Programme Title: MBA University of South Wales Programme

Course Title: ST4S39-V1 Strategic Systems Thinking

Summative Assessment Essay 2

Student Name: Ekebo Udo Ituk

Student ID Number: 74107156

Lecturer: Bernardo Batiz Lazo

Submission Date: March 2019.

Task: “Before we measure something we must ask whether we understand what it is we

are trying to measure.” (Gray et al, 2015).

Critically discuss the above statement in relation to effectively developing the strategic

knowledge base in your organization.

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Table of Contents

Introduction ..................................................................................................................... 3

Knowledge Management/Environment............................................................................ 4

Communities of Practice/Interest .................................................................................... 9

Intellectual Capital and Social Networks ....................................................................... 11

Performance Measurement ........................................................................................... 14

Conclusion .................................................................................................................... 16

References .................................................................................................................... 17

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Introduction

There is a common saying that 'knowledge is power'. This is relative to every facet of

life and living because where knowledge is absent, there is no growth. A firm's learning

process is made up of acquiring, distributing, interpreting, and memorizing of

knowledge. This knowledge is contingent on its in-house learning activities in addition to

the learning activities of different external players. Strategic systems thinking would be

deficient without a Strategic Knowledge base. Numerous frameworks have emerged to

the advantage of knowledge systems, albeit a small number have really strived to put

this knowledge management in the bigger scene of strategic systems thinking. The

objective of this paper is to discuss an organization’s outlook to strategic management

of knowledge and organizational learning, assessing the use of its strategic structures

and tools.

This paper discusses the bedrock and the complete structure of the Knowledge System,

underlining its significance on the backdrop of Communities of Practice (CoP). It also

underlines its function in relation to Intellectual Capital (IC) - a bastion of the practice, in

the absence of which it would be just some other unclear idea. Knowledge management

and Performance Management go hand-in-hand, both playing a huge role in their

measurement and inherent challenges in their measurement. This paper touches the

role of Social Networks in relation to knowledge management. It also examines Gray et

al's statement: “Before we measure something we must ask whether we understand

what it is we are trying to measure” (Gray et al, 2015) in relation to developing strategic
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knowledge base of the writer's work place - Spacepointe Limited. Spacepointe Limited

is a payments solutions company that provides financial services and payment

processing via created software and applications. The method of investigation is

completely based on the analysis of literature of related articles.

Knowledge Management/Environment

Knowledge has been defined by different people in various ways. Davenport and

Prusak's (1998) defines knowledge as cited in Mahdi, Almsafir and Yao (2011, p.9922)

“as a fluid mix of framed experience, values, contextual information, and expert insight

that provides a framework for evaluating and incorporating new experiences and

information. It originates and is applied in the minds of experts. In organizations, it often

becomes embedded not only in documents or repositories but also in organizational

routines, processes, practices, and norms”. Endres et al. (2007) as cited in Mahdi,

Almsafir and Yao (2011, p.9922) defines knowledge from an organizational point of

view. It is considered “a valuable intangible resource and potential source of capabilities

and competencies for innovations and new product development, it consists of

information, technology, know-how, and skills. Value and sustainability are created from

the integration of these resources better than competitors". It is an esteemed position in

which a person is in cognitive connection with reality. It is, therefore, an interconnection.

This definition clearly shows that knowledge is not just an unassertive exercise but
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created through activity. Knowledge is more intricate than data or information; it is

personalized, usually founded on experience, and very inferential. It is seen as the basis

of creating value (Rastogi, 2002).

There are two main types of knowledge i.e. Tacit Knowledge and Explicit/Codified

Knowledge. Dalkir (2005) explains that tacit knowledge is the knowledge that borders

on expertise, know-how, know-why, and care-why. It involves the ability to adapt, to

deal with new and unusual situations. Tacit knowledge can integrate, share a vision,

pass on a culture and it involves tutoring and mentoring to transfer experiential

knowledge on a one-on-one face-to-face basis. Kogut and Zander (1992) further

explains that it is uncodified, slow to transfer, though can be acquired via observation

and emulation, it shows only when it is applied, requiring a degree of closeness and

perpetuity, and as stated by Choo (2002) it is expensive, needing complex interactive

structures. It is difficult to communicate and also difficult to put into words, text, or

drawings.

On the other hand, explicit or codified knowledge represents content that has been

expressed in some material form such as words, audio recordings, or images bothering

on observability and information that can be transferred without integrity loss (Kogut and

Zander, 1992). It involves the ability to promulgate, to replicate, to ingress, to teach, to

train and to reapply all through the organization. Explicit or codified knowledge also

involves the ability to arrange, to classify; to express and convert a vision into a mission

statement, into operational guidelines as well as transfer of knowledge via products,

services, and documented processes (Dalkir, 2005). It is also inexpensive to convey

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and disseminate. In summary, tacit knowledge has the propensity to live “within the

heads of knowers,” whilst explicit knowledge is typically contained within material or

concrete media. Van den Berg (2013) argues that there is a third type of knowledge -

Encapsulated knowledge. He claims that encapsulated knowledge is neither tacit nor

explicit, because it is externalized and implicit.

