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206 Int. J. Innovation and Learning, Vol. 19, No. 2, 2016
Copyright © 2016 Inderscience Enterprises Ltd.
Knowledge management and innovation
management: best practices in knowledge sharing
and knowledge value chain
Ming-Chang Lee
National Kaohsiung University of Applied Science,
No. 415 Chien Kung Rd., Kaohsiung Taiwan
Email: Ming_li@mail2000.com.tw
Abstract: Because knowledge assets enhance today’s organisations to achieve
better results than their competitors, managing knowledge creation and sharing
has become an important source of competitive advantage for firms. Innovation
has been taken as a main solution for the difficulties that companies faced in
the highly competitive environment. But the existence alone does not help the
organisation without properly utilised it. Therefore, this proposal is important
to activate knowledge sharing activity in order to transfer and share tacit
knowledge in the organisation. This paper uses design science research method
to integrate knowledge management and innovation management in order to
practice knowledge sharing, knowledge capital and knowledge value. The basic
objective is to recommend a strategic management framework as a conceptual
model for organisations performance.
Keywords: knowledge management; innovation management; knowledge
value chain; KVC.
Reference to this paper should be made as follows: Lee, M-C. (2016)
‘Knowledge management and innovation management: best practices in
knowledge sharing and knowledge value chain’, Int. J. Innovation and
Learning, Vol. 19, No. 2, pp.206–226.
Biographical notes: Ming-Chang Lee is an Assistant Professor of National
Kaohsiung University of Applied Sciences. His research interests include
knowledge management, parallel computing, and data analysis. His
publications include articles in the Journal of Computer and Mathematics with
Applications, International Journal of Operation Research, American Journal
of Applied Science and Computers, Industrial Engineering, International
Journal Innovation and Learning, International Journal of Services and
Standards, Lecture Notes in Computer Science (LNCS), International Journal
of Computer Science and Network Security, Journal of Convergence
Information Technology and International Journal of Advancements in
Computing Technology.
This paper is a revised and expanded version of a paper entitled ‘Knowledge
value chain model implemented for supply chain management performance’
presented at the Fifth International Joint Conference on INC, IMS and IDC,
Seoul, Korea, 25–27 August 2009.
Knowledge management and innovation management 207
1 Introduction
The economy of the world is changing fast, and the knowledge assets and the knowledge
innovation (KI) are become the primary source of the organisation. Companies are facing
important challenges such as the need to reduce the time-to-market, the development and
manufacturing costs, or to manage products with more and more technology. Thus, this
current situation is encouraging the implementation of new management technologies
such as knowledge management (KM) and innovation management (IM) to increase
competitive advantages.
KM is one of critical assets to leverage when pursuing enterprise competitive
advantage (Lee and Choi, 2003; Sharkie, 2003). Rubenstein-Montano et al. (2001) argued
that many organisations are now engaging in KM in order to leverage both within their
organisation and externally to their customers and suppliers. Nonaka and Takeuchi
(1995) proposed that knowledge creation was generated by the interaction of tacit
knowledge and explicit knowledge. Delong and Fahey (2000) developed a useful
framework to classify knowledge, which distinguished among human, social, and
structured of knowledge.
IM is the discipline of managing processes in innovation. IM can be used to develop
both product and organisational innovation. The focus of IM is to allow the organisation
to respond to an external or internal opportunity, and use its creative efforts to introduce
new ideas, processes or products (Kelly and Kranzburg, 1978). Importantly, IM is not
relegated to R&D; it involves workers at every level in contributing creatively to a
company’s development, manufacturing, and marketing (Tien et al., 2007). By utilising
appropriate IM tools, management can trigger and deploy the creative juices of the whole
work force towards the continuous development of a company (Cleark, 1980).
Amidon (1997) has aptly described ‘KI’ as the creation, evolution, exchange and
application of new ideas into marketable goods and services, leading to the success of
enterprise, the vitality of a nation’s economy and the advancement of society. Therefore,
KI is a process which people use the past knowledge to create new knowledge by some
necessary technology channels and creative thinking activity of brain. It is active to
change knowledge amount expansion, quality improvement, knowledge extension, depth,
and originality (Lee, 2010). The basic objective is to recommend a strategic management
framework as a conceptual model for organisations to assess how KM can be more
effectively deployed for KI in a more holistic, inclusive and coordinated manner (Sung,
2006). Therefore, this paper provides the integration of KM and IM to introduce a
strategic management approach towards KI as a source of sustainable competitive
advantage.
Intellectual capital (IC) is a basic capital for the organisation. IC is sources of future
benefits (value), which are generated by innovation, unique organisational designs, or
human resource practices (Lev, 2001). The IC needs to be mobilising in promoting higher
performance which is through KI and knowledge sharing. Darroch and McNaughton
(2002) identified that knowledge sharing can be viewed as an organisational innovation.
