MGMT20144 Management Business Context Master of Business Administration (MBA) School of Business and Law MGMT20144 Management Business Context Unit 8 Knowledge Management and e-Commerce . Table of Contents Introduction 3 Learning objectives 3 The Nature of Innovation 4 Sustaining versus Disruptive Innovation 4 Open Innovation 6 Norms that promote Creatiity and Innovation 8 Entrepreneurship and Innovation 10 Required Reading 14 References 16 Introduction The term knowledge management formally entered popular usage in the late 1980s when conferences in KM began appearing and KM as a concept started to be discussed in business journals and the first books on KM were published. It needs to be remembered that this same period was around the time that main frame data storage and retrieval systems were coming into there own. It was a period where data analytics was coming to the fore and the new wave of both main frames and personal computers were enabling those in the computer industry to see potential for Knowledge Management in storage, retrieval application for multiple designed purposes. Moving ahead from Knowledge Management the late 21st century has seen the realization and expansion of e-commerce as a common platform for retail and business to business transactions. In expanding application to differing commercial contexts, enlarging options and becoming more user friendly in operation, e-commerce has become a significant platform in provision of products and services and is responsible for breaking down geographic commercial barriers. Every individual that owns a computer internet enabled device, access to the internet and a credit card or other form of recognized payment can purchase products or services from around the globe. Significantly this form of commerce provides consumers with both access and choice but based on price premiums. It is now possible to gain instantaneous satisfaction in purchasing software or digital music on line. For physical products though there is a delay, for a fee it can be delivered within 48 hours. E-Commerce now means access to global products and services. Many of the issues covered in this topic, in particular Knowledge Management and e-Commerce have facets that will be discussed in courses such as as MRKT20052 Advanced Marketing Management and MGMT20133 Strategic Business Management. In these courses the opportunities created by timely analysis of information and on line business presence for firms will be highlighted. Learning objectives This unit has the following learning objectives: 1. To understand the key concepts supporting Knowledge Management and e-Commerce concepts and practices 2. Examine the nature of differing theories to support Knowledge Management and e-Commerce and the impacts that these approaches have for businesses and business managers. 3. Consider the opportunities from study of Knowledge Management and e-Commerce practice to frame new opportunities and capabilities for a business. 4. Apply knowledge and skills gained from this unit towards resolving business challenges and issues, with relevance to Knowledge Management and e-Commerce practice for improved outcomes for the firm. The Nature Knowledge Management The ability to manage knowledge is critical in today’s knowledge economy. The creation and diffusion of knowledge have become increasingly important factors in developing and sustaining competitiveness. Knowledge is being thought of as a valuable commodity that is embedded in products (especially high-technology products) and embedded in the tacit knowledge of highly mobile employees. While knowledge is increasingly being viewed as a commodity or intellectual asset, there are some paradoxical characteristics of knowledge that are radically different from other valuable commodities. These knowledge characteristics include the following: • Using knowledge does not consume it. • Transferring knowledge does not result in losing it. • Knowledge is abundant, but the ability to use it is scarce. • Much of an organization’s valuable knowledge walks out the door at the end of the day. According to Davenport and Prusak (1998, p. 13) ‘Increasingly, companies will differentiate themselves on the basis of what they know. A relevant variation on Sidney Winter’s definition of a business firm as an organization that knows how to do things would define a business firm that thrives over the next decade as an organization that knows how to do new things well and quickly.’ Knowledge management was initially defined as the process of applying a systematic approach to the capture, structuring, management, and dissemination of knowledge throughout an organization to work faster, reuse best practices, and reduce costly rework from project to project (Nonaka and Takeuchi, 1995; Pasternack and Viscio1998; Pfeffer and Sutton, 1999; Ruggles and Holtshouse, 1999). According to Dalkir, (2011) many knowledge management efforts have been largely concerned with capturing, codifying, and sharing the knowledge possessed by people in organizations. Although there is still no consensus over what constitutes a good definition of KM there is clear agreement as to the goals of an organization that undertakes KM. Nickols (2000, p. 23) summarizes this as follows: ‘the basic aim of knowledge management is to leverage knowledge to the organization’s advantage.’ Some of management’s motives are obvious: the loss of skilled people through turnover, pressure to avoid reinventing the wheel, pressure for organization-wide innovations in processes as well as products, managing risk, and the accelerating rate with which new knowledge is being created. Some typical knowledge management objectives would be to: • Facilitate a smooth transition from those retiring to their successors who are recruited to fill their positions • Minimize loss of corporate memory due to attrition and retirement • Identify critical resources and critical areas of knowledge so that the corporation knows what it knows and does well — and why • Build up a toolkit of methods that can be used with individuals, with groups, and with the organization to stem the potential loss of intellectual capital Knowledge Management Defined Dalkir (2011) indicates that there are over a hundred published definitions of Knowledge Management (KM) and of these, at least seventy-two could be considered to be very good. He puts forward two for consideration: Knowledge management is a collaborative and integrated approach to the creation, capture, organization, access, and use of an enterprise’s intellectual assets. (Grey 1996) ‘Knowledge management is the process by which we manage human centered assets . . . the function of knowledge management is to guard and grow knowledge owned by individuals, and where possible, transfer the asset into a form where it can be more readily shared by other employees in the company.’ (Brooking 1999, p. 154). Note that in both of these business oriented definitions of KM the emphasis is to acquire, organize and apply the intellectual capital (knowledge) in creative shared ways throughout the activities of the organization. A further view relevant to the business context is that of knowledge related to organizational learning thereby making a distinction between the management of information resources and the management of knowledge resources. Knowledge management ‘is understanding the organization’s information flows and implementing organizational learning practices which make explicit key aspects of its knowledge base. . . . It is about enhancing the use of organizational knowledge through sound practices of information management and organizational learning.’ (Broadbent 1997, pp. 8 – 9) From Knowledge Management to Knowledge Creation for Purpose John Hagel of Deloitte’s Center for the Edge is concerned in how knowledge is distributed and dispersed throughout an organization, and asks: “How do we capture it, and make it available to others?” (IdeasProject, 2010) Hagel states ‘One of the interesting ways of capturing the problems with traditional knowledge management is it came at knowledge from a stocks viewpoint, a stocks of knowledge. The problem is, we have knowledge, it’s distributed and dispersed throughout the organization. How do we capture it and make it available to others? Certainly a big challenge, I don’t want to diminish that as a value, but I think what people found as they tried to implement the various systems and methodologies to do that is there wasn’t really a lot of motivation for people to invest the time and effort to develop and define those stocks and make them available as part of a broader repository.’ (IdeasProject, 2010, p. 1). This kind of approach really shifts the attention from stocks of knowledge, what we know today, to defining and developing new knowledge, addressing critical performance objectives that the firm, has in front of it. In this way you’re driving performance not by learning in the abstract, but because there is a real performance challenge in front of the firm it is a case of the following: How to identify the right people, bring them together, create the environments. Also due to the digital platforms that ae available now, as these environments are created, firms are capturing, as a byproduct, the knowledge that is created as part of that environment. This means that this new knowledge and its context of environment becomes available to others but it is not the primary focus. It’s a byproduct (IdeasProject, 2010). Types of Knowledge in KM According to De Brun (2005), knowledge in organizations is often classified into two types: Explicit and Tacit. 1. Explicit knowledge - is knowledge that can be captured and written down in documents or databases. Examples of explicit knowledge include instruction manuals, written procedures, best practices, lessons learned and research findings. Explicit knowledge can be classified as either structured or unstructured. Documents, databases, and spreadsheets are examples of structured knowledge, because the data or information in them is organized in a specific way for future retrieval. In contrast, e-mails, images, audio and video items are examples of unstructured knowledge because the information they contain is not arranged for retrieval (De Brun, 2005). 