BSC is a knowledge management tool

Many companies use the BSC tool as a KM process within the organizational structure. In particular, the learning and growth perspective is directly linked to KM.

Figure 2.4 below presents the relationship between KM and learning and Growth

52 Figure 2.4 The relationship between KM, learning and growth

BSC Perspectives Strategic

Management activities

Financial Budget and cost management

Customer satisfaction Customer relationship

Business Process Business process improvement

Learning & growth Knowledge management

Source: Wegmann (2007).

Chan (2006) affirms that the failure of more than 70 per cent of BSC is due to the lack of information management systems. Kaplan and Norton (2004a) explain that the information capital requires an information technology portfolio of infrastructure to support internal process. The infrastructure includes two categories: transaction processing applications and analytic applications. Transaction processing applications automate the basic repetitive transactions of the enterprise. Analytic applications promote analysis, interpretation, and sharing of information and knowledge. Kaplan and Norton (2004a) suggest that executives must understand how to plan, set priorities for, and manage an information portfolio that supports their organisation’s strategy. Al- Mudimigh (2009) finds that applying a management information system increases the value of sharing information among all stakeholders. In addition, the information system prevents errors, decreases information asymmetry, and tracks and provides feedback about events. Furthermore, the management information system improves communication, makes knowledge more readily accessible, assimilates key pieces of information, assists with calculations, performs checks in real time, assists with monitoring, and provides decision support. Bates and Gawande (2003) claims that information systems can assist in the flow of key data related to internal processes in the health care services.

53 Andersson et al. (2003) claim that management information systems help managers and data providers to share common understanding of work routines, information demands, and other central preconditions at the clinical level. Furthermore, management information systems enable healthcare managers at different management levels to understand, visualise and conceptualise activities, goals and the strategies. Martinsons (1999) finds evidence that a BSC information system can be the foundation for a strategic management system, provided that appropriate measures are identified and key implementation obstacles are overcome.

Stewart and Mohammed (2001) summarise the advantages of applying information systems in business organisations. Such advantages include: facilitating document transfer and handling; enhancing coordination between project participants; reducing response time to answer queries; establishing and supporting the project alliance; empowering project participants to make decisions; enabling immediate reporting and receiving feedback; and identifying errors and/or inconsistencies. Stewart and Mohammed (2001) and Janhangiri and Dashti (2012) suggest that the information system of BSC satisfies three objectives. First, the information system categorises the measures and goals into levels (project level; business level; organisational level). Second, the information system creates a systematic relationship between these measures and the goals of every noted level. Third, IS improves communication and understanding of performance evaluation across the organization.

Janhangiri and Dashti (2012) suggest that BSC measures should have a goal at the decision making level. For example, at the organisational level, measures must be focused on the duty and the general goals of the organisation. At the business level, measures should stabilize processes and programs of the information system. More detailed reports than those at the organisational level should also be sent to deliver more

54 information to beneficiaries. Measures at the business level must be focused on operational improvement. At the project level, measures are based on activity and duty information that are used for executive and applied decisions. Table 2.2 summarises the criteria of spreading the knowledge of BSC through the process of a management information system.

2.2.9.1 Definition of Knowledge Management

To begin with, it must be acknowledged that as Bhatt (2001) has observed, the term ‘knowledge management (KM)’ is as complex to define as the term ‘knowledge’ itself. Furthermore, as Earl (2001) argues, despite the sizeable literature on knowledge management, there appears to be no common or universally accepted definition of the concept. The most prominent and representative of the range of accepted definitions include those from analysts such as Sallis and Jones (2002), and Graham and Thomas (2008). They suggest that the concept can cover everything from the application of new technology to harnessing intellectual capital in an organization. The system also relates to concepts including collaborative work, organizational learning, organizational memory, information technology, and information sharing.

Table 2. 2 Summarizes the criteria for spreading the knowledge of BSC Indicators related to the competitive advantages

Cost efficient Time saving

Improved quality of documentation Reduced number of design errors Number of customers satisfied Simpler procedures

Indicators related to the operational

Transfer and document management facilitated Improved coordination between project participants

Response time to problems reduced Project continuity established and supported Decision making of project participants

strengthened

55 Decision-making process based on improved

information technology

Coordination and communication based on improved information technology

Indicators associated with the technology / system

Suitable outputs and applications Improved tool reliability

User-friendly Suitability of the location

Accuracy and quality of the tool / system Security

Indicators associated with the user- centred

Level and frequency of information technology courses

Frequency and level of support courses Level and frequency of information technology

optimization

Information technology applications and tools for the organization

User-friendly tools and information technology applications

Effective use of information technology

Indicators related to the strategic competition

Improving customer satisfaction Improving corporate image Attracting more qualified customers Enabling international partnerships Increasing organization competition Improving computer literacy

Source: Janhangiri and Dashti (2012)

Davenport et al. (1998) affirm that KM is concerned with exploitation and development of the ‘knowledge assets’ of an organization, with a view to promoting/advancing the objectives of the organization. Such knowledge to be managed includes explicit (documented) knowledge and tacit (subjective) knowledge. They also suggest that management involves all those processes which are associated with the identification, sharing, and creation of knowledge. Bhatt (2001) builds on this explanation with the description that KM includes the processes and procedures governing the creation, dissemination, and use of knowledge. The processes fuse organizational structures and people with technology in order to better leverage resources within an organization.