It has the potential to generate new ideas and develop new business opportunities through
socialisation and learning process of knowledge. Cataldo and Ubaldo (2008) investigate
the relation between IC and knowledge sharing through information communication
technology (ICT). There are three dimensions of IC (namely the human, social and
208 M-C. Lee
structural capital) (Ling, 2012). Figure 1 gives a pictorial view for the potential
integration of the two disciplines, namely: IM and KM to introduce a strategic
management towards leveraging KI as a source of sustainable competitive advantage.
2 Innovation management
Innovation is seen as the single most important building block of competitive advantages.
Innovation is a change in the thought process for doing something, or the useful
application of new inventions or discoveries (Tien et al., 2007). It may refer to
incremental emergent or radical and revolutionary changes in thinking, products,
processes, or organisations. Success of innovation processes in relation to KM has
become a popular research topic in the last decade (Roberto, 2005).
Figure 1 KI IC and knowledge value
Competitive
advanta
g
e
Knowledge
m
anagement and
innovation management
Innovation
value chain
Relational
ca
p
ital
Knowledge assets
Knowledge value chain
Structural
ca
p
ital
Human capital
Knowledge
sharing
Intellectual
capital
IM is a field of discipline that deals with issue relating to how the innovation process
could be managed effectively (Goh, 2004; Harkema and Browrys, 2002). With
innovations as the mainstay of today’s business, IM is now an organisation’s core
function (Panagiotis and Irene, 2009).
The innovation value chain (IVC) is a thinking tool which can be used to define those
enterprises involved in innovation activities such as product development. Each link in
the chain needs to add value to innovation (Lee, 2010). The IVC helps think through the
often-complex relationships in product development and look for improvements in
relationships (with suppliers, customers, partners and competitors and partnerships) (see
Table 1). The IVC is ideation, project selection, development, and commercialisation.
Knowledge management and innovation management 209
Table 1 The IVC
Ideation Project selection Development Commercialisation
• New product and
technology ideals
• Strategy and new
product linkage
• Disciplined and
effective
stage/gate process
• Marketing and
investment
• New business
concepts and
opportunities
• Governances of
new initiative
• Time to market • Consumer profiling
and segmentation
• Consumer
insights
• Tracking and
definition
• Bottleneck
elimination and
identification of
project
‘congestion’
• Competitive
resources and timing
• Tread analysis
and anticipation
• project approval
decision making
processes
• Parallel planning
of work steps
• Advertising and
promotion decision
making
• New-to-the
world and
extensions of
existing ideals
• Use of advanced
valuation
methodologies
• Resource
allocation
• Product tracking
Source: Ferry (2004)
3 Knowledge management
Knowledge is one of the critical assets to leverage when pursuing enterprise competitive
advantage. Knowledge is an organised combination of ideas, rules, procedures, and
information (Lee and Chang, 2007). Marakas (1999) argued that KM is the process
established to capture and use knowledge in an organisation for the purpose of improving
organisation performance and organisational capabilities are based on knowledge (Malik
et al., 2010). Thus knowledge is a resource that forms the foundation of the company’s
capabilities combine to become competencies and these are core competencies when they
represent a domain in which the organisation excels (Marr et al., 2004).
KM systems refer to a class of information systems applied to managing organisation
knowledge, which is an IT-based system developed to support the organisational KM
behaviour: acquisition, generation, codification, storage, transfer, retrieval (Alavi and
Leidner, 2001).
There are two forms of knowledge explicit knowledge and tacit knowledge. Explicit
knowledge is defined as knowledge that can be expressed formally and can be easily
communicated or diffused throughout an organisation (Nonaka and Takeuchi, 1995).
Implicit (tacit) knowledge is knowledge that is unmodified and difficult to diffuse.
Nonaka and Takeuchi (1995) view implicit knowledge and explicit knowledge as
complementary entities. There contend that there are four modes (socialisation,
externalisation, combination, and internalisation) in which organisational knowledge is
created through the interaction and conversion between implicit and explicit knowledge.
KM is the process of creating, capturing, and using knowledge to enhance
organisational performance (Alawneh et al., 2009). Lee and Yang (2000) argue that KM
is the collection in process that govern the creation, dissemination, and levering of
210 M-C. Lee
knowledge to fulfil organisational objective. Therefore, KM is being collective
intelligence to increase enterprise response and innovation ability as a concise definition
(Beijerse, 1999).
