Critical Success Factors for Knowledge Management

Critical Success Factors for Knowledge Management Enablers and Inhibitors of Knowledge Management: Critical Success Factors for Knowledge Management Introduction The information revolution has caused enterprises to realize the shift from resource economy of controlling land, machines, factories, raw materials, and labor forces to the knowledge economy of creating business value through utilization of intangible knowledge. This has caused â€Å"knowledge management† to be of crucial importance and it has grabbed peoples attention and generated significant discussions both in the academia and industry. The true creation of business value today mainly comes from knowledge and its management. Knowledge is critical in obtaining competitive advantage within an enterprise (Sang and Hong, 2002), enterprises should consider the knowledge to be a critical resource and leverage it judiciously (Gupta et al., 2000; Liebowitz, 2003). To facilitate the knowledge accumulation process, enterprises must encourage employees to share their experience and knowledge with others meanwhile accumulating their knowledge as an organizational asset. Therefore, th e activities of knowledge management should enable the creation, communication, and application of knowledge; and they should drive the capability of creating and retaining a greater value onto the core business competencies (Tiwana, 2001). The enterprise needs to build a framework for evaluating the implementation activities of knowledge management system to enhance the effectiveness for incorporating new experiences and information to nourish the contents and contexts of its knowledge. However, there are concerns about the enablers and inhibitors to implementing knowledge management for enterprises. The response to that concern is that there are broad and value studies related with the implementation of knowledge management (Barney, 1995; Nonaka et al., 2000; Ndlela and Toit, 2001; Tiwana, 2001, Lin and Tseng, 2005). For example, Barney (1995) demonstrated that before launch to implement knowledge management, the enterprise needs to solve four questions: 1. Where is the value of knowledge? 2. How does the firm develop and exploit the special characteristics of knowledge and find a niche to obtain greater competitiveness? 3. How does the firm avoid being imitated by other firms of its special characteristics of knowledge management? 4. How does the firm organize the exploitation of resources in order to implement knowledge management? In the process of carrying out knowledge management, enterprises have to face the varying conditions of corporate culture, workflow processes, and the integration of group members knowledge. They also need strong support from top management, because it is possible that during the process they will encounter resistance from employees. Enterprises also need to increase the usage of information technology in order to help the problem regarding the flow of information. Through the study of enablers and inhibitors this research not just tries to validate theory with reality, but it also hopes to provide a reference for academia as well as the business field and suggest critical success factors for knowledge management implementations. Wong, (2005) indicate that previous studies of CSFs for KM implementation have been heavily focused on large companies. This is because most of the early adopters and superior performers of KM were in fact large and multinational corporations. As such, existing factors are mainly large companies oriented, thereby reflecting their situations and needs. Directly applying these factors into the SMEs environment may not be sufficient without an understanding of their very own and specific conditions. Previous studies fall short of studying and identifying the CSFs from the SMEs perspective. They have not considered the features, characteristics and situations of smaller firms. Nor have they explored other factors, which could potentially be more important for SMEs when accomplishing KM. This paper evolves a model for critical success factors for Knowledge Management implementations in Small Medium Enterprises using the Analytic Hierarchy Process (AHP). AHP is an effective quantitative tool that helps to prioritize problems, issues or variables based on relevant criteria and alternatives. The applicability and usefulness of the AHP approach as a multi-criteria decision-making tool is well acknowledged in the management literature. The present work has adopted this tool for segregating a few critical aspects of Knowledge Management implementation from the inconsequential many, so that organizations could focus only on those dimensions that are crucial for their success instead of spending a large quantity of time, effort and resources in mindlessly concentrating on peripheral issues. Hence the objectives of this paper are two-fold: †¢ To identify the criteria for the AHP model with respect to issues relating to critical success factors for Knowledge Management implementations in SMEs †¢ To present an AHP framework for absolute measurement of priorities in order to critically evaluate the issues relating to critical success factors for Knowledge