For people and organizations to survive and grow in our ever-changing society, new

knowledge is required to get work done. Firms cannot rely on their previous knowledge

as it becomes obsolete and ineffective in handling the new situation caused by change.

This is where the role of Knowledge Management (KM) comes into play. The aim of KM

is seen as the commitment to reproduce, as a matter of fact to create the information

environment that is sound, abundant and unbarred communication and information

access as well as establish the potential for the organization to create outstanding

situational awareness and therefore to make the right decisions. "The utilization of

knowledge and knowledge management (KM) is being highly considered as an

organizational capability and a potential source of sustainable competitive advantage

(SCA)" (Mahdi, Almsafir and Yao, 2011). In summary, KM is the business activity and

research discipline centered on anchoring knowledge for organizational competitive

advantage.

There is no widely recognized definition of knowledge and knowledge management

(KM), but most experts and practitioners agree that KM uses both tacit and explicit

knowledge with the purpose of adding worth to the organization. Dalkir (2005) defines

Knowledge management as "the deliberate and systematic coordination of an

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organization’s people, technology, processes, and organizational structure in order to

add value through reuse and innovation. This coordination is achieved through creating,

sharing, and applying knowledge as well as through feeding the valuable lessons

learned and best practices into corporate memory in order to foster continued

organizational learning".

Dalkir (2005) explained the meaning of knowledge management from two perspectives:

cognitive science or knowledge science perspective and the process/technology

perspective. In the cognitive science perspective, he cited Wiig (1993, pp. 38–39) as

saying that knowledge—the insights, understandings, and practical know-how that we

all possess—is the fundamental resource that allows us to function intelligently. Over

time, considerable knowledge is also transformed to other manifestations—such as

books, technology, practices, and traditions—within organizations of all kinds and in

society in general. These transformations result in cumulated expertise and, when used

appropriately, increased effectiveness. Knowledge is one, if not THE, principal factor

that makes personal, organizational, and societal intelligent behavior possible. From the

process/technology viewpoint, “knowledge management is the concept under which

information is turned into actionable knowledge and made available effortlessly in a

usable form to the people who can apply it” (Information Week, 2003) as cited in Dalkir

(2005). Dalkir (2005) also cites (Steve Ward and Northrop Grumman) arguing that

knowledge management is "a systematic approach to manage the use of information in

order to provide a continuous flow of Knowledge to the right people at the right time

enabling efficient and effective decision making in their everyday business". It involves
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"leveraging collective wisdom to increase responsiveness and innovation" (Carl

Frappaolo) as cited in Dalkir (2005).

In an organization, it is vital to grow both tacit and explicit knowledge (Nonaka and

Takeuchi, 1995). Organizational knowledge should not take the place of individual

knowledge but rather supplement it so as to make it stronger, more logical, and more

widely applicable. As seen in the ChevronTexaco’s Communities of Practice case study

by Stemke (2004), they offered comprehensions as to how tacit and explicit knowledge

can be formed. Here, they developed explicit knowledge by providing links to internal

and external knowledge information interchanges i.e. databases, benchmarking data

and past studies, and creation of “Global Refining Networks” which makes possible swift

interrelation between curious and interested staff and those with appropriate

competence and knowledge. Similarly, tacit knowledge is started by facilitating and

expediting the suitable and efficient adoption of latest technologies, value-adding

practices and lessons learnt and network metrics. Chevron has a ‘Technology Rapid

Execution’ (TRex) networks. These transports tacit knowledge between technical and

operations staff for cost-effective and performance-improving technology development

(Stemke, 2004).

Relating knowledge management to the case study of the Essex Police’s ‘Plan on a

Page’, Marr and Creelman (2015) explains that innovation starts with the creation of a

novelty approach to knowledge management within the organization. With the

knowledge of ‘desperation for a change’ and furnishing the workforce with both explicit

and tacit knowledge, there was an unprecedented change in the police force.
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Conversely, with Spacepointe Limited, despite being an IT/Payments Solutions firm that

should be a knowledge-creating organization, it can be said that they do not have a

well-built knowledge base although they are an organization that strongly requires it. In

Spacepointe, knowledge is more of explicit/codified form than of tacit despite

possessing the knowledge vision because the staff are not intellectually inspired to

create knowledge as top management does not do enough to encourage this. Even

though there is interactivity and training, it is predominantly ‘information’ that is been

made obtainable to the staff.