4 Knowledge innovation
KM and IM are logically linked (Nicolas and Withelm, 2010). However, the alignment of
their respective deployment mechanisms is still not obvious. The lack of an integrated
view of KI has lead to a certain degree of confusion (Goh, 2004). Since a comprehensive
model for understanding the strategic aspects of KM practices in innovation is not yet
apparent in extant literature, integrating KM and IM within the strategic management
framework would be required (Goh, 2004; Sung, 2006). To better understand the
evolution of KI, strategic perspectives of KM applicable to innovation are necessary
(Sung, 2006). KI fuels organisational growth drives future success and is the engine that
allows business to sustain their viability in the new knowledge-based economy (Kostas
and John, 2006). Amidon (1997) that the first defined the KI as creation, evolution,
exchange and application of new ideas into marketable goods and services, leading to the
success of an enterprise, the vitality of a nation’s economy and the advancement of
society. KI embodies the concept that innovation is the one competence needed for the
future. The management of KI should not be viewed as a technology-based concept.
While technological tools may support its management, it should be borne in mind that
management decisions relating to KI are ultimately based on people, knowledge assets
and business objectives (Goh, 2005).
5 Knowledge sharing
Knowledge sharing is a key component KM system. Bartol and Srivastva (2002) defined
knowledge sharing as individuals sharing organisationally relevant information, ideas,
suggestions, and expertise with one another. The knowledge shared by individuals could
be implicit as well as tacit. Knowledge sharing is basically the act of making knowledge
available to others with the organisation (Liu and Cheng, 2007). There are two alternative
conversational technologies in the process of knowledge sharing and retention (Arben
et al., 2008). Knowledge sharing has been identified as positive force in creating
innovative organisations especially when there is more positive social interaction culture
(Ching and Yang, 2000).
A framework of Capital and knowledge sharing is showed as Figure 2. By developing
a framework (organisational performance), in terms of perspectives on knowledge
centred principles, knowledge sharing infrastructures and knowledge-based initiatives;
the objective is to focus on how organisations could better fulfil their roles in these
strategic areas (Sung, 2006).
5.1 Knowledge-centred principles
There have five core concepts that distinguish KI from other knowledge and innovation
approaches (Lee, 2010; Mindlogicx, 2008):
Knowledge management and innovation management 211
1 Innovation value system (not value chain): the innovation value system is dynamic
and shows all the interdependent relationships that are need to be developed for
successful innovation.
2 Strategic business network (not strategic business units): strategic business unit
management tends to create isolated islands of knowledge. The Strategic Business
Network encourages the flow of knowledge between partners, customers, suppliers,
research organisations and other stakeholders, including competitors, in the
innovation process.
3 Collaborative (not competitive) advantage: competitive strategies create win-lose
scenarios.
4 Collaborative strategies encourage win-win situations through symbiotic
relationships.
5 Customer success (not Satisfaction): customer satisfaction meets today’s articulated
need. A focus on the success of your customer helps identify those future
unarticulated needs, the source of growth and future success.
Figure 2 A framework of capital and knowledge sharing
Human
capital
Structural
capital
Knowledge-centered
principles
Knowledge-sharing
infrastructures Knowledge-
b
ased
initiatives
• Innovation thinking
• Strategy management
• Process improvement
• Customer focus
•Human technology KM
solutions
• Strategic knowledge
network
•Uses widely supported
Communications standard
protocol
• Offers world-wide access
•Avails end user software
• Employs a high speed,
broad-band, digital network
based on optical
•Provides means of
publishing information
•
Structuring and mapping
knowledge
• Developing knowledge
database
•Embedding knowledge in
new products and services
• Capturing and re-using
information and knowledge
•Sharing knowledge or
lessons learnt
Intellectual
capital
Source: Sung (2006)
5.2 Knowledge – sharing infrastructures
The knowledge sharing infrastructures of the internet and its related technologies should
process the following five characteristics (Goh, 2005; Barth, 2000).
1 It uses a widely-supported communications standard protocol: which means that it is
accessible from multiple locations and through different computer platforms.
212 M-C. Lee
2 It offers world wide access, with increasingly more international service providers:
which mean that individuals can use the internet like a corporate network without
building an in-house option.
3 It avails end user software, such as electronic mail and browsers to be universally
available at low cost: which means that it is cost-effective to implement on an
enterprise wide basis.
4 It employs a high-speed, broadband, digital network based on optical fibre cables
with limitless bandwidth: which means that it provides quick access at an affordable
cost.
5 It provides a quick means of publishing information, through the World Wide Web,
that can be shared world-wide: which means that the universal repository of
information resources can be updated and widely shared at an attractive cost.
5.3 Knowledge-based initiatives
There are nine knowledge-based initiatives have emerged to be of considerable
significance to KI in products, process and people (Amidon, 1997).
