Chapter 2

Knowledge Management
&
Information Systems Strategy
 Knowledge Management (KM)

Knowledge management (KM) is a process that helps organizations

manipulate important knowledge ie., part of the organization’s memory.
For an organization to be successful, knowledge, as a form of capital, must
exist in a format that can be exchanged among persons.
In information technology context, knowledge is distinct from data and
information.
Companies must know how to manage this knowledge.
Knowledge management (KM) is the process by which organizations
extract value from their knowledge assets.
 Conti..
Knowledge management systems refer to any kind of Information Technology system that stores and
retrieves knowledge, improves collaboration, locates knowledge sources, mines repositories for hidden
knowledge, captures and uses knowledge, or in some other way enhances the Knowledge Management
process.
A knowledge management system (KMS) is a system for applying and using knowledge management
principles. These include data-driven objectives around business productivity, a competitive business
model, business intelligence analysis, retrieving relevant data from repositories and more.
A knowledge management system is made up of different software modules served by a central user
interface. Some of these features can allow for data mining on customer input and histories, along with
the provision or sharing of electronic documents. Knowledge management systems can help with staff
training and orientation, support better sales, or help business leaders to make critical decisions.
 Conti..
There are also two different types of knowledge, explicit and tacit
Explicit knowledge includes things that you can easily pass on to someone else by
teaching it or putting it into a database or a book. Explaining your company's safety
protocols to a new team member is demonstrating explicit knowledge.
In contrast, tacit knowledge is the cumulative store of subjective or experiential
learning. In an organization, tacit knowledge consists of an organization’s experiences,
insights, expertise, know-how, trade secrets, skill sets, understanding, and learning. It
also includes the organizational culture, which reflects the past and present
experiences of the organization’s people and processes, as well as the prevailing values.
Tacit knowledge is generally slow, imprecise, and costly to transfer. It is also highly
personal.
 Discussions
Why Knowledge Management is necessary?
Speed up access to information and knowledge

Improve decision-making processes

Promote innovation and cultural change

Improve the efficiency of an organization’s operating units and business processes

Increase customer satisfaction

Information Systems Strategies
 The Role of the General Manager
A key decisions maker.
Not necessary to have a deep technical knowledge of there is.
Aggressively seek to understand the consequences of using technologies relevant
to the business’s environment.
Ask questions when it’s not clear.
Should not leave IS decisions solely to the IS professionals
 Information Systems Alignment

An IS that is inappropriate for a given operating environment can

actually inhibit and confuse things, or even lead to a crisis
environments.
The IS department manages an infrastructure that is essential to the
firm’s functioning .
A firm’s IS must be aligned with the way it manages its employees and
processes .
 IS Strategy Triangle

Business Strategy drives all other strategies

Organizational and Information Strategy are then dependent upon the Business
Strategy
Changes in any strategy requires changes in the others to maintain balance.
IS Strategy is affected by the other strategies a firm uses.
IS strategy always involves consequences
 Questions for the General Manager

What is a business strategy?

Which factors influences a business strategy?
 Business Strategy

A strategy is a coordinated set of actions to fulfill objectives, purposes and goals

Strategy starts with a mission.
some example of mission statements are shown on next slide
A business strategy is a plan articulating where a business seeks to go and how it
expects to get there
There are several “strategies” worth examining
 Mission statements of computer companies

Company Mission Statement

To provide the best customer service possible. Internally we call this our
Zappos® WOW Philosophy

We seek to be Earth’s most customer-centric company for three primary

Amazon® customer sets: consumer customers, seller customers and developer
customers

L.L. Sell good merchandise at a reasonable profit, treat your customers like
Bean® human beings and they will always come back for more
 Generic Strategies Framework
Michael Porter describes how businesses can build a sustainable competitive
advantage
“fundamental basis of above-average performance in the long run is sustainable
competitive advantage.”
He identified three primary strategies for achieving competitive advantage:
Cost leadership – lowest-cost producer
Differentiation – product is unique
Focus – limited scope
 Porter’s Competitive Advantage

Remember that a companies overall business strategy will drive all

other strategies
Porter defined these competitive advantages to represent various
business strategies found in the marketplace
Cost leadership results when the organization aims to be the lowest-cost
producer in the marketplace
Through differentiation, the organization qualifies its product or
service in a way that allows it to appear unique in the marketplace
 Porter’s Competitive Advantage (Cont.)

Focus allows an organization to limit its scope to a narrower segment of the market
and tailor its offerings to that group of customers
 This strategy has two variants:

1. Cost focus
2. differentiation focus
 Dynamic Environment Strategies

Porter’s model is useful for diagnostics, or understanding how a

business seeks to profit in its chosen marketplace, and for prescriptions,
or building new opportunities for advantage
Porter model was developed at a time where the rate of change in any
given industry was relatively slow and manageable
Newer models were developed to take into account the increasing
turbulence and velocity of the marketplace
 Hyper competition Model
Porter’s model focus on creating competitive advantage, whereas hyper
competition models suggest that the speed and aggressiveness of the moves and
countermoves in any given market create an environment in which advantages are
rapidly created.
Hyper competition models
Fits turbulent environments

Enables managers respond instantly and change rapidly

Requires dynamic structures and processes
 Rapidly Changing Environment and Marketplace