Communities of Practice/Interest

Communities of Practice started and developed from informal networks (Wenger and

Trayner, 2011). As stated by Wenger and Snyder (2000), it is a recent organizational

disposition composed of an unofficial group brought together by shared competence

and passion for consolidated enterprise. They have different names such as learning

networks, thematic groups, or tech clubs. Wenger (no date) defines communities of

practice as "groups of people who share a concern or a passion for something they do

and learn how to do it better as they interact regularly". There is a shared area of

interest and expertise in chasing their interest in their field, members engage in

common activities and discourses, assist and aid each other, and share information.

They build a shared collection of resources: insights, stories, contrivances, ways of

handling recurring difficulties.

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Few CoPs are a bit compact; while others are exceptionally large, usually with a

nucleus group and numerous outlying secondary constituents. Some are domestic, and

others are world over. Some meet mostly face-to-face, others usually online. Few are

inside an organization and others include constituents from different organizations.

Some are officially certified, usually funded; and some are totally unofficial and

surprisingly unnoticeable. Communities of practice can be seen in organizations, in the

government, in education (schools), associations, social sector, international

development as well as the web. As a matter of fact, communities of practice are all

over. They are a well-known experience, so near maybe that people don't take notice of

them (Wenger, no date).

Communities of practice specifically, lets us to look beyond more apparent official

structures such as classrooms, organizations or nations, and consider the constructs

determined by meeting in practice and the informal learning that accompanies it.

Practitioners can address the tacit and dynamic aspects of knowledge creation and

sharing, as well as the more explicit aspects. Things that can be addressed include but

not limited to problem solving, information requests, seeking competence and

experience, reusing assets, coordinating and synergizing, talking over and analyzing

evolution and growths, visits, documentation projects, knowledge mapping and

recognizing omissions (Wenger, no date).

As seen in the ChevronTexaco’s Communities of Practice case study, they have an

officially certified and well-funded community of practice, whereas Spacepointe Limited

as an organization has no connection or affiliation with a community of practice as the

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management neither encourages nor motivates the workers and they do not give room

or time for anything else outside the regular robotic working schedules.

Intellectual Capital and Social Networks

An organization's worth is not only about its physical and tangible assets. There are

other things, though intangible that contributes to the value or worth of an organization

which can also be measured. One of such is the intellectual capital or intellectual asset

of the organization. This is required in any organization that desires to maintain

competitive advantage in their sphere of operation. There are numerous definitions that

can be considered as Intellectual Capital/Asset. Choong (2008) defines intellectual

capital from the accounting and non-accounting perspectives. For the nonaccounting

researchers, “intellectual capital” is defined as the “difference between the firm’s market

value and its book value of entity” (Edvinsson and Malone, 1997; Stewart, 1997; Sveiby,

1997; Mouritsen et al., 2001) as cited in Choong (2008). Accounting researchers like

(Ohlson, 1995, p. 662; Feltham and Ohlson, 1996, p. 220; Beaver, 1998, p. 78;

Holthausen and Watts, 2001, p. 50) as cited in Choong (2008) defines intellectual

capital as the difference between the market value of the entity and the book value of

the entity’s identifiable assets is defined as “goodwill.” Goodwill is also known as

“intangible assets.”

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Citing Marr and Schium (2001), Kamukama, Ahiauzu and Ntayi (2011) argues that

"intellectual capital is the group of invisible assets that are ascribed to an organization

and most significantly influence the firm’s competitive position and performance".

Kamukama, Ahiauzu and Ntayi (2011) further buttress their point on the pricelessness

of intellectual capital by citing Wang and Changa (2005) that "intellectual capital is a

fundamental determinant of a firm's current and future competitiveness as well as a

firm's value growth." Intellectual Capital also comprises of the skills or knowledge that a

company owns through its staff, chiefly the staff skill sets, aptitudes, outlooks – human

knowledge that is not possessed by the organization, but can be harnessed and

conveyed to add value to the organization (Choong, 2008).It is the duty of the

organization to take advantage of the extensive knowledge staff have obtained on the

job by harnessing and transferring the knowledge to current and prospective workers.

The knowledge management nexus of a firm consists of a dense, dynamic, and

mutually supportive interactive pattern of its social capital (social network), human

capital, structural capital and customer capital and knowledge management. Intellectual

capital (IC) of the firm is the resultant from this nexus (Rastogi, 2002). Nahapiet and

Ghoshal (1998) views a Social Network as a ‘Social Collectivity’, because it involves

people- in an organization, firm or even an ‘Intellectual Community’. In such context,

connections and relationships are formed both internally and externally which is termed

‘Social Capital’: the main definition being that networks of relationships create a

valuable resource for the management of social proceedings. It consists of structural,

relational and cognitive dimensions. It creates new intellectual capital (IC)through a

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combination and exchange of various other components of intellectual capital. It is one

of the leading categories that produce stability in Intellectual Capital.