1 Products
a structuring and mapping knowledge – such as developing typologies or
synthesising different knowledge types
b developing knowledge databases – documenting best practices, expert
directories, market intelligence and so on
c embedding knowledge in new products and services – such as the introduction
of smart products.
2 Process
a capturing and re-using information as knowledge – such as utilising old project
deliverables as source materials to develop specifications for a new project
b sharing of knowledge or lessons learnt about knowledge processes – from one
part of organisation to another, through distribution, dissemination or personal
interactions
c measuring and managing the value of knowledge assets – such as attaching an
economic worth to the ownership of patents or managing the right of these
patents.
3 People
a creating knowledge or IC teams – to help identify and audit intangible
knowledge assets using people from multiple discipline and to develop new
practices of KM
b forming people oriented knowledge centres – focal points for the development
of knowledge skills, managing and enhancing knowledge databases and
facilitating knowledge flow
Knowledge management and innovation management 213
c using collaborative technologies for knowledge exchange between people – the
implementation of internet, electronic mail, Lotus Notes, groupware for multiple
user process.
6 Intellectual capital
IC plays a key role in innovation, productivity growth as well as the performance and
competitiveness of organisations. IC is sources of future benefits (value), which are
generated by innovation, unique organisational designs, or human resource practices
(Lev, 2001). IC is the composed of all knowledge assets that are attributed to an
organisation and most significantly contribute to an improved competitive position of this
organisation by adding value to defined key stakeholders (Marr et al., 2004). The IC is
knowledge built up over the course of the corporation’s business and serves as vital
resource for moving to more effective and efficient business model (Tsuneo, 2001). IC
has many complex connotations and is often used synonymously with intellectual
property, intellectual assets and knowledge assets. IC can be through of as the total stock
of capital or knowledge-based equity that the company processes. As such, IC can be
both the end result of a knowledge transformation process or the knowledge itself that is
transformed into intellectual property or intellectual assets of the firm. IC is of substantial
and growing importance in innovation and productivity growth, organisational
competitiveness and economic performance (Bhagwath, 2014).
Cohen and Kaimenakis (2007) had carried out a research on IC on knowledge
intensive firms but only to find structural and customer capital link to performance even
through human capital is said to be most important capital in a firm. Wang and Chang
(2006) found that IC needs a medium to influencing performance which is through
innovation and knowledge sharing. IC is a broad concept which is often split into
different categories – most commonly human, relational and structural capital (CIMA).
• Human capital is defined as the knowledge, skills and experience that employees
take with them when they level. Some of this individual; some may be generic.
Examples are innovation capability, creativity, know- how and previous experience,
teamwork capacity, employee flexibility, tolerance for ambiguity, motivation,
satisfaction, learning capacity, loyalty, formal training and education.
• Relational capital is defined as all resources linked to the external relationships of the
firm – with customers, suppliers or partners in research and development. Examples
of this are image, customer loyalty, customer satisfaction, links with suppliers,
commercial power, negotiating capacity with financial entities and environment
activities.
• Structural capital is defined as the knowledge that stays within the firm. It comprises
organisational routines, procedures, systems, cultures and database. Examples are
organisational flexibility, a documentation service, the existence of a knowledge
centre, the general use of information technologies and organisational learning
capacity.
214 M-C. Lee
The International Federation of Accountants (IFAC) offers a slightly different
classification (Table 2).
Table 2 Classification of IC
Human capital Customer (relational capital)
• Know-how • Brands
• Education • Customers
• Vocational qualification • Customer loyalty
• Work-related knowledge • Company names
• Occupational assessments • Backlog orders
• Psychometric assessments • Distribution channels
• Work-related competencies • Business collaborations
• Licensing agreements
• Favourable contracts
• Entrepreneurial plan, innovativeness,
proactive and relative abilities,
changeability
• Franchising agreements
Organisational (structural) capital
Intellectual property Infrastructure assets
• Patents • Management philosophy
• Copyrights • Corporate culture
• Design rights • Management processes
• Trade secrets • Information systems
• Trademarks • Networking systems
• Service marks • Financial relations
Innovation capital Process capital
• Product/process innovation • Waste reduction
• Innovation flow • Time compression
• Partnership management • Flexible response
• Threats and substitutes • Unit cost reduction
Source: IFAC (2001)
7 IC measurement
IC measurement is important from two aspects: Inter organisational which its purpose is
better to allocate resources in the line of efficiency and to minimise the costs of
organisation. Enter organisational which its purpose is to make access existing and
potential investment information to forecast future growth as well as long-term
planning’s (Mojtahedi and Ashranfipour, 2013). This propensity for complexity suggests
that a rigorous approach to managing, measuring, and reporting on the IC within the firm
would require a number of measures to evaluate the IC of the firms. It is difficult to
measure the contribution and value of IC. Most of the studies only proposed indicators
for evaluating it (Chen, 2009). Some possible measures are presented in Table 3.
