Knowledge Management the Ultimate Competitive Advantage for Modern Businesses

Knowledge management: the ultimate competitive advantage for the modern business organisations

Executive Summary

This assignment highlights the challenges face by expatriates in managing highly diversified

cultural teams and the need for cultural intelligence to mitigate these challenges that arise in their

assignments. Also, highlighted will be the cost of failure of assignments, which result in lost

opportunities for multinational companies in the particular country they operate in. These failures

result in the need of repertoires that can be used to successfully implement the expatriate’s

assignment in the respective host countries. As such, the importance of Cultural Intelligence (CI)

in a highly multi cultural workforce is further discussed.

CI can be learned and it is plays an important role in developing the main five repertoires namely,

manage diverse teams, recruit and develop cross-cultural talent, adapt leadership style,

demonstrate respect and understand diverse customers; which is needed for expatriate to manage

in highly culturally diversified organization.

Explained further will be the four step cycle of CI that will enhance the expatriates, drive,

knowledge, strategy and action needed in developing the repertoires for effective and efficient

management and operation in varied cultural environment.

Using this four step cycle of CI, emphasized in the latter parts will be how CI abilities such as:

cultural awareness, motivational cultural adaptation, adaptive behavior and effective cross-

cultural communication; can be used as a success factor for developing repertoires needed for an

expatriate that result in effective leadership.

