Knowledge management and organizations’ growth

Two knowledge perspectives can be derived from the knowledge management literature. The similar perspectives can be perceived also in practical management situations. First, when considering knowledge as a strategic resource, the managerial question concerns whether an organization possesses the needed knowledge assets to enable its business objectives. Second, decision-making necessitates correct and timely information.

The two viewpoints lead to very different knowledge initiatives. Acquiring new competence and capabilities is a different type of knowledge need than gathering decision-making information. We studied these two perspectives empirically in the particular case of a company aiming at rapid growth in the construction industry.

Empirical examination brought up several important aspects to be considered when taking a knowledge perspective to growth management. Most importantly, the ultimate business target, growth in our case, needs to be divided into smaller and more concrete management tasks in order to recognize the actual knowledge needs and to define responsibilities.

We ended up to break the growth objective down to three sub-objectives (performance gaps): choosing the right projects, keeping employees satisfied and confirming the performance of the production network. For these management tasks it was reasonable to pose the two questions: what knowledge assets are needed and what information is needed to support decision-making?

In choosing the right projects the main focus was on external information. Recognizing the right information sources, having the processes and tools for gathering and analyzing this information and, finally, incorporating the results to everyday management processes were considered the main knowledge management tasks in this area.

One major concern related to a more general issue in the construction business, which was its reliance on tacit knowledge. This hinders the renewal capability of individual organizations and the whole industry. Organization’s absorptive capacity, that is, recipient’s prior knowledge and adaptability, amount and quality of communication as well as trust and cultural compatibility, could be enhanced by better utilization of external knowledge and the possibilities of business intelligence methods and tools.

Considering the other two management tasks identified, the focus was more on internal management issues, organizational culture and internal information. The importance of open communication with the personnel was emphasized. Condensing the information into a clear and understandable message, or a ‘growth story’, was seen as an essential task. The importance of communicating the entrepreneur’s vision is highlighted also by the literature.

This communication can be enforced with an open organization culture and further supported by the available information and knowledge. The story behind the growth objective puts in evidence what knowledge resources are missing, where to get them and what knowledge is needed to make more informed decisions. This could mean, for example, specifying the project types the organization is going to take part in.

Setting priorities for different kind of projects will concretize the methods, capabilities and tools needed for making the growth objective to realize. This will open the intended future not only for employees but also other interest groups and lead to concretization of the growth objectives.

Case experiences highlighted that developing a growth strategy is always contingent on situational factors. It also became evident that it is difficult to consider knowledge strategy, or knowledge management more generally, independent from the more traditional management. Rather, knowledge perspective should be integrated into human resource management, process management, marketing and strategic management in order to fully capture the potential of organization wide knowledge resources.

There are multiple paths that can be chosen. Knowledge management literature provides managers with several mental models to be followed. These include at least information management, business intelligence, intellectual capital management and knowledge management. Empirical examination illustrated how different management situations and growth determinants call for different approaches and tools.

Effective knowledge strategy would balance various perspectives and notice that implementation of new tools, such as information systems, also require training and investment in human resources and most probably affect processes and ways of operating. In practical management situations it is important not to be dazzled with only one perspective. Composing a knowledge strategy is a context specific exercise. Selecting the most suitable approach and tools from the knowledge-based management toolbox depends on the business case and whether you are interested, for example, in knowledge creation, innovations, entering into new markets or improving internal efficiency and streamlining respective knowledge flows.

To summarize the main managerial implications of our case the following cornerstones of growth-oriented knowledge strategy were derived:

  1. Concretization of growth strategy and objectives. The ‘growth story’ creates a basis for knowledge-based decision-making and communication of objectives.
  2. Open and mutual communication with the personnel. Growth both necessitates and causes changes, which brings along many requirements but also possibilities.
  3. Modeling and analyzing the extent and capabilities of the current production network. Having the right partners guarantees high quality and maintaining of schedules.
  4. Clarifying and systemizing the knowledge-base for selecting the right projects. Choosing the right projects brings along profitable growth.
  5. Continuous follow-up of the prevailing market situation. Demand for housing and office premises as well as supply of resources set boundary conditions for growth.

These cornerstones of a knowledge strategy cover many aspects stressed in the literature. Implicitly those take into account the extremes of internal and external knowledge, individual and organizational knowledge as well as explicit and tacit knowledge. However, it is important to bear in mind the business objective and the growth story, which should define what knowledge is to be gathered. This turns the focus from mere information gathering and accumulation to its usage for business improvement.

Laihonen, H., Lönnqvist, A. and Metsälä, J. (2015) “Two Knowledge perspectives to growth management”, VINE: Special Issue on Knowledge Strategies: a new connection between strategic thinking and knowledge management capabilities, 45(4), 473-494.

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