Knowledge management and innovation management 215
Table 3 Measures for managing IC
Human capital indicators
• Reputation of company employees with headhunters
• Years of experience in profession
• Rookie ratio (percent of employees with less than two years experience)
• Employee satisfaction
• Proportion of employees making new idea suggestions (proportion implemented)
• Value added per employee
• Value added per salary dollar
Organisational capital indicators
• Number of patents
• Income per R&D expense
• Cost of patent maintenance
• Project life-cycle cost per dollar of sales
• The number of individual computer links to the database
• The number of times the database has been consulted
• Contributions to the database
• Upgrades of the database
• Volume of IS use and connections
• Cost of IS per sales dollar
• Income per dollar if IS expense
• Satisfaction with IS service
• The ratio of new ideas generated to new ideas implemented
• The number of new product introductions
• New product introductions per employee
• Number of multi-functional project teams
• Proportion of income from new product introductions
• Five year trend of product life cycle
• Average length of time for product design and development
• Value of new ideas (money saved, money earned)
Customer and relational capital indicators
• Growth in business volume
• Proportion of sales by repeat customers
• Brand loyalty
• Customer satisfaction
• Customer complaints
• Product returns as a proportion of sales
• Number of supplier/customer alliances and their value
• Proportion of customer’s (supplier’s) business that your product (service) represents (in
dollars terms)
Source: Chen (2009)
216 M-C. Lee
8 The management of knowledge assets
Knowledge assets are the soul of innovation of knowledge assets increase the knowledge
capability of the organisation and knowledge capability leads to innovation. Knowledge
assets is defined as separately identifiable, non-monetary, without physical substance and
held by an entity in order to produce or supply goods or services, to rent to others or for
administrative purposes (Cearns, 1999). Knowledge assets underpin capabilities and core
competencies of any organisation (Marr et al., 2004). Some research defines knowledge
assets as a major part of an organisation value. The research seeks to help managers in
managing and evaluating the firm performance (Teece, 2000). IC helps managers to
identify and classify the knowledge components of organisation. Knowledge assets
represent the foundation of a company’s capabilities. Capabilities in turn determine the
performance of the processes necessary to execute a company’s strategy. Brennan and
Connell (2000) support this view and state that successful organisations manage their IC
better than the less successful firms. KM assets assists in creating tools, platforms and
process for tacit knowledge creation, sharing, storing and leverage in organisation, which
plays an important role in the innovation process (Plessis, 2007). We introduce two
models of management of knowledge assets.
8.1 Skandia navigator (Edvinsson and Malone, 1997)
The Skandia Navigator model splits IC into five categories: human capital, structural
capital, customer capital, process capital and Innovation capital. The specific foci used
for analysis include: financial focus, customer focus, process focus, renewal and
development focus and most importantly human focus.
The following describes the five categories of Universal IC Report and illustrates
several of the measurement tools in each area.
1 Financial, it includes standard calculations of ROI, and other common financial
ratios. Examples of measures that take a financial focus include:
Revenues/employee, value-added/ customer, profit/employee, revenues from new
customers/total revenues, value added/employee, value added/IT employee.
2 Customer, It uses financial, percentage, and numerical indicators to paint a picture of
such things as composition of market share, customer service, demographic
characteristics of various customer groups, and the overhead and other support costs
required. Examples of customer capital indicators included: Market share,
Customer/employees. Satisfied sales/customers, Annual sales/customers, annual
sales per customer, customer lost, average duration of customer relationship, revenue
generating staff, average time from customer contact to sales response, it
investment/sales person, support expense/customer.
3 Process, they primarily include ratios of administrative costs; information technology
use and spending per employee; efficiency measures based on time, workload, and
errors; and effectiveness measures designed to monitor quality management systems.
Process measures include: administrative expense/total revenues, cost for
administrative error/management revenues, processing time, out-payments, contracts
field without errors, PCs and laptops per employee, network capability/employee, IT
expense/employee, IT capacity/employee, corporate quality performance
(ISO 9000).
Knowledge management and innovation management 217
4 Innovative capabilities; this focus on the effectiveness of investment in training,
research and development outcomes, and the return to technological infrastructure
spending. The following indicators are seen to capture these elements: training
expanse/employee, training expense/administrative expense, competence
development expense/employee, share of training hours, business development
expense/administrative expense, R&D expense/administrative expense, R&D
invested in basic research, R&D invested in product design, R&D resources/total
resources, IT expenses an training/IT expense, educational investment/customer,
value of EDI system, upgrades to EDI system.
