesses competencies, knowledge, and skills in the organization such as computer engineers, accountants, etc. If a person leaves the organization, their knowledge goes with them. Knowledge is acquirable and renewable. It is the source of innovation and creativity. This is the traditional focus of many training and education programs.

In the knowledge economy, knowledge permeates through everything important В± people, products organizations. There have always been people who worked with their minds rather than their hands. In knowledge era, these are the majority of the workforce. Already, almost 60 per cent of American workers are knowledge workers. Recruiting knowledge workers in organizations is a key activity in the long term. Knowledge storage capacity Knowledge storage capacity is organizational memory and capabilities for people to store and reuse information and knowledge.

It involves the organization's routine operations and structures that support employees' quests for optimum intellectual performance and, therefore, overall business performance. An individual can have a high level of knowledge, but if the organization has poor systems and procedures by which to track his or her actions, the overall knowledge resource will not reach its fullest potential. Knowledge storage capacity is owned by the organization. It is retained by the organization when employees leave. There exist two organizational structures, formal and informal.

In formal organizations, people easily access explicit knowledge. Informal organizations are rich in tacit knowledge, which usually is the source of innovation. It is difficult to articulate in writing and is acquired through personal experience. It is shared by intensive face-to-face communication. To keep the costs of knowledge transfer low, angers try to turn inherently tacit knowledge into explicit knowledge. There are different approaches to implement KM, it depends on what kind of knowledge your people rely on to solve problem.

When employees rely on explicit knowledge to do their work, the people-documents approach makes the most sense. When people use tacit knowledge most often to solve problems, the person-to-person approach works best. Customer/supplier relationship Customer/supplier relationship refers to the organization's relationships with its customers/suppliers. It might include customer/supplier loyalty for services or reduces, the purchasing/sale patterns of different customer/supplier groups, customer/supplier service reputation, warranties and undertakings by customer/ supplier, and database for customer/supplier.

The relationship between a corporation and its suppliers is very important and can be regarded as a intangible and agile asset of the corporation. It enables corporation to meet the needs of customers at a lower cost. Owning more stable and closer relationship with suppliers than its competitors means that the corporation has gained a superior competitive position over its competitors. In other words, the applier relationship is mainly for cost control purposes. Understanding better than anyone else what customers want in a product or a service is what makes someone a business leader as opposed to a follower.

Turning knowledge into new customized products and services will maximize a corporation's market value. COOK and management As a corporation undertakes a KM program, the position of chief knowledge officer (COOK) is emerging to coordinate the KM infrastructure components and KM activities. The COOK is entrusted with the role of transforming intellectual property into a business value. In other words, The COOK is responsible for the overall knowledge assets of a company and for defining the area in which the knowledge capabilities of the organization should evolve, based on its ongoing mission and vision.

The COOK has the ultimate corporation-wide responsibility for the controlled vocabulary and knowledge directory and tackles the difficult issues associated with cross-department or cross-corporation processes that have unique knowledge-sharing requirements. The COOK also is responsible for ensuring that an appropriate technology infrastructure is in place for effective KM. The COOK has two principle design competencies: He is a technologist or environmentalist. Breadth of career experience, familiarity with his organization, and infectious enthusiasm for his mission are characteristic of the COOK. 87 788 In this research, both the COOK and management can be considered as support not only for the other three infrastructure components, but also for the entire process of Process of knowledge management As noted in Figure 1, the process of KM consists of five activities В± knowledge acquisition, integration, innovation, protection, and dissemination. Knowledge acquisition In order to do something we need to track down and analyze all the information and explicit knowledge that is available.

This will lead to beginning the process of knowledge acquisition via knowledge management infrastructure. We will discuss two processes through which organizations acquire information or knowledge: searching and organizational learning. Organizational information acquisition through searching can be viewed as occurring in three forms (Huber, 1991): (1) scanning; (2) focused search; and (3) performance monitoring. Scanning refers to the relatively wide-ranging sensing of the organization's external environment.

