Knowledge Management Architecture and its Effects
on Organizational Performance
By
Dr. Nathaniel C. Ozigbo
Department of Business Administration
University of Abuja
Abuja – Nigeria
E-mail: Franklin_consult@yahoo.com
Abstract
Knowledge management has emerged over the last decade to become one of the most
debated management concepts. As apply, knowledge management (KM) is a formalized,
integrated approach to identifying and managing an organization’s knowledge assets. The
main purpose of this study is to develop a better understanding of the critical factors
affecting the successful implementation of knowledge management. To achieve this
objective, the study developed and tested a variety of variables. A cross-sectional field
survey was used as research methodology and multiple research methods were utilized to
provide broad basis for interpreting and validating the data. The study examined how
Nigerian manufacturing sector apply knowledge management processes in their daily
business activities. The study also analyzes the relationship between knowledge
management processes and organizational performance. The results of this study would
assist most organizations, especially in Nigeria to better understand the knowledge
management discipline, to facilitate its adoption and to prioritize its practices. From the
results of statistical analysis, important generalizations were suggested.
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Introduction
Today’s economy is characterized by a rapid change, globalization and knowledge
based products. The survival and performance of any organization is influenced by its
ability and speed in developing knowledge based competency. Keen competitiveness in
the global economy underscores the importance of knowledge management as a basis of
competition. In knowledge-based economy, where generation and exploitation of
knowledge play a vital role in the process of wealth creation, competitive advantage is
accrued from unique knowledge and the ability to learn faster than one’s competitor.
Knowledge management is today considered as a vital part of today’s
organizations to use the wealth of expertise, latent insights and bright ideas to equip itself
with a vision to foresee the future. In other words, in today’s competitive business
environment, many organizations are struggling to meet or keep up with the demands of
their clients, competitors, investors and regulators. Managers all over the world are
realizing that knowledge in the form of expertise and competence is the organization’s
most important assets and its quality and availability can assist the organization to face
most situations. This phenomenon leads in introducing a new business philosophy known
as “knowledge management” which directs decision on where, how, when to create,
accumulate, update and account for knowledge (Squire and Snyman, 2004).
Today, many organizations have come to realize the need to care about intellectual
capital. The intellectual capitals have become the strategic resource of the organization
that plays a key role in getting competitive advantages and differentiations. These
realizations reflect the real picture of knowledge in the business process as a corporate
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assets, which could make the difference in the market place. It is important to note that
empowering, capitalizing and developing critical success factors in the business
organizations will lead towards ways of building knowledge environment base which
leads for exploiting the opportunities in the field. As with many physical assets, the value
of knowledge can erode over-time, though constant review of the implementation areas
and processes within the organizational system are appear to be very essential.
Unfortunately, very few studies have been conducted on the Nigerian
manufacturing sectors to investigate the architecture of knowledge management. Riley
(2003) points out the challenges. The organization encounter to determine the principles
and guidelines on how knowledge can be created, harvested, shared and distributed. This
context has encouraged the researcher of this study to investigate empirically the critical
success
factors
influencing
knowledge
management
architecture
in
Nigerian
manufacturing sector.
Furthermore, it is important to note that knowledge management has played an
important role in the development of the society. The transformation from an agrarian
society to the information society has largely been brought about as a result of
accumulation of knowledge through the centuries.
Knowledge by its very nature depends on other knowledge to build on.
Knowledge creation is in fact a process of value acquisition to previous knowledge
through innovation (Narayanan, 2001). This also implies that the more knowledge we
possess the more we can be in a position to create and transfer to others. The key to
economic success is always linked to the advances in knowledge creation and the ability
3
of the nation in translating knowledge into products and services. Knowledge creates
knowledge and in the process brings competitive advantage and leads to wealth creation.
When talking about knowledge management, it is clear that we are dealing with a
set of complex issues that are inter-related and cannot be segmented. This is because
much of the knowledge creation activities are products of people interacting with people,
people interacting with data and information, people interacting with environment in
which they operate. For knowledge management to succeed, we need to treat knowledge
as an activity and not as an object. The minute and activity is transformed to an object, it
should not be called knowledge but rather a piece of information.
With knowledge, management as a concept is very attractive. Many organizations
are trendy and nice to be associated with it. It is also important to note that for many
organizations, knowledge management is something trendy and has a positive impact on
the organization image.
Objectives of the Study
The importance of this study derives from the ability of determining the critical success
factors affecting knowledge management architecture in the Nigerian manufacturing
sector. In an attempt to shed some light on the above mentioned issues, this study
developed the following specific objectives:
-
To investigate the critical success factors (CSFs) for adopting knowledge
management in the Nigerian manufacturing sector, an area that has to date,
received, very little attention in the literature.
4
-
To test number of variables which affect the architecture of knowledge
management in the Nigerian manufacturing sector.
-
To explore empirically the readiness of the Nigerian manufacturing sector to
implement knowledge management concepts.