5 Human; they include a number of calculated indexes of employee competency,
measures of the élan and potential creativity of the replaced. The following is a
sample of these measures: it literacy of staff, leadership index, motivation index,
number of employees, number of managers, average age of managers, annual
turnover of full-time permanent employees, percentage of company managers with
advanced degree in business, science and engineering, and liberal arts, time in
training each year.
8.2 Balanced scorecard (Kaplan and Norton, 1996)
Balanced scorecard (BSC) was presented in the “balanced scorecard: a good performance
evaluation system”, by Kaplan and Norton (1996). BSC translates an organisation’s
mission and strategy into a comprehensive set of performance indicators for strategic
management and measurement. BSC has focus on financial objectives as well as building
of capabilities and acquiring intangible assets for future growth. The scorecard attempts
to seek balance between external measures for shareholders and customers, and internal
measures of critical business processes, innovation, and of learning and growth. Balance
is also sight between relatively objective outcome measures and subjective/judgmental
measure of performance. A company’s performance is measured with indicators covering
four major focus perspectives:
1 financial perspective
2 customer perspective
3 internal process perspective
4 learning perspective.
9 Knowledge value chain
KVC is a sequence of intellectual tasks by which knowledge workers build their
employer’s unique competitive advantage and/or social and environmental benefit
(Beanon, 1998). The KVC is an integrated concept that combines Drucker’s (2002) next
society, Porter’s (1985) value chain, Nonaka’s spiral of knowledge (Nonaka, 1991;
Nonaka et al., 1998), Kaplan and Norton (1996) BSC and Gardner’s (1995) multiple
intelligence. There have three KVC models (Chen’s model, Weggeman’s model, and
Ching and Yang’s model).
218 M-C. Lee
9.1 Chen’s KVC
The KVC model consists of three parts: input knowledge, knowledge activities, and
output values. Input of the KVC model is based on the development of the knowledge
economy. The second part knowledge activities, is derived from Porter’s value chain and
Nonaka’s spiral of knowledge. The last part, output values (goals), is integrated from
Kaplan and Norton’s BSC. Knowledge flow from intranets, extranets, and the internet
will converge toward the enterprise information portal (EIP). Knowledge flow may also
come from non information technology channels, such as tacit knowledge and explicit
knowledge. All knowledge will be integrated into knowledge repositories. Financial
margin and business value can be achieved with valued-added activities. The concept of
knowledge value activities extends from Porter’s value to Nonaka’s (1991) spiral of
knowledge. The spiral consists for interaction processes (socialisation, externalisation,
combination and internalisation). Enterprise use a BSC to translate strategy into
performance measures (Gumba and Lussier, 2006). The BSC lists four important balance
perspectives (financial, customer, internal business and learning and growth) instead of a
single accounting criterion to manage the performance of a company (Kaplan and
Norton, 1996). The output of KVC is knowledge performance. The knowledge
performance contains the following criteria: financial profitability, customer satisfaction,
business process improvement, learning growth and innovation encouragement.
The activities of the value chain contain two parts: primary activities and support
activities. Primary activities include inbound logistics, operations, outbound logistics,
marketing and sales and service. Support activities include procurement, technology
development, human resource management, and firm infrastructure. Figure 3 is KVC
model.
Figure 3 KVC model
○
○
Balanced scorecard
Financial
profitability
Customer
satisfaction
Busin ess
process
improvement
Learning and
growth
Socialization Externalization
Internalization Combination
K
In
p
ut
K
nowledge
performance
Input
K
nowledge
K
nowledge a ctivit ies
K
nowledge output
Convergence Diversification
K
nowledge assets
K
nowledge intellectual Performance indicators
Source: Extended from Chen et al. (2007)
Knowledge management and innovation management 219
9.2 Weggeman’s KVC model
Weggeman (1997) distinguishes four successive constituent processes (developing
knowledge, knowledge sharing, applying knowledge, and evaluation knowledge). The
strategic need for knowledge needs to be determined. The quantitative and qualitative
difference between the knowledge needs and that available in the organisation. The
available knowledge is disseminated and applied to serve the interest of customers and
other stakeholders. This model is still based on the industrial production line of inputs,
processing, and outputs. Figure 4 is Weggeman’s KVC model.
Figure 4 Weggeman’s KVC model
Developing
knowledge
Knowledge
sharing
Applying
knowledge
Evaluation
knowledge
MVTS- Mission vision targets strategy
Determining needed knowledge
Determine available knowledge
Source: Weggeman (1997)
9.3 Ching and Yang’s KVC model
Ching and Yang (2000) distinguishes five successive constituent processes: knowledge
acquisition, KI, knowledge protection, knowledge integration and knowledge
dissemination. In knowledge acquisition, organisational information acquisition
searching can be viewed as occurring in three forms: scanning focused search and
performance (Huber, 1991). KI is from tacit knowledge to tacit knowledge, from tacit
knowledge to explicit knowledge, from explicit knowledge to explicit knowledge, and
from explicit knowledge to tacit knowledge. Knowledge protection is legal and IT
protection. Corporations should contract with employees regarding confidential
information and their tenure in case of they leave. They develop other protocols and
policy guidelines which recognise and promote rights of knowledge. Figure 5 is Ching
and Yang’s KVC model.