2. Tacit knowledge - is the knowledge that people hold in their heads. It is much less concrete than explicit knowledge. It is more of an “unspoken understanding” about something, knowledge that is more difficult to write down and document. An example would be, knowing how to ride a bicycle – you know how to do it, you can do it again and again, but it is difficult to write down instructions for someone to learn to ride a bicycle. It is more experientially based know how. Tacit knowledge can be difficult to access, as it is often not known to others. In fact, most people are not aware of the knowledge they themselves possess or of its value to others. Tacit knowledge is considered more valuable because it provides a context for people, places, ideas and experiences. It generally requires extensive personal contact and trust to share effectively (De Brun, 2005). KM for Individuals, Communities, and Organizations According to Dalkir (2011), Knowledge Management (KM) provides benefits to individual employees, to communities of practice (COP), and to the organization itself. This three-tiered view of KM helps emphasize why KM is important today. For the individual, KM: • Helps people do their jobs and save time through better decision making and problem solving • Builds a sense of community bonds within the organization • Helps people to keep up to date • Provides challenges and opportunities to contribute For the community of practice, KM: • Develops professional skills • Promotes peer-to-peer mentoring • Facilitates more effective networking and collaboration • Develops a professional code of ethics that members can adhere to • Develops a common language • For the organization, KM: • Helps drive strategy • Solves problems quickly • Diffuses best practices • Improves knowledge embedded in products and services • Cross-fertilizes ideas and increases opportunities for innovation • Enables organizations to better stay ahead of the competition • Builds organizational memory The Concept of e-Commerce E-Commerce is generally thought of as an online commercial transaction between a supplier and a client. However, although this idea is correct, e-commerce can be refined to identify more specific types of business transactional arrangements between. E-commerce can be categorized into into six major types, all with different characteristics. These are: 1. Business-to-Business (B2B) 2. Business-to-Consumer (B2C) 3. Consumer-to-Consumer (C2C) 4. Consumer-to-Business (C2B). 5. Business-to-Administration (B2A) 6. Consumer-to-Administration (C2A) Business-to-Business (B2B) Business-to-Business (B2B) e-commerce involves all electronic transactions of products or services conducted between companies. Producers and traditional commercial wholesalers typically operate by applying this type of electronic commerce. Business-to-Consumer (B2C) The Business-to-Consumer type of e-commerce is distinguished by the establishment of electronic business relationships between businesses and final consumers. It corresponds to the retail section of e-commerce, where traditional retail trade normally operates. These types of relationships can be easier and more dynamic, but also more sporadic or discontinuous. This type of commerce has developed enormously, due to the advent of the world wide web. As a result, there are many virtual stores and malls on the Internet, which sell all kinds of consumer goods, such as computers, software, books, apparel, cars, financial products, digital publications, and the like When compared to buying through a traditional ‘brick’ retail outlet, the consumer usually has more information available in terms of product or service detail. There is also a widespread idea that consumers will be buying cheaper, without jeopardizing an equally personalized customer service, as well as ensuring quick processing and delivery of order. Consumer-to-Consumer (C2C) Consumer-to-Consumer (C2C) type e-commerce involves all electronic transactions of products or services conducted between consumers. Generally, these transactions are conducted through a third party, which provides the online platform where the transactions are actually carried out. An example would be e-bay. Consumer-to-Business (C2B) In C2B there is a complete reversal of the traditional sense of exchanging goods. This type of e-commerce is very common in crowdsourcing based projects. A large number of individuals make their services or products available for purchase for companies seeking precisely these types of services or products. Examples of such practices are the sites where designers present several proposals for a company logo and where only one of them is selected and effectively purchased. Business-to-Administration (B2G) This part of