Management implementations in SMEs. Review of Literature Enablers to Knowledge Management As enterprises embark into managing their knowledge they need to be clear of the factors that influence knowledge management, which are known as knowledge management enablers. Because enablers are the driving force in carrying out knowledge management, they do not just generate knowledge in the organization by stimulating the creation of knowledge, but they also motivate the group members to share their knowledge and experiences with one another, allowing organizational knowledge to grow concurrently and systematically (Ichijo et al., 1998; Stonehouse and Pemberton, 1999). Knowledge management enablers are the mechanism for the organization to develop its knowledge and also stimulate an environment within the organization for the creation and protection of knowledge. They are also the necessary building blocks in the improvement of the effectiveness of activities for knowledge management (Ichijo et al., 1998; Stonehouse and Pemberton, 1999). In related research, knowledge management enablers include the methods of knowledge management, organizational structure, corporate culture, information technology, people, and strategies, etc. (Bennett and Gabriel, 1999; Arthur Anderson Business Consulting, 1999; Arthur Anderson and APQC, 1996; Zack, 1999; Davenport, 1997; Long, 1997). To meet the challenge of managing strategic knowledge resources, an organization should be able to assess its preconditions for successful KM and their impacts on KM performance (Gold et al., 2001). A study by Yu et al (2007) identified a set of critical enablers for developing organizational capabilities of KM. KM team activity, learning orientation, KM system quality, and KM reward were found to have a significant, positive influence on KM performance. Research done by Yeh et al. (2006) concludes that strategy and leadership, corporate culture, people, and information technology are four of the enablers in knowledge management. They found that for the strategy and leadership enabler the most important part is to obtain the support of the top managers. For the corporate culture enabler, the important part is the forming of a culture of sharing but needs to be supplemented by information technology. For the people enabler, other than the training courses, the channels of learning and the incentive program for the employees are also key factors. As for the information technology enabler, other than the digitalization of the documents, the speedy search of knowledge for its re-use is becoming more and more important. In practice they discovered that the â€Å"establishment of a dedicated unit† is also a key enabler, and this enabler mainly plays the role of furthering knowledge management, taking communication, and coordinating with other departments as its duty. Inhibitors to Knowledge Management The biggest inhibitor to knowledge management implementation arises from unwillingness of people to systematically organize their knowledge. Since, this cannot be solved with technology, different kinds of work are needed. Examples include the promotion of knowledge management amongst people, or requiring top management to give their people pressure to implement knowledge management (Yeh et al., 2006). Lin et al (2005) suggest inhibitors in implementing the Knowledge Management arise out of strategic, perception, planning and implementation issues. The results of their research reveal that: †¢ From the strategic aspect, the upper management should address the enterprises strength, weakness, opportunities, and threats, and then formulate a suitable KM strategy. Furthermore, they should be equipped with information about the activities and performance throughout the organization. †¢ From the perception aspect, the critical task of the top managers is to identify the core knowledge required to maintain competitive advantage. Employees and top managers work together for a common goal; thus, employee efforts can guarantee a successful implementation of the KMS. Therefore, an enterprise should provide suitable training and resources to the employees, and use information technology to provide a friendly repository to standardize and store knowledge. The enterprise should also es tablish an atmosphere emphasizing knowledge sharing and innovation and encouraging employees to form such a culture through a reward system. †¢ From the planning aspect, the action plan should include schedule, people involved and resources required, although it is difficult to transfer the necessary knowledge to the KM plan due to non-standardization. Employees orientation toward KM, including the awareness of the importance and benefits of KM and IT skills for KM process, should be completely addressed. Knowledge-oriented employee assessments can also fail if they are not linked closely to existing incentive systems. The company should take steps to build up the trust of the knowledge owners by associating knowledge sharing to pay and incentives. †¢ From the implementation aspect, a robust set of metrics that evaluates the value of the KMS after implementation will need to be developed. It is essential that the top managers instill in the employees the