Aishath Sheneen Ibrahim Page 1 of 21


1. Introduction

In a globalised world where firms are competing to gain market share,

need for resources other than the basic factor of production has arisen

in order for them to gain competitive advantage. For the transformation

towards a ‘post-capitalist’ world that we are witnessing today,

businesses need knowledge as the primary economic resource

(Drucker, 1993, 1994 as cited in Carrion et al., 2004) to compete, rather

than the ownership of land or access to capital as their resources

(Teece, 1998; Zack, 1999 as cited in Dunford, 2000). Unsurprisingly

knowledge has become a preferred entity of management in modern

business organizations (Kreiner, 2002) and their competitive advantage

is based on the capacity of taking effective action on knowledge (Lytras

et al., 2002) by way of managing knowledge which is the key element

in the achievement and sustainability of a competitive advantage

(Perez and de Pablos, 2003). With this development has come

burgeoning attention to ``knowledge management'' and ``knowledge

strategy'' (Dunford, 2000) as such, when knowledge management was

introduced to the business world, many declared it as a trend in the

business environment; however today it is recognized as a

recommended tool for profitable approach to business management

(Chauvel and Despres, 2002) and it is been a target for academics and

practitioners whereby, knowledge management is being addressed by

a broad range of academic literature and popular press (Kakabadse et

al., 2003). Historically, knowledge management can be distinguished

into three generation the first is the recognition and familiarizing with



knowledge management in 1990-1995, the second generation emerged

in 1996 where new jobs for knowledge management specialist were set

up by corporations and the combination of knowledge management in

the organization discourse was absorbed, which brought in systematic

organizational change management practices, measurement systems,

tools and content management needed for co-development; resulting in

the emergence of a third generation

of knowledge management with new methods and results (Metaxiotis et

al., 2005). Knowledge is not a static commodity it has a high value in its

exploitation to deliver new market values or expectations by

destabilizing existing products in terms of entity to market and relative

value (Newman, 1997) and according to Argote and Ingram (2000) as

cited in Magnier-Watanabe and Senoo (2009) previous research has

shown that the creation and transfer of knowledge as well as

knowledge embedded in interactions of people, tools and tasks provide

a basis for competitive advantage in firms. Knowledge management

includes the development, implementation and management of the

appropriate organizational infra-structure to enable the acquisition,

generation, management and deployment of knowledge within the

enterprise (Carrion, et al., 2004). Use of knowledge management

increased in most companies and is universally recognised as a critical

competitive asset (Ajmal et al., 2010) however, organizations fail to

affectively use knowledge management in the organizations due to the

fact that organizations fail to grasp the concept of how knowledge can



be managed. According to Kleindl, 2003 as cited in Call, 2005 ‘‘An

InformationWeek survey indicated that 94 percent of companies

considered knowledge management to be strategically important to

their business’’ and yet it is ‘‘reported that at least half of all

knowledge management initiatives fail; some peg the failure rate as

high as 70 percent’’ (Rossett, 2002 as cited in Call, 2005). Hence, in

this literature review I am evaluating these viewpoints, by thoroughly

examining the concept of knowledge and the transfer and utilization of

knowledge in organizations. Considering the role of knowledge workers

in leveraging knowledge and increasing performance and innovation by

effective knowledge management as well how the integration of

knowledge in organizational strategies, human resource management

and production processes and the use of knowledge management

systems can be used to further gain competitive advantage in the

organization.

1. Creation and Utilization of Knowledge for sustainable

competitive advantage

1.1Fundamentals of Knowledge

Knowledge is withheld among the employees of the organization and

interaction among employees is required to gain access to this

knowledge to further improve the organization processes and gain

competitive advantage. Knowledge is being held between

individuals and collectives, within organisational processes and

systems leading to a consideration of the personal and sociological



needs of individuals and collectives in knowledge genesis and

learning (Blackman and Kennedy, 2009). Knowledge type according

to “Knowledge creation theory” knowledge is divided into tactic

knowledge (cognitive knowledge) and explicit knowledge (objective

and rational knowledge) (Polanyi, 1966 as cited in Magnier-

Watanabe and Senoo, 2009; Lang, 2001). Tactic knowledge involves

beliefs, point of views, technical skills and know-how thus is hard to

express (Magnier-Watanabe and Senoo, 2009; Lang, 2001) and it

includes individual activities such as customer interactions, technical

problem solving, and new product developments (Silvi and

Cuganesan, 2006) which can be augmented and shared via

interpersonal interaction and strong caring social relationships

among organization members (Lang, 2001). The conversion mode of

tactic to tactic knowledge is the most important source of affective

knowledge (Magnier-Watanabe, 2009). Explicit knowledge, on the

other hand, is related to activities such as order filling, inbound

logistics, supply ordering, production computer aided designs that

are executed by using technologies (Silvi and Cuganesan, 2006) and

formal standard procedures (Silvi and Cuganesan, 2006; Lang, 2001)

as such explicit knowledge is easily captured artificially through

manuals and is shared with others through books or taught courses

(Lang, 2001). The conversion mode of explicit to explicit to explicit

knowledge is the most important source of technical knowledge

(Magnier-Watanabe and Senoo 2009). Knowledge management

states that it is a collection of processes that enables knowledge to



be utilized as a key factor in adding and generating value (Perez and

de Pablos, 2003) and Nonaka et al., (2000) as cited in Magnier-

Watanabe (2009) showed that the base of knowledge creating

processes are knowledge assets and further categorize them into

four types which are:

1- Experiential knowledge assets- that consist of the shared tacit

knowledge built through shared hands-on experience among the

members of the organization, and between the members of the

organization and its customers, suppliers and affiliated firms.

2- Conceptual knowledge assets- that consist of explicit knowledge

articulated through the assets based on the concepts held by

customers and members of the organization.

3- Systemic knowledge assets- that consist of systematized and

packaged explicit knowledge.

4- Cultural (routine) knowledge assets- that consists of the tacit

knowledge that is routinized and embedded in the actions and

practices of the organization.

To successfully implement organizational knowledge management

that provides sustainable competitive advantage in an organization,

it is important to understand the infrastructure elements: People,

Process and Technology which is required to support the acquisition,

management and transfer of tacit and explicit organizational

knowledge (Carrion et al., 2004) this is further seen to in the latter

part of the literature review. However, there is no framework on

why some organizations can gain higher capacity of knowledge



management than others and it is unclear due to hidden causal

ambiguity which exists when a firm’s sustained competitive

advantage is not fully understood with the capacity for knowledge

management in the organization (Hoffman et al., 2005).