Figure 5 Ching and Yang’s KVC model
KM-infrastructure
CKO & management, knowledge worker recruitment, knowledge storage capacity,
customer / supplier relationship
Knowledge
acq uisition
Knowledge
development
Knowledge
creation
Knowledge
Integration
Knowledge
diffusion
Knowledge
sharing
Knowledge
transfer
Knowledge
evaluation
Knowledge
applying
Knowledge
protection
Knowledge
innovation
KM process’s activities
Source: Ching and Yang (2000)
220 M-C. Lee
KVC consists of KM infrastructure (CKO and management, knowledge worker
recruitment, knowledge storage capacity, customer/supplier relationship) and the KM
process’s activities and knowledge performance. The financial performances such as ROI
are particularly difficult to make for KM activities. The non-financial measures include
operating performance outcomes and direct measures of learning. Example of operating
performance measures include lead times, customer satisfaction, and employee
productivity. Learning measures include such items as the number of participants in
communities of practice, employees trained, and customers affected by the use of
knowledge.
9.4 The performance measurement approach of knowledge asset and IC
The performance measurement approach of knowledge asset and IC in BSC is discussed
as follow.
It also allows managers to list out the important functions that support KM and to
prioritise them. The suggested measures are by no means complete, but we list them as a
catalyst for mangers to think of other measures that are suited to their organisation’s
current environment (Ahmed et al., 1999). Fitz-Enz (1995) suggests there are five key
underlying principles that should form the basis of developing a measurement system
relating to an organisation’s human resources, the prime knowledge assets of an
organisation. A number of empirical studies have been focusing on how KM depends
upon particular factors (Minbaeva and Michailova, 2004). The factors that have so far
attracted researchers’ attention are the characteristics of the knowledge recipient (Goh,
2002; Glazer, 1998) characteristics of the knowledge sources (Sarker et al., 2003; Foss
and Pedersen, 2002) characteristics of the transferred knowledge (Zander and Kogut,
1995; Szulanski, 1996) and absorptive capacity of knowledge receivers (Szulanski, 1996;
Lyles and Salk, 1996; Lane and Lubatkin, 1998; Gupta and Govindarajan, 2000; Lane
et al., 2001). Bhagwat and Sharma (2007) established a performance measurement
approach of supply chain based on the perspective provided in BSC. A further
development of the classic BSC are knowledge scorecards with perspectives that are
applied to the needs of knowledge organisation (Fairchild, 2002).
In Figure 6, it added knowledge assets and knowledge intellectual (human capital,
structural capital, process capital, innovation capital, and customer capital) in Ching and
Yang’s KVC model. Figure 6 is KVC model and balance scorecard for organisational
performance indicators, which modified from Weggeman (1997), Bhagwat and Sharma
(2007), Fairchild (2002), Bhagwat and Sharma (2007), and Ching and Yang (2000).
For example, C Company was founded in June of 1969 and signed a technical
collaboration with Mitsubishi Motors Corporation the following year. Beginning with
producing commercial vehicles, C Company is the leader of Taiwan’s commercial
vehicles manufactures. While the company’s Yang-Mei plant produced less than 3,000
vehicles per month through 1975, by the year 1983, total output had surpassed the 100,
000 unit mark. Under enterprise operation, C Company builds the KM objective and
organisation. The strategic of building KM are: higher-level manager support, plastic a
sharing business culture, to plant one’s feet on solid ground, to praise KM contribution
and application, to establish a platform of KM. The project has three core activities:
1 acquisition and sharing of knowledge, such as document management
2 interaction and innovation of knowledge, such as communities of practice
Knowledge management and innovation management 221
3 learning and dissemination of knowledge, such as best practices of experts.
Used in the combination of KM and KVC, there knowledge input knowledge activities
and knowledge output (performance). Figure 7 is shown as a framework for the KM
implement in C Company.