Human Capital: Citing (Halim, 2010; Bontis, 2002), Kamukama, Ahiauzu and Ntayi

(2011) argues that human capital is a principal component of intellectual capital which

refers to the human factor in the organization, the people and what an employee brings

into the value adding processes and encompasses combined intelligence, skills,

learning ability, quality management, core competencies, knowledge base, professional

competence, social competence, employee motivation, and leadership ability which

gives the organization its distinctive character.

Structural Capital talks about the processes and operations of the organization, cultural

set up and the innovativeness in its operations. Kamukama, Ahiauzu and Ntayi (2011)

argues further by referring to the definition of structural capital by Halim (2010) that

states that it is “what happens among the people, how the people are connected within

the company, and what stays when the employee leaves the company”. It is a stock of

knowledge that is possessed by the firm and includes corporate culture, information

technology and explicit knowledge, product innovation, process optimization, and

innovation among others.

Customer Capital: This refers to relational capital. It is the value of external

relationships, and how customers are treated and valued in the organization: ‘Goodwill’.

Choong (2008) listed seven schools of thought by various other researchers in modeling

and measuring intellectual capital. They are Skandia Navigator by Edvinsson (1997)
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and Edvinsson and Malone (1997), Intangible asset monitor by Sveiby (1997),

Calculated intangible value by Stewart (1997) and Luthy (1998), Balance scorecard by

Kaplan and Norton (1996, 2000), Technology broker by Brooking (1996), Value Explorer

by Andriessen and Tiessen (2000) and Value Chain Scoreboard by Lev (2001, 2002b).

Kaplan and Norton’s (1996, 2000) balanced scorecard method, is one of the widely

instituted techniques. This was how the indicators (Human, Customer and Structural

Capital) surfaced. A base ratio was formed for each of these items- Modernization,

Development and Number of Customers. Measurement is key because it helps in the

systematic management of these unseen values as well as provide sound

understanding into future development and make known values vital to the

organizations’ strategic future (Edvinsson, 1997) as cited in Choong (2008). The

challenge to measurement nonetheless is the complex and intricate quantification of

measuring the perspicacity of an organization which is dependent on subjective

evaluation.

Performance Measurement

Performance measurement aids executives to assess if an organization’s business

results measure up to the strategic goals. To execute this process, organizations

measure their performance using various techniques and standards, including

performance metrics for every business activity. The reasons for measuring
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performance include but not limited to understanding the extent of a thing, documenting

the way a thing works, to limit the complicatedness of the world, to give a feeling of

control and to be able to grow. Measurement is aided by ‘Performance Management

Systems’, ‘Quality Improvement Systems’, ‘Dashboards’, ‘Metrics e.g. Skandia AFS’,

and the ‘Balance Scorecard’ as in Skandia AFS. These systems enable leaders to

assess business results across every unit in an organization as well as how the various

constituents of an organization function together to yield business outcomes in order to

be able to form more knowledgeable decisions—such as budget adjustments, staff

recruitments, or business process streamlining.

To support the performance measurement (PM) process, executives determine which

features of performance need to be measured. To measure performance, there has to

be clearly defined objectives, critical success factors (CSFs) for each objective must be

identified, and key performance indicators (KPIs) for each CSF must be defined and

targets set for each defined KPI. The whole process of measurement and target setting

works when the targets fit the context and the management of the business and there is

a clear understanding of the type of target being used. Properly designed KPIs supplies

the crucial navigation tools that provides a clear understanding of present levels of

performance and the wrong KPIs may drive a company to financial ruin (Worth, 2016).

An example of effective application of performance measurement is the Essex Police

Force' ‘Plan on a Page’ where they unanimously reached an agreement on strategic

goals, and a clear communication of their priorities.

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Conclusion

For Spacepointe Limited to grow their strategic knowledge base, every player must

support knowledge management, not just top executives. They must become self-

organized with matching purpose, reorganizing their objectives, having a precise

mission and direction. They must also engender a shared perception of concepts that

will aid a diversity of knowledge. They should eradicate limitations and be devoted to

members. Questions like 'What is their IC? Have they measured performance? Would

they advocate CoPs both internally and externally? Are they ready for new beginnings?'

must be asked and answered. Everyone needs to function together as an efficient

system should. In conclusion, new knowledge creation must be encouraged, and it

should be a continuous process. This is the only way Spacepointe Limited will remain

relevant in our ever-changing society.

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