1.1.1Knowledge Workers role in leveraging knowledge

Both business and academic communities believe that by

leveraging knowledge, an organization can sustain its long-

term competitive advantages (Bhatt, 2001). As such

knowledge workers play an important role in leverage

knowledge in the organizations through distribution of

knowledge with the organization. Sustainable competitive

advantage is attainable if the knowledge worker is not

perfectly mobile and if a knowledge workers knowledge and

understanding is asymmetrically distributed in the organization

(Smith and Rupp, 2002). Knowledge workers are becoming an

increasingly important segment of the workforce and are

known to be present in many industries (Wickramasinghe and

Ginzberg, 2001) and with the massive organizational

restructuring and consequent dissolution of jobs in the

professional ranks in 1990s in North America knowledge

workers have move towards been independent knowledge

workers (Fenwick, 2007). Having external knowledge workers

as consultants bring out a different perspective on the issues

faced in maintaining knowledge and sharing knowledge in the

organizations. From an organizational point of view, these



independently-oriented knowledge workers are attractive as

they tend to be enterprising flexible workers who thrive on

challenge and initiative (Fenwick, 2007). Knowledge workers

own the means of production (Wickramasinghe and Ginzberg,

2001; Lang, 2001) that is, the knowledge workers decides on

how great their yield of knowledge will be and what knowledge

will be contributed to the organization (Lang, 2001).

A study done by Smith and Rupp (2002) confirms that the de-

coupling of performance rating and merit increases is a

common practice today in modern knowledge-based

environment and 58% of the knowledge workers stated that

they have been subject to a merit increase that did not

coincide with their performance rating. Management of

knowledge workers is an important issue to the organization

due to the predominant workforce of knowledge workers and

their impact on organizational performance (Wickramasinghe

and Ginzberg, 2001). Therefore, knowledge workers have to be

monitored closely and should be motivated through incentives

that goes with their performance as they are decisive in how

much they will be contributing to the organization and plays an

important role in the utilization of knowledge in the

organization.

1.1.2Effective Knowledge management and Performance



Knowledge management for some is a strategy of sharing and

putting information into action in ways that strive to improve

organizational performance by way of getting the right

knowledge to the right people at the right time (O’Dell and

Jackson 1998, p. 4, as cited in Kakabadse et al., 2003) and in

order to achieve performance result both tacit and empirical

knowledge has to be maintained simultaneously (Jordan and

Jones, 1997 as cited in Magnier-Watanabe and Senoo, 2009).

According to Kalling (2003) knowledge management is divided

into three instances: development, utilization and

capitalization, based on the assumption that knowledge is not

always utilized, and that utilized knowledge does not always

result in improved performance. However, it was noted that

transfer of knowledge between units within the same

corporation do lead to improved productivity (Szulanski, 1996;

Darr et al., 1995 as cited in Kalling, 2003) and the link between

knowledge and performance often takes place in the form of

non-financial performance (such as productivity), due to the

lack of interest in utilization of knowledge by

managers and employees in the organization (Perez and de

Pablos, 2003). Further supporting to the above, the research

carried out by Zack et al., (2009) showed that the potential for

knowledge management to create competitive advantage was

positively linked to organizational performance but there was

no significant direct relationship between knowledge



management and financial performances. Deployed

knowledge-related assets and capabilities in the organizations

operations can be used to gain competitive advantage which

consequently will lead to better performance (Akroush and Al-

Mohammad, 2010). It is noted that organizational performance

can be achieved not only via financial performance but also

through non-financial performance only through utilization of

knowledge in the organization. According to Darroch (2005)

knowledge management plays an important supporting

function by providing a coordinating mechanism to enhance

the conversion of resources into capabilities. Although the use

of knowledge management as a resource barrier is proposed

to be positively associated with an organizations ability to

achieve sustained superior performance; there is no clear and

cohesive theoretical framework that can provide a structure

for analysis and a lens through which to assess how knowledge

management can lead to sustained superior organizational

performance, or what determines an organization’s capacity

for knowledge management capabilities (Hoffman et al., 2005).