e-commerce encompasses all transactions conducted online between companies and public sector. This is an area that involves a large amount and a variety of services, particularly in areas such as fiscal, licensing, employment, legal documents and registers, etc. These types of services have increased considerably in recent years with investments made in e-government. Consumer-to-Government (C2G) The Consumer-to-Government model encompasses all electronic transactions conducted between individuals and public administration. Examples might include payment of council rates, government provision of information and fees for services, education distance learning, application processing, taxation filing, payments or return deposits, health information, appointments and payments. Advantages and Disadvantages of e-Commerce The following are the key advantages and disadvantages of e-commerce: Advantages of Ecommerce • Faster buying/selling procedure, as well as easy to find products. • Buying/selling 24/7. • More reach to customers, there are no geographical limitations. • Low operational costs and potentially better quality of services. • No need of physical company facilities in high rental catchments. • Easy to start and manage a business. • Customers can easily select products from different providers without moving around physically and thus there are low or few switching costs. Disadvantages of Ecommerce • Any one, good or bad, can easily start a business. And there are many bad sites which eat up customers’ money. • There is no guarantee of product quality. Descriptions and on line images can be misleading. • Mechanical failures can cause unpredictable effects on the total processes. • As there is minimum chance of direct customer to company interactions, customer loyalty is always a challenge for an e-business. • There are many hackers who look for opportunities, and thus an e-commerce site, service, payment gateways, all frequently prone to attack. (eSalesTrack, 2016) Traditional Retail and e-Commerce – Omnichannel Retailers According to Rigby (2014) it is clear that digital technology is transforming the retail industry. Digital devices are changing how customers discover, evaluate, purchase, receive, use, and also return products. Also more and more customer interactions take place entirely online. Over the past 20 years, e-commerce sales have grown to about 6% of total retail sales (excluding vehicle fuel and food services). However, though the e-commerce growth rate is attractive, it has slowed from about 30% per year in the early 2000s to less than half that rate today. Rigby (2014) argues that omnichannel retailers—those that seamlessly integrate the best of both digital and physical worlds at each step of the customer experience—would enjoy significant advantages over retailers that try to pursue either one approach alone or both independently. For omnichannel retailers, websites and mobile apps are not just e-commerce ordering vehicles, they have become the front doors to the stores. The stores are not longer showrooms, they are digitally-enabled inspiration sites, testing labs, purchase points, instantaneous pickup places, help desks, shipping centers, and return locations. As Bain and Company’s research has found, these principles apply well beyond retailing. In most industries, digital technologies are transforming physical businesses rather than destroying them. Indeed, the integration of digital and physical innovations which are labelled – ‘digical’—creates opportunities that firms are yet extract. A ‘digical’ experience is what consumers now want and have come to expect now having experienced some of the best in offering from the best operators. This means that no firm aiming to develop fully in the 21st century can avoid the synergy of brick and click in a ‘digical’ strategy. Big Data and the Internet of Things (IoT) According to the latest Oracle Cloud White Paper (2016), Big Data and the Internet of Things (IoT) are two of the most exciting developments in the business world, however future oriented organizations need new types of technologies to fully realize their potential. Both are critical in their own right. Together they offer even greater potential. IoT is an important strand in a broader conversation that is being articulated with big data analytics. The value lies in the data, but much of that value is buried. In essence the data is much like rock in which precious minerals and rare earths reside. Locating deposits, refining, making associations to create alloys, these are the challenges within a vaster landscape. The challenge comes with finding precious data elements and uncovering unique insights, and then using those learnings to impact enterprise applications and processes. When properly configured, big data and IoT reinforce each other, with the whole becoming greater than the sum of the parts. The value of a connected enterprise goes beyond its remote systems. It is what those remote machines and sensors connect