Firms focus on their capability to dynamically adjust their organizational

resources, valuing agility itself as the competitive advantage
Still focus on customer satisfaction, profit maximization, and other goals consistent
with the business’s values and beliefs
Utilize components of business intelligence:
The ability to predict new opportunities, organizational designs that can sense,

restructure, and respond quickly

Strategic signaling and actions that both surprise and confuse competitors
 Competitive Dynamics Models
Destroy Your Business (DYB)- strategic planning implemented by leadership guru
Jack Welch at General Electric (GE)
GE employees develop strategies to destroy GE’s competitive advantage

Grow Your Business (GYB) - strategy to find fresh ways to reach new customers and
better serve existing ones
Complete disruption of current practices

Take actions to protect GE business before competitors hone in on its weaknesses

Implicit assumption underlying DYB is that GE would not be able to sustain its
position in the marketplace over the long term
 Examples of Competitive Dynamics Models

A similar strategy of cannibalizing their own products was used by

Apple® and GilletteTM.
Apple introduced the iPhone® while iPod® sales were brisk, and the
iPad® while its Macintosh sales were strong
Apple continues to exhibit this strategy with subsequent releases of new
models of all of its products
Gillette spent resources to convince customers to upgrade to the newer
and more expensive products
 IS Planning and Strategic Advantage Models
General Managers cannot afford to rely solely on IS personnel to make IS
decisions
Business strategy drives IS decision making
Changes in business strategy should entail reassessments of IS
Changes in IS potential should trigger business strategy reassessments (i.e. the
Internet)
Information Systems Strategy Triangle shows the proper balance of strategies
The models are helpful in discussing the role of IS in building and sustaining
competitive advantage
 Summary of strategic approaches and IT applications
Strategic Key Idea Application to Information
Approach Systems

Porter’s Firms achieve competitive Understanding which strategy is

generic advantage through cost chosen by a firm is critical to
strategies leadership, differentiation, or choosing IS to complement the
focus strategy

Dynamic Speed, agility, and aggressive IS are critical to achieving the speed
environment moves and countermoves by a needed for moves and
strategies firm create competitive countermoves.
advantage IS are in a constant state of flux or
development
 Building a Social Business Strategy

A plan of how the firm will use social IT, aligned with organization
strategy and IS strategy
A vision of how the business would operate if it seamlessly and
thoroughly incorporated social and collaborative capabilities
throughout the business model
Answers the same type of questions of what, how, and who, as any other
business strategy
 Social Business Strategies
Collaboration
Using social IT to extend the reach of stakeholders, both employees and those

outside the enterprise walls.

Social networks enable individuals to find and connect with each other to share

ideas, information, and expertise.

Engagement
Using social IT to involve stakeholders in the traditional business of the enterprise.
Communities and blogs provide a platform for individuals to join in conversations,

create new conversations, offer support to each other, and other activities that
create a deeper feeling of connection to the company, brand, or enterprise
 Social Business Strategies (Cont.)
Innovation
Using social IT to identify, describe, prioritize, and create new ideas

for the enterprise

Social IT offer the community members a “super idea box” where

individuals suggest new ideas, comment on other ideas, and vote for
their favorite idea, giving managers a new way to generate and
decide on products and services
 Applications of Social IT

National Instruments (ni.com) has embraced social IT and created a social

business strategy
Managers developed a branded community consisting of a number of social IT
tools like Facebook®, Twitter®, blogs, forums, and more
Thinking holistically about all of the ways customers and employees might
interact with each other, the branded community has become the hub of
collaboration, engagement and idea generation
 Brief Overview of Organizational Strategies
Organizational strategy includes the organization’s design as well as the choices it
makes to define, set up, coordinate, and control its work processes
A plan that answers the question:
 “How will the company organize to achieve its goals and implement its business

strategy?”
There are numerous models of organizational strategy
The business diamond introduced by Harold Leavitt, identifies the crucial
components of an organization’s plan as its information/control, people, structure,
and tasks.
The Business Diamond
 The Managerial Levers
This framework suggests that the successful execution of a business’s
organizational strategy comprises the best combination of organizational,
control, and cultural variables
Organizational variables include:
Decision rights, business processes, formal reporting relationships,
and informal networks
Control variables include:
availability of data, nature and quality of planning, effectiveness of
performance measurement and evaluation systems, and incentives to
do good work
Cultural variables comprise the values of the organization
Managerial levers
 Summary of organizational strategy frameworks
Frame work Key Idea Usefulness in IS Discussions

Business There are four key components to an Using IS in an organization will affect
diamond organization’s design: people, each of these components. Use this
structure, tasks, and framework to identify where these
information/control impacts are likely to occur

Managerial Organizational variables, control This is a more detailed model than the
levers variables, and cultural variables are Business diamond and gives specific
the levers managers can use to affect areas where IS can be used to manage
change in their organization the organization and to change the
organization
 Brief Overview of IS Strategy
IS strategy is the plan an organization uses to provide information services.
IS allows a company to implement its business strategy

Business strategy is a function of

Competition (What does the customer want and what does the competition do?)
Positioning (In what way does the firm want to compete?)
Capabilities (What can the firm do?). IS help determine the company’s

capabilities.
 IS strategy matrix
What Who Where
Hardware List of physical • Individuals who use it Physical location
components of the system Individuals who manage it

Software List of programs, • Individuals who use it What hardware it resides

applications, and utilities Individuals who manage it upon and where that
hardware is located

Networking Diagram of how hardware • Individuals who use it Where the nodes are
and software components • Individuals who manage it located, where the wires
are connected • Company service obtained from and other transport media
are located

Data Bits of information stored • Individuals who use it Where the information
in the system • Individuals who manage it resides
 Discussions
Why we need IS strategy in Organizations?
Thank You!