The shared view of O’Dell et al. (1998) was that KM may be regarded collectively as those strategies and methods necessary for the exercise of identifying, capturing, and then leveraging knowledge so to assist and benefit a firm in order to compete. Beckman (1999) advocates the view that KM relates to the formalization of access to experience, expertise, and knowledge in order to generate new potential,

56 encourage innovation, enable superior performance, and enhances customer value. Similarly, Davenport and Prusak (2000) posit KM to be a fluid blend of framed experience, contextual information, and expert insight that can provide a framework for incorporating and evaluating information and new experiences.

The viewpoint of Egbu (2004) is that KM is the capacity of an organization to innovate and continuously improve. They suggest that KM is also dependent on the effective sharing and exploitation of its collective knowledge. Rao (2005) advocates KM to be a systematic discipline, and a set of approaches, which facilitate information and knowledge in creating value within an organisation. To Koskinen and Pihlanto (2008), KM encompasses a range of practices employed by organizations to identify, create, represent, and share knowledge; further, it develops awareness and learning within the organization. According to Madhoushi and Sadati (2010), is a planned, structured process that manages the creation and acquisition, sharing and transfer as well as the application of tacit and explicit knowledge as an organisational asset to encourage innovation and to enhance competitive advantage.

As can be observed from these representative samples, most of the definitions focus on managing knowledge that currently exists within the organization. However, such definitions do not sufficiently take into consideration the importance and significance of ‘knowledge creation’, which is a vital resource for competitive advantage. For the most part, the definitions focus on making available the knowledge, per se, yet pay modest attention to the development of capabilities that are necessary to exploit available organisational knowledge. Organisational knowledge is a determinant of the degree to which an organisation could benefit from its knowledge (Haas and Hansen, 2005). Furthermore, current definitions focus on limited characteristics of

57 organizational KM and do not necessarily consider the vitally important strategic dimension.

2.2.9.2 Knowledge Hierarchy

The most common theme in KM literature, posited by Zack (1999), Davenport and Prusak (2000), Clarke and Rollo (2001), and Hicks et al. (2006), is that of ‘knowledge hierarchy’.

Figure 2.5 The knowledge hierarchy (Hicks et al., 2006)

A sequential knowledge hierarchy exists whereby ‘data’ are transformed into ‘information’ and that ‘information’ is then converted into ‘knowledge’. However, Tuomi (2000) and Hicks et al. (2006) give different value regarding this sequential nature. They advocate that in a ‘value hierarchy’, ‘knowledge’ is considered to be high-order information; whereas ‘information’ is deemed to be high-order data.

Untreated (raw) data provides depictions of reality, which is drawn upon to produce information. This procedure involves data arrangement, categorization, analysis, and contextualization (the context can comprise virtual, physical, or mental elements or any combination of these). Galliers and Leidner (2009) posit distinct

58 ‘data’ as context-free, and argue that it can be understood in many different ways for various purposes. Similarly ‘information’ is processed data and is context-dependent. Information systems need to include the human dynamic in the act of interpretation /analysis in order for the data to have meaning. Vlada and Nica (2010) have stated that ‘knowledge’ may be identified as information-in-context, although ‘information’ is not necessarily instinctively ‘knowledge’.

2.2.9.3 Types of Knowledge

In an organisation, the KM dimension is the most significant. It categorizes knowledge according to its availability and presence. Key questions related to the type of knowledge include:

1. Is it only accessible for the owning human being?

2. Can it be communicated and transferred to the outside and applied?

3. Is it externally accessible in the firm’s organisational memory (as detached from the individual)? (Amman, 2010).

Bratianu (2009) and Leon and Atanasiu (2010) note that some knowledge resources are concrete, while others are intangible. For instance, people as human capital, infrastructure, and manuals are concrete; whilst individual or organisational capabilities, insight, relationships, know-how, and related issues are intangible.

Koskinen and Pihlanto (2008) place importance on the distinction between explicit knowledge and tacit knowledge. Madhoushi and Sadati (2010) agree and assert that both tacit and explicit forms of knowledge are accepted as significant sources of competitive advantage (and value creation), and thus are crucial ingredients for dynamic core competencies development. In general, explicit

59 knowledge is regarded as impartial, standing above and separate from individual and social value systems. Additionally, it is seen as something that could be codified in a tangible format. Tacit knowledge represents knowledge that individuals possess, but are not always able to be express.

According to Nonaka and Takeuchi (1995), explicit knowledge can be expressed in formal language as the ‘know-what’; it is documented and public, has structured fixed-content and is externalized and conscious. Nonaka and Takeuchi (1995) state that explicit knowledge is codified in a formal way that can be captured and shared through information technology, and can thus be easily transferred from one medium to another. Alavi and Leidner (2001) agree that explicit knowledge is articulated, codified, and communicated via natural or symbolic forms of language. Together with Nissen et al., (2000), they assert that it is knowledge that can be captured and processed, transmitted and stored. This is comparatively easily by means of information technology.

Hislop (2009), argues that the chief drawback of tacit knowledge is that it is personal and difficult, if not impossible, to disembody and codify. Tacit knowledge illustrates the direct consequence of the interaction between the individual and his/her external environment. It is deeply ingrained in actions, ideas, experiences, values, and involvement, within a particular context (Alavi and Leidner, 2001, (Nonaka and Takeuchi, 1995). As such, it is difficult to share and to formalise, codify, express, or communicate tacit knowledge to other persons. Essentially, tacit knowledge should not be considered autonomously from explicit knowledge, as there is indeed a tacit aspect/element to knowledge in all of its forms (Polanyi, 1996).

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