1.1.3 Innovation and competitive advantages

In a world that faces rapid changes that require quick action to

be taken for further improvement, innovation through

knowledge management through knowledge creation is one

way to remain competitive in the business



environment today. Well-developed knowledge management

behaviours are evident in firms that have a propensity toward

developing incremental innovations (Darroch, 2005). Scholars

such as Drucker (1998:) as cited in Lewrick (2009) states that

in order to bridge the gap between knowledge and innovation

stating: "we know that the source of wealth is something

specifically human knowledge. If we apply knowledge to tasks

we already know how to do, we call it productivity. If we apply

knowledge to tasks that are new and different, we call it

innovation. Only knowledge allows us to achieve those two

goals." From this also we can see that knowledge creates

value in the organization by way of innovation and productivity

however, it has to be utilized and applied in the organization to

gain competitive advantages. The challenges faced by

knowledge intensive organizations, is to remain competitive in

a highly volatile and competitive knowledge environment

where markets quickly shift, technologies rapidly proliferate,

competitors multiply, and products and services become

obsolete almost overnight (Carrion et al., 2004) employees can

help to improve organization performance (de Jong, and

Hartog, 2007) by organizations innovativeness and learning

processes that enables to re-bundle and revitalize existing and

newly acquired resources into core competencies and

competitive advantages from internally and externally created

knowledge (Adams and Lamont, 2003) introducing new



technologies, research and break through ideas to sustain

business and promote success. (Lewrick, 2009). It all comes to

the culture withheld in the organization, and if a culture of

innovation is adopted by the organization it is unfeasible to

fail in the market as leaders enhance the formulation of the

culture among employees resulting in the transfer of

knowledge within the organization. Thus, as a leader

it seems it is impossible not to affect employees innovative

behaviour (de Jong, and Hartog, 2007) and companies will be

unable to attract creative innovative individuals unless they

offer a supportive corporate culture (Takahashi and

Vandenbrink, 2004)

2. Organizational Culture and Knowledge Management

According to Kakabadse et al., (2003) it can be argued that knowledge

management is not about managing knowledge but about changing

entire business cultures and strategies of organizations to ones that

value learning and sharing. Also, it is important to realize that

knowledge management is less of a technical problem, and more of a

cultural problem (Call, 2005) although some aspects of knowledge, such

as culture, organizational structure, communication processes and

information can be managed, knowledge itself, cannot be managed

(Kakabadse et al., 2003) and every organizations has to first change its

culture to successfully implement knowledge management (Call, 2005).

There are four basic stages in which organizational strategy for



knowledge management are structured, that constitute the knowledge

management process (Perez and de Pablos, 2003). They are as follows:

1- Generating or capturing knowledge;

2- Structuring and providing value to gathered knowledge;

3- Transferring knowledge; and

4- Establishing mechanisms for the use and re-use of this knowledge,

both for individuals as well as for groups of individuals within the

organization.

It is understood that these processes will enhance to captivate

knowledge in the organization but it is unclear on how and why some

organizations can manage knowledge in a higher capacity than others.

Organization can sustain its competitive advantage by

creating an environment that encourages “learning-by-doing” (Bhatt,

2001) through skills learnt from trial and error and performance

critique rather than knowledge fully conveyed by communication alone

(Winter, 1987 as cited in Kakabadse et al., 2003). Empirical evidence

was found that collaborative culture influences organizational learning.