Figure 6 KVC model and balance scorecard for organisational performance indicators
KM-infrastructure
CKO and management, knowledge worker recruitment, knowledge storage
capacity, customer / supplier relationship
Knowledge assets and Knowledge
intellectual
Human
capital
Structural
capital
Process
capital
Innovation
capital
Customer
capital
KM process’s activities
Knowledge
acquisition
Knowledge
development
Knowledge
creation
Knowledge
Integration
Knowledge
diffusion
Knowledge
sharing
Knowledge
transfer
Knowledge
evaluation
Knowledge
applying
Knowledge
protection
Knowledge
innovation
Customer Indicators
• Market share
• Target number of obtaining customers
• Customer attention
• The growth rate of customer of complaint
• Innovative services
• Order delivery performance
• Deliveries with zero defects
• Flexibility of service on customer specific
Financial Indicators
• Economic value added bank profits
• The per capital profit
• Non-interest income
• Project life-cycle cost per dollar of sales
• Net interest income
• Marketing cost income ratio
• Office expenses
• Labor costs
• Product returns as a proportion of sales
Business Process Indicators
• Growth in business volume
• Product and service innovation
• New products and service revenue
• The new non-performance loan rate and
the rate of increase
• The number of internal regulations
• Product returns as a proportion of sales
• Cycle time of orders
• Total inventory cost
• Percentage of purchase back
• Accuracy of forecasting techniques
Sustainable competitive indicators
• Employee satisfaction
• Staff violation rate
• Pass rate of stature examination
• The operational capacity of standard rate
• Professional development program
• Staff training satisfaction
• Cycle time product development
• Viable initiative for cost reduction
MVTS (Mission Vision Targets Strategy)
Determining needed knowledge
Determine available knowledge
Knowledge
perform ance
Cyclical continuous process
Source: Modified from Weggeman (1997) and Ching and Yang (2000)
222 M-C. Lee
Figure 7 A framework for the KM implements in C Company
Knowledge outputs
Knowledge inputs Knowledge process
1. Recruiting and human
resource management
2. Job rotation
3. Training
4. Expansion
management
5. Knowledge map
6. Knowledge database
7. Less on learning
1.
knowledge creation
2. knowledge diffusion
3. Knowledge transfer
1. Customer satisfaction
2. Customer loyalty
3. Increasing innovation
speed
4. Increasing productivity
5. cost reduction for R&D
6. Lead time
7. Learning measure
8. Employee trained
9. ROT
10. Culture aspect of
behavior, attribute, and
collaboration
11. Supplier meeting
12. Bench marking activities
13. Supplier development
program
1. knowledge acquisition
2. knowledge innovation
3. knowledge protection
4. knowledge integration
5.
CKO $ ma
nagement
6. knowledge
dissemination
Source: Lee and Han (2009)
10 Conclusions
This paper analyses the KM and IM. It suggests integrating two management areas:
knowledge sharing and KI, each having a momentum of its own, into one singular focus
to foster new strategic thinking in sustaining competitive advantage through KI. Finally,
it proposes a strategic management framework for organisations to better fulfil their role
in fostering KI.
The conclusion is
1 the organisations should promote knowledge-based initiatives to better facilitate the
creation of KI. The knowledge shared by individuals could be implicit as well as
tacit. Knowledge sharing is basically the act of making knowledge available to others
with the organisation.
2 The IC is the group of knowledge assets that are attributed to an organisation and
most significantly contribute to an improved competitive position of this
organisation by adding value to defined key stakeholders.
A rigorous approach to managing, measuring, and reporting on the IC within the firm
would require a number of measures to evaluate the IC of the firms.
Knowledge integration is that this cumulative manufacturing, sales, and service
experiences from different departments, together with information gathered from outside
sources, can be integrated into the KVC of the organisation. Establish the linkage of
management of knowledge and corporate process and strategy in organisational
perspective, like the integrated model of KVC and IM with IC and knowledge assets for
enterprise Competitive advantage. Like Km, IM has been consistently demonstrated to be
a key value creator in organisational growth and business performance (Goh, 2004). It is
important to notice that KVC with knowledge assets and knowledge intellectual to
Knowledge management and innovation management 223
increase KM and IM performance and from a cyclical continuous process. An effective
KM should enable an organisation to improve operational efficiency, reduce cost, achieve
higher productivity and boost revenues.
The combinations of this paper are described as following:
1 Adding employees and customer into measure of KM performance to fulfil more
complete knowledge performance measurement.
2 Constructing an integrated KVC and KM performances model to introduce,
implement and measure KM performance.
3 Providing a very detail process from knowledge developing, sharing, applying and
evaluating to knowledge acquisition, innovation, protection, integration,
dissemination and transfer for corporate KM implement. Providing a detail process
from human capital, structural capital, process capital, innovation process, and
customer capital for knowledge assets and IC. Finally, the activities of KM from a
cyclic process to sustain value-added.
4 Fulfilling a corporate mission, version, target, strategy (MVTS) of knowledge gap
and making knowledge flow more smoothly to further help corporate KM implement
successfully.
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