Focused searching occurs when organizational members or units actively search in a narrow segment of the organization's internal or external environment, often in response to actual or suspected problems or opportunities. Performance monitoring is used to mean both focused and withdrawing sensing of the organization's effectiveness in fulfilling its own practicalities goals or the requirements of stakeholders. Noticing is the unintended acquisition of information about the organization's external environment, internal conditions, or performance.

Organizational learning plays a vital role in knowledge acquisition. The need for organizations to change continuously, which was emphasized by Trucker, has long been the central concern of organizational learning theorists. Just as with individuals, organizations must always confront novel aspects of their circumstances (Cohen, 1991). It is widely agreed that learning consists of two kinds of activity. The first kind of learning is obtaining know-how in order to solve specific problems based upon existing premises.

The second kind of learning is establishing new premises (paradigms, schemata, mental models, or perspectives) to override the existing ones. These two kinds of learning have been referred to as ' 'Learning l" and "Learning II" (Battens, 1972) or 'single-loop learning" and 'double-loop learning" (Argils and Chon, 1978). From our viewpoint, knowledge acquisition and knowledge innovation certainly involve interaction between these two kinds of learning, which forms a kind of dynamic spiral. Sense (1990) recognized that many organizations suffer from 'learning disabilities".

To cure the diseases and enhance the organization's capacity to learn, he proposed the ' 'learning organization" as a practical model. He argued that the learning organization has the capacity for both generative learning (I. E. Active) and adaptive learning (I. E. Passive) as the sustainable sources of competitive advantage. Knowledge innovation In a strict sense, knowledge is created only by individuals. An organization cannot create knowledge without individuals. The organization supports creative individuals or provides contexts for them to create knowledge.

Organizational knowledge innovation, therefore, should be understood as a process that ' 'organizationally" amplifies the knowledge created by individuals and crystallizes it as a part of the knowledge network of the organization. There are actually three levels of knowledge- creating entities including individual, group, and organization. On the other hand, the conversion of tacit knowledge to explicit knowledge is a key process in creating new knowledge. A knowledge-innovation spiral emerges when the interaction between tacit and explicit knowledge is elevated dynamically from a lower level knowledgeableness entity to higher levels.

The assumption that knowledge is created through the interaction between tacit and explicit knowledge leads to four different modes of knowledge conversion. The four modes actually are four realizations: (1) from tacit knowledge to tacit knowledge, which is called colonization; (2) from tacit knowledge to explicit knowledge, or sterilization; (3) from explicit knowledge to explicit knowledge, or combination; and (4) from explicit knowledge to tacit knowledge, or naturalization. Knowledge protection Protection of knowledge is important because it protects creativity and the interests of knowledge-owners.

In legal systems protection of knowledge means protection of Intellectual Property Rights (PR) such as copyrights and patents, which includes revision for a right of legal action against infringes of PR and provisions detailing persons or corporations empowered to authorize the commercial use of PR and allowing the owner of PR to charge fees for such commercial uses. In a sophisticated information technology (IT) system, knowledge will be protected by filename, by surname, by password, etc. So that knowledge can be reused when it receives a request and checks against the standard file-sharing users and group table to determine what rights the user has. In addition to legal and IT protection, corporations should contract with employees guarding confidential information and their tenure in case of they 789 790 leave, and should also develop other protocols and policy guidelines which recognize and promote rights of knowledge, and then implement them by staff awareness and education campaigns.

Knowledge integration Latest advances of information technology can facilitate the processes such as acquiring and disseminating knowledge; however, the final burden is on people deciding how to translate this raw knowledge into actionable knowledge by means of an acute understanding of their business context. This is a internal knowledge integration process. Corporations have always had some process to synthesize their experience and integrate it with knowledge acquired from outside sources (e. G. Inventions, purchased patents).