to that really adds value. Every large business depends on a growing set of data sources and established enterprise applications. The key principles of IoT and big data projects are to absorb the data and react to it in real time, to analyze sensor data alongside existing enterprise data for deeper insights, and to use those insights to enhance and reinforce the processes within the firm’s applications (Oracle Cloud White Paper, 2016). There are four primary types of IoT projects: • Monitoring products – Embedding sensors, software and other technologies into the offerings that a company brings to market • Monitoring customers – Tracking digital devices that customers carry or wear • Monitoring supply chains – Putting sensors, digital cameras, and other digital devices in production and distribution operations • Monitoring premises – Putting sensors, digital cameras, and other devices in places where companies do business with their customers By loading a real-time IoT stream into a big data reservoir the firm can also conduct after the fact analytics to extract more value from that data as the firm gradually moves from reactive to proactive operations. This more comprehensive approach goes beyond merely absorbing data to perform analytics on the real time data stream. Once something breaks the firm can react by fixing it — and it can also study the event data so it can foresee and prevent similar events from happening in the future (Oracle Cloud White Paper, 2016). Objectives for Big Data Davenport and Dyché (2013) argue that as with many new information technologies, big data has the capacity to create dramatic cost reductions, substantial improvements in the time required to perform a computing task, or provide insights for the development of new product and service offerings. Like traditional analytics, it can also support internal business decisions. The technologies and concepts behind big data allow organizations to achieve a variety of objectives, however most of the organizations surveyed in research were focused on one or two (Davenport & Dyché, 2013). The selected objectives have implications for not only the outcome and financial benefits from big data, but also the process — who will lead the initiative, where it fits within the organization, and how the project will be managed. The following activity considers the nature of Disruptive Innovation and identifying the types of Disruptive Innovations that have contributed to society and changed the nature of industries and society as a whole. Required Reading References: Broadbent, M. 1997. The emerging phenomenon of knowledge management. Australian Library Journal, vol. 46, no.1, pp. 6–24. Brooking, A. 1999. Corporate Memory: Strategies for Knowledge Management. International Thomson Business Press, London. Dalkir, K. 2011. Knowledge Management in Theory and Practice, 2nd Edn. The MIT Press, Boston, MA. Davenport, T.H. & Dyché, J. 2013. Big Data in Big Companies, International Institute for Analytics website at https://www.sas.com/resources/asset/Big-Data-in-Big-Companies.pdf accessed 8 August 2016. Davenport, T.H., & Prusak, L. 1998. Working Knowledge. Harvard Business School Press, Boston, MA. De Brun, C. 2005. The ABC of Knowledge Management. NHS National Library for Health: Knowledge Management Specialist Library located at http://www.fao.org/fileadmin/user_upload/knowledge/docs/ABC_of_KM.pdf accessed 9 August 2016. Ecommerce Europe, 2016. Cross Border e-Commerce Barometer at Ecommerce Europe website at www.ecommerce-europe.eu/.../research-report-cross-border-e-commerce-barometer-2... accessed 9 August 2016. eSalesTrack, 2016. at http://www.esalestrack.com/blog/2008/09/advantages-and-disadvantages-of.html accessed 9 August 2016. Grey, D. 1996. What is knowledge management? The Knowledge Management Forum. March, from http://www.km-forum.org/t000008.htm accessed 12 February 2006 IdeasProject, 2010. How Knowledge Management Is Moving Away from the Repository as Goal. hbr.org website at https://hbr.org/2010/07/how-knowledge-management-is-mo.html accessed 9 August 2016. Nickols, F. 2000. Knowledge Management overview from http://home.att.net/discon/KM/KM_Overview_Context.htm accessed 18 May 2004. Nonaka, I., & Takeuchi, H. 1995. The Knowledge Creating Company: How Japanese Companies Create the Dynamics of Innovation. Oxford University Press, New York, NY. Oracle Cloud White Paper, 2016. Oracle website at http://www.oracle.com/us/solutions/internetofthings/big-data-and-iot-wp-3098381.pdf accessed 8 August 2016. Pasternack, B., & Viscio, A. 1998. The Centerless Corporation. Simon & Schuster, New York, NY. Pfeiffer, J., & Sutton, R. 1999. The Knowing-doing Gap: How Smart Companies turn Knowledge into Action. Harvard Business School Press, Boston, MA. Rigby, D.K. 2014. E-Commerce is not eating retail, hbr.org website at https://hbr.org/2014/08/e-commerce-is-not-eating-retail accessed 9 August 2016. Ruggles, R., & Holtshouse, D. 1999. The Knowledge Advantage. Capstone Publishers, Dover, NH.