importance and ben efits of KM. Employees often fear that if they pass on their knowledge to others, they will endanger their own position, authority, even power in the organization. Training and communication are essential to calm down employees fears of change, and perhaps to help them to enjoy new ways of working with their colleagues. Thus, firms need to create the right circumstance around the organization, primarily in the areas of KM activities and culture. Jennex and Zakharova (2005) suggest a holistic approach that addresses critical elements such as an effective technological infrastructure; integrating the technology infrastructure into everyday processes; having an enterprise-wide knowledge structure or taxonomy; a knowledge management strategy; knowledge management metrics of success and identification of inhibitors of knowledge usage. Lang (2001) have identified several inhibitors to knowledge creation and utilization in organizations. First, there may be inadequate care of those organizational relationships that promote knowledge creation. Second, there may be insufficient linkage between knowledge management and corporate strategy. Thirdly, inaccurate valuation of the contribution that knowledge makes to corporations bottom line renders the value of knowledge management ambiguous. Fourthly, there may be a pervasive lack of holism in knowledge management efforts. Finally perhaps not something ordinarily considered a problem for managers to deal with -poor verbal skills may hinder the actual processes of knowledge creation. Plessis, (2007) feel that the management of the inhibitors to knowledge management would need to be a mix of cultural, organizational, process, management and technology initiatives. The challenge is to select and combine the methods and approaches available, and harness them to address the organizations business needs. Critical Success Factors for KM There is a need for a more systematic and deliberate study on the critical success factors (CSFs) for implementing KM. Organisations need to be cognizant and aware of the factors that will influence the success of a KM initiative. Ignorance and oversight of the enablers and inhibitors will likely hinder an organisations effort to realise its full benefit (Hung et al, 2005). Initially, KM appeared to be adopted only in large, multinational and international companies and hence, research work on CSFs has been largely centred on them. Most of these studies have not considered the differences of company size as well as the specific features of small and medium enterprises (SMEs) that could affect KM. However, as it has now become a widely spread business discipline, it is no longer the concern of just large organisations. As asserted by Frey (2001), although major corporations have led the way in introducing and implementing KM, it is increasingly important for small businesses to manage their collective intellect. Okunoye and Karsten (2002) stated that KM has indeed become the underlying sources for successful organisations regardless of their size and geographical locations. Therefore, a better understanding of the CSFs for implementing it in SMEs is needed in order to ensure the success of their efforts. Wong, (2005) has grouped the critical success factors into a number of generic factors such as management leadership and support, culture, technology, strategy, measurement, roles and responsibilities, etc. These are common in KM efforts and therefore, they are also believed to be applicable to SMEs. He suggests that one should also consider the needs and situations of SMEs when developing CSFs for them.Wong, (2005) proposes a comprehensive model for implementing KM in SMEs. They are: †¢ management leadership and support; †¢ culture; †¢ IT; †¢ strategy and purpose; †¢ measurement; †¢ organisational infrastructure; †¢ processes and activities; †¢ motivational aids; †¢ resources; †¢ training and education; and †¢ HRM. What emerges from the review of literature is the following: ï  ¶ There are both enablers and inhibitors to knowledge management implementations in SMEs ï  ¶ Both enablers and inhibitors may be classified essentially into three broad categories human, technical and financial. ï  ¶ Critical Success Factors for KM implementations are different for SMEs from that of large organizations ï  ¶ Critical Success Factors also depend on the management of the enablers and the inhibitors Thus, it is beneficial for the SME to build a framework that would be used to prioritize the enablers and inhibitors to success. Therefore, we propose this AHP framework to the priorities for a SMEs initiative towards KM implementation. Framework for KM implementation Any successful managerial implementation requires management of enablers and the inhibitors. Similarly, in case of Knowledge Management as well it is important to manage the enablers and the inhibitors. From the review of literature a 3 level hierarchical model as shown in Figure 1 may be envisaged. At the root of the hierarchy the overall objective of a successful Knowledge Management implementation may be considered. Successful Knowledge Management implementation depends on two criteria enablers and inhibitors which are depicted as level 2 in the