Collaborative culture is a means of leveraging knowledge through

organizational learning (Lopez et al., 2004). Thus, the culture of the

organizations plays an important role in the successful implementation

and transfer of knowledge within the employees of the organization to

gain competitive advantages. According to Bhatt (2001) the five

phases of knowledge management; knowledge creation which is the

ability of an organization to develop novel and useful ideas and

solutions (Marakas, 1999, p.440 as cited in Bhatt, 2001), knowledge



validation is the extent to which a firm can reflect on knowledge and

evaluate its effectiveness for the existing organizational environment ,

knowledge presentation refers to the way knowledge is displayed to

the members, knowledge distribution where knowledge has to be

shared throughout the organization and knowledge application in

which firms make knowledge more active and relevant creating values,

allows an organization to learn, reflect, and unlearn and relearn,

usually considered essential for building, maintaining, and replenishing

of core-competencies.

However to fully utilize and benefit from these five phases of

knowledge management and create a knowledge management culture

organizations have to incorporate knowledge in their corporate

strategies. This means that the top level management will play an

important role in leveraging knowledge within the organization in their

processes. The competitive and time-based nature of knowledge

leadership becomes evident in effect and CEO’s responsibility is to gain

competitive advantage by continually evaluate organizations

knowledge inventory to find potential to deliver market leadership,

readiness to exploit it and seen to timing for release new products or

processes (Newman, 1997), looking at knowledge management in a

strategic context thus identifying the mission that knowledge

management initiatives are to support to adopt a competitive position

within that industry (Lang, 2001). As such, a successful link between

the knowledge and profit is also, tacitly reflected in the field of

strategic management. (Kalling, 2003). Reconceptualising the role of



knowledge is an important shift in improving effective knowledge

strategies in the organization (Blackman and Kennedy, 2009).

Incorporating knowledge management in organizations strategies

reduces the hindrance of knowledge creation within the organization. It

reduces the problems arising from insufficient linkage between

knowledge management and corporate strategy due to the lack of

support from top management (Lang, 2001).

2.1 Knowledge management in Organizational processes

2.1.1Use of knowledge in Human Resource Management

(HRM)

The most difficult to control resources are the employees in

the organization (Perez and de Pablos, 2003). Enabling

knowledge management in corporate culture in turn will affect

HRM polices towards that culture. Hence, HRM plays a huge

role in resolving problems faced by employees in the

organization and enabling knowledge transfer in the

organization by various HRM policies that encourage

employees to participate and share knowledge. According to

Lam and Lambermont-Ford (2010) facilitating knowledge

sharing is a difficult task: the willingness of individual to share

and integrate their knowledge is one of the central barriers.

However, implementing the changes in appraisal and reward



system as well as inculcating values aligned with acceptable

and

encouraged practices and providing a setting wherein

knowledge sharing can occur in an organizational level may

augment knowledge sharing prosperity amongst individuals in

the organization (Lam and Lambermont-Ford, 2010) One

example of a company that is involved in knowledge

management throughout their career is PwC in which bonuses,

promotions, and partner admissions are linked to knowledge

sharing (Call, 2005).