A corporation acquires knowledge from years of experience in such things as manufacturing, sales, and service. This cumulative experience from different departments, together with information gathered from outside sources, can be integrated into the C.V. of the organization, which is a inter- sub-C.V. integration process, eventually being the base of KM infrastructure. Knowledge dissemination The most effective way to disseminate knowledge and best practice is through systematic transfer. That is, to create a knowledge-sharing environment.

It is no coincidence that IT has blossomed at the same time that knowledge is becoming recognized as the most valuable of a corporation's assets. Explicit knowledge can be shared through an IT system. However, tacit knowledge is best shared through people. The more 'valuable" the knowledge, the less sophisticated the technology that supports it. Dissemination of tacit knowledge is a social process. People must contribute knowledge to become part of a knowledge network. IT alone will not remove significant KM barriers.

IT will not change people's behaviors, increase management's commitment, nor create a shared understanding of its strategy or its implementation. To show its commitment for sharing knowledge, an organization should foster the employee's willingness to share and contribute to the knowledge base. This may be the most difficult obstacle to overcome. Current performance and rewards systems exemplify an individual's personal achievement and rarely take into account an individual's contribution to or participation in formal collaboration efforts.

Reward structures and performance metrics need to be created which benefit those individuals who contribute to and use a shared knowledge base. Those who excel at knowledge sharing should be recognized in public forums such as newsletters and e- mails. By effective communication, the knowledge disseminated flows to the acquirers who are searching for and learning knowledge or information they need. Employees must be made to understand that the success and advancement in their career will be based on KM principles.

KM skills must be seen to be as important to career advancement as continuing education and communication skills. C.V., business value chain, and competitive strategy As the value chain itself implies, each element of activity can create value and then all the value flows to the endpoint of the business value chain and Joins together, forming the overall value of business, which is usually expressed as a margin (see Figure 2). Probing deeply, we can find that the added value comes from the competence of element activity itself, which in turn comes from specific suburb of itself.

For example, sub-C.V. in inbound logistics (IL) activity enables business to gain the inbound logistics competence, and then the added value follows. The same process occurs in other activities including operations (POP), outbound logistics (OLL), marketing and sales (MS), and service (SE). Finally, all 791 Figure 2. Relationship between business value chain and C.V. 792 the sub-Kvass are integrated together into the whole C.V.. In the process of knowledge integration, the competence of knowledge infrastructure is gradually forming. In the end, corporation competence follows C.V..

By analyzing the above, we might note that competence is after all the measurement of each sub-C.V.. That is the reason why we feel that the core competence of the corporation should be employed as the key non- uncial measure of knowledge performance. In the whole process of KM, the innovation activity fits the product differentiation strategy, which can enable corporation gains the competitive advantage, as mentioned before (see Figure 3), while reusing knowledge fits low cost strategy, by which competitive advantage gained again.

In consulting corporations, it's Just like building with bricks: consultants reuse existing bricks while applying their skills to construct something new. The reuse of knowledge saves work, reduces communication costs, and allows a company to take on more projects. A case study of KM by Hansen et al. (1999) noted that, as a consequence, corporations such as Andersen Consulting and Ernst & Young have been able to grow at rates of 20 per cent or more in recent years. Ernst & Young worldwide consulting revenues, for example, increased from $1. Billion in 1995 to $2. 7 billion in 1997. Generally, managing knowledge assets should, like patents, trademarks and licenses, even add knowledge to the balance sheet. Conclusion and further discussion Knowledge is information plus causal links that help to make sense of this information. KM is a process that transforms information into knowledge. KM guides the way a corporation performs individual knowledge activities and organizes its entire knowledge value chain.

It is suggested that competitive advantage grows out of the way corporations organize and perform discrete activities in the knowledge value chain, which should be measured by the core competence of the corporation. In the end, we would raise another assumption for further discussion, so that for KM to ' 'open the black box" of a corporation and examine its intricate details. We assumed that the corporation should be treated more or less as a box of tricks reducing the predictable outputs of knowledge-based products and services from specific inputs of information or/and knowledge.

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