figure. As has been mentioned above these enablers and inhibitors can be classified in level 3 into technical, human and financial enablers (inhibitors). Figure 1: Framework for Successful Knowledge Management Implementation 4. METHODOLOGY Data Source: The research used both secondary and primary data. An extensive literature survey was undertaken, which helped in framing the questionnaire for the primary data collection. The focus of the study was on primary data. Research approach: The survey method was used for the study. Our primary data has been gathered using questionnaire technique. Our target population is all small firms in the National Capital Territory of Delhi (India) with turnover ranging from Rs. 5 crores to Rs. 25 Crores and employment levels between 15 and 50 employees. Specifically, we are targeting the owners or top managers at these firms. For the purposes of this research, we used a questionnaire survey. The questionnaire included 60 questions in two sections such as: [A] Enablers to Knowledge Management [B] Inhibitors to Knowledge Management Contact Method: The questionnaires were sent via email and were telephonically followed up. Sample Size: Amongst the 4263 companies (as per Centre for Monitoring Indian Economy Prowess database) that belonged to the criteria in the entire country, 1039 such companies were located in the National Capital Region of Delhi, which included New Delhi, Delhi, Faridabad, Gurgaon, Ghaziabad and NOIDA. Due care has been taken to include only those companies that made the sample more representative thus, e-mail questionnaires were sent to 500 amongst these 1039 companies. 119 responses were received that formed the sample for the study. This is a 23.8% response rate, which is acceptable. Data Analysis: The data so collected were analyzed with the AHP techniques to arrive at weights. The AHP is a generic problem-solving approach that is used in making complex multi-criteria decisions based on variables that do not have exact numerical consequences. The decision problem is represented in the form of a hierarchical structure with the apex being the overall focus or objective, criteria at the middle and the decision alternatives at the bottom. Such a configuration represents the basic three-level model of AHP. Nevertheless, several levels like sub goals, sub criteria, scenarios etc. could be considered in the model depending on the construction of the decision problem (Saaty, 2000). It employs a qualitative methodology to decompose an unstructured problem into a systematic decision hierarchy. In the quantitative sense, it adopts a pair wise comparison to execute the consistency test to validate the consistency of responses. In short, AHP is a hierarchical representation of a system. A hierarchy is an abstraction of the structure of the system, consisting of several levels representing the decomposition of the overall objective to a set of clusters, sub-clusters, and so on down to the final level. Decomposing the complexity of a problem into different levels or components and synthesizing the relations of the components are the underlying concepts of AHP (Cheng and Li, 2001). 5. RESEARCH FINDINGS Wong , Kuan Yew, (2005), â€Å"Critical success factors for implementing knowledge management in small and medium enterprises†, Industrial Management Data Systems Volume 105 Number 3 pp. 261-279 Frey, R.S. (2001), Knowledge management, proposal development, and small businesses, The Journal of Management Development, Vol. 20 No.1, pp.38-54 Okunoye, A., Karsten, H. (2002), Where the global needs the local: variation in enablers in the knowledge management process, Journal of Global Information Technology Management, Vol. 5 No.3, pp.12-31. Hung , Yu-Chung, Huang , Shi-Ming, Lin , Quo-Pin, Tsai , Mei-Ling, (2005), â€Å"Critical factors in adopting a knowledge management system for the pharmaceutical industry†, Industrial Management Data Systems, Volume 105 Number 2 pp. 164-183 Lang , Josephine Chinying (2001), â€Å"Managerial concerns in Knowledge management†, Journal of Knowledge Management Volume 5 . Number 1 . . pp. 43 ±57 Plessis , Marina du (2007),† Knowledge management: what makes complex implementations successful?, JOURNAL OF KNOWLEDGE MANAGEMENT, VOL. 11 NO. 2 2007, pp. 91-101 Jennex, M.E., Zakharova, I. (2005), Knowledge management critical success factors, available at: www.management.com.au/strategy/str110.html Lin , Chinho, Yeh, Jong-Mau, Tseng, Shu-Mei, (2005), † Case study on knowledge-management gaps†, Journal of Knowledge Management Volume 9 Number 3 pp. 36-50 Yeh , Ying-Jung, Lai, Sun-Quae, Ho, Chin-Tsang, (2006), â€Å"Knowledge management enablers: a case study†, Industrial Management Data Systems Volume 106 Number 6 pp. 793-810 Yu, Sung-Ho, Kim, Young-Gul, Kim, Min-Yong, (2007), â€Å"Do we know what really drives KM performance?, Journal of Knowledge Management, Volume 11 Number 6 pp. 39-53 Gold, A.H., Malhotra, A., Segars, A.H. (2001), Knowledge management: an organizational capabilities perspective, Journal of Management Information Systems, Vol. 18 No.1, pp.185-214. Zack, M.H. (1999), Managing codified knowledge, Sloan Management Review, Vol. 40 No.4, pp.45-57. Davenport, T.H. 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