3. Technological development and knowledge transfer

3.1 Knowledge Management System

The core organizational competency comes from developing new

technology via the implementation and creation of knowledge

(Newman, 1997). Knowledge is continually being turned into

something new therefore, it needs to be fixed in a signifying system

or captured by (semi) stable concepts that can be used to denote

objects of knowledge (Styhre, 2003). KMS is one temperament in the

chain involved in leveraging organizational resources to develop

sustainable competitive advantage over time. (Adams and Lamont,

2003). Although technology can assist a well-established knowledge

management initiative; knowledge management will not succeed

based solely on technology (Call, 2005) as knowledge management



system alone do not possess the qualities required to provide

organizations with sustainable competitive advantage (Adams and

Lamont, 2003). According to Lang (2001) recent knowledge

management technologies cannot yet handle uncertainty with

imperfect information and most existing knowledge management

systems cannot allow the kind of continuous learning and unlearning

needed to generate multiple, diverse, even contradictory

perspectives to meet dynamically changing business environments

knowledge management system does not retain any new knowledge

in the organization or manage any new knowledge through the

software obtained for it. Thus, in knowledge management, key

processes in trying to create a shared knowledge resource are

deliberations about what information should be included, how best

to organize it, and who should be authorized to access and alter it

(Lang, 2001). Technology may bring knowledge management

system into the organizations but it’s the human capital that is going

to manage the knowledge in the knowledge management system. In

the research of Call (2005) Management at Ritz-Carlton believes the

most important component of the knowledge management system is

the company’s employees. Further to support this, the research

done by Park et al., (2004) states that the success of knowledge

management technology implementation was mediated by human

behavior. Also Park et al., (2004) data analysis revealed sufficient

evidence to establish a correlation between cultural attributes and

the successful implementation of KM technology and knowledge



sharing. Knowledge management systems must connect people to

enable them to think together and to take time to articulate and

share information and insights they know are useful to others in the

organization (Bhatt, 2001). Knowledge management system can

make direct contributions to the development of sustainable

advantages using several types of innovative and learning based

organizational activities (Adams and Lamont, 2003). Use of

absorptive capacity and development of absorptive capacity is

critical in the revitalization of existing competitive advantages and

the creation of new core competencies and competitive advantages

over time (Adams and Lamont, 2003) Transformative capacity is an

internally-driven process that aids in the extension of existing

competitive advantages and the creation of new, more effective and

efficient products processes (Adams and Lamont, 2003) It also

include provision, circulation,

and storage of internal reports and information needed to utilize firm

resources effectively and efficiently and creation, processing, and

distribution of data into information and knowledge to be assessed

by organizational members for strategic decision-making (Adam and

Lamont, 2003). Furthermore the examination of the external

environment for identification of competitor activities and potential

strategic learning opportunities such as joint venture, mergers and

acquisition (Hambrick, 1981 as cited in Adams and Lamont, 2003)

also is a way of gaining benefit for the knowledge management

system.



4. Conclusion

It is seen that in today’s rapid changing world knowledge plays an

important role. As knowledge is reckoned to be the ultimate source of

providing organizations with products, processes and innovation that

can gain competitive advantage it has become highly critical to

manage knowledge in the organizations. Although the implementations

of knowledge management systems have been undertaken by



organizations to manage knowledge, it is not the ultimate source of

managing knowledge effectively. Knowledge cannot be managed

without knowing what kind of knowledge is needed within the

organization, as per the review it is highly important to differentiate

among the available knowledge and in finding the right knowledge

requirement of the organization. Hence an ultimate importance is

given to the human capital and the capability of organizations to

enable the employees to share knowledge for further enhancing to the

successful implementation of knowledge utilization. Organizational

culture is the ultimate link to managing knowledge successfully in the

organization. Incorporating an innovative and knowledge sharing

culture in the corporate strategy enables the transfer of knowledge

among the employees in the organization in making use of the

knowledge to gain competitive advantage. It is seen that

organizational culture also plays an important role in leveraging

knowledge which can enable increase in the performance of the

organizations I can conclude that knowledge management is the

ultimate competitive advantage for the modern business

organizations. Despite of all these above factors contribute to

knowledge to gain competitive advantage, it is still unclear on how

knowledge management provides competitive advantage to

organization to succeed in the market and there is need for further

empirical studies to build the link on how these elements can achieve

sustainable performance through innovation and organizational culture



to gain competitive advantage.

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Bibliography

Gao, F., Meng, L. and Nakamori, Y. (2002), ‘Systems thinking on knowledge and its management: systems methodology for knowledge management’. Journal of Knowledge Management, Vol. 6, No. 1, pp. 7-17.

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Knowledge Management the Ultimate Competitive Advantage for Modern Businesses