-
To enhance the understanding of knowledge management and its importance.
Research Question
The major question that arises from the objectives of this study and need to be
answered is;
-
To what extent knowledge management architecture factors exist in the
Nigerian manufacturing sector?
It is important to note that in recent years, a number of management researchers have
outlined the theoretical case for knowledge management (Senge 1990). It is claimed that
with product life cycles shortening the technologies becoming increasingly imitable,
organizational knowledge emerges as a major source of competitive advantage by virtue
of its tacitness, and immobility (Grant 1997). Despite the plausibility of these arguments,
relatively few studies have provided empirical insights into how companies develop and
manage “know-how” through the interplay between organizational context and
information technology. Indeed, most of the existing literature is conceived with the
ontological debate about the nature of knowledge and therefore tends to promote
particular approaches as universal panaceas. More specifically, with the development of
5
the field of knowledge management, there has been a massive outpouring of articles and
books dealing with these issues from a prescriptive standpoint. Their relatively weak
empirical base notwithstanding, many of these contributions confidently define
organizational knowledge as a kind of economic asset or commodity or as a purely
cognitive phenomenon. The kind of knowledge this study is concerned is referred to as
organizational knowledge, defined as the knowledge which is define available to
organizational decision makers and which is relevant to organizational activities.
Review of Related Literature
Knowledge management has generated much interest in recent years and has become the
management buss word in many organizations. Many people have started wondering
whether knowledge management is just another consultancy fad. The knowledge
management as a concept with people taking the centre stage has prompted many to
rethink information management and shift focus from trying to develop intelligent
systems to that of developing tools for intelligent people. It is this realization that makes
knowledge management attractive to many organizations.
Davenport and Prusak (1998) pointed that;
“knowledge is a fluid mix of framed experience, values,
contextual information and expert insight that provides a
framework for evaluating and incorporating new experiences
and information”.
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When talking about knowledge management, it is clear that we are dealing with a
set of complex issues that are inter-related and cannot be segmented. The three different
types of knowledge that knowledge management is concerned with are:
-
Explicit knowledge (information)
-
Know-how or implicit knowledge (can be captured and codified as
information)
-
Tacit knowledge (cannot be captured and codified as information).
Technology plays an important role in knowledge management, although knowledge
management is not about technology. Technology only facilitates the process of
transmitting and exchanging information. According to Davenport and Prusak (1998),
knowledge technologies deal most frequently with text rather than numbers and text in
relatively unstructured forms, such as clauses, sentences and paragraphs. Knowledge
technologies are more likely to be employed in an interactive and iterative manner by
their users. Therefore, the roles of people in knowledge technologies are integral to their
success. Narayannan (2001) emphasizes that knowledge management plays a significant
role in achieving organizational efficiency. In the new economy, speed and
responsiveness are defining successive factors. Knowledge management is a combination
of organizational culture, strategic goals, individual needs and the expertise of its people
to create an atmosphere of learning and growth.
Philosophically, knowledge management act as a vital part of corporate principles
and individual jobs for knowledge sharing to succeed. It is through its conceptual
components that knowledge management becomes legitimate. Knowledge and
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information are increasingly becoming key assets for organizations. Three key terms to
understand as the building blocks for knowledge management include data, information
and knowledge as Groft and Jones (2001) explain.
Knowledge is the full utilization of information and data coupled with the potential of
people’s skills, competencies, ideas, intuitions, commitments and motivations (Warrier
2003) and constitutes the most basic economic resources today. According to Grant
(1997), knowledge is the most strategically important of the firm’s resources. According
to Gartner Group, knowledge management promotes an integrated approach for
identifying, capturing, retrieving, sharing and evaluating an enterprises information
assets. The old truism “knowledge is power” has never been more true than it is today.
Knowledge is a new currency of power (Chaudhavy 2005). Therefore
organizational success in today’s competitive market place depends on the quality of
knowledge each business organization can learn, build, modify, improve and apply on
one side and how knowledge could be managed efficiently on the other side of the
equation. The equation is human and technical. Rangnekar (2001) pointed that;
“motivating employees to search, accept and adopt best
practices through identifying and developing model leaders,
who
support
learning
at
the
individual,
team
and
organizational level is very essential to hit the target”.
Although, many studies have integrated knowledge management with certain
factors assumed to be a successful force for implementation, Lueg (2001) argued that
knowledge not only depend on information processing, but also on shared interpretation
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of the information and the filtering of the knowledge into degrees of importance.
Carnerio (2000) found that knowledge management system is a key component in
innovation and competitiveness. As a result, mechanism and new insights should be
considered carefully by leaders and decision makers in the organizations to build up
successful knowledge organizations.
Most discussions on knowledge management and its related issues have focused
on large organization, with little attention being paid to the small business sector
(McAdam et al 2001). This was due to large organizations generally having more
knowledge assets to be managed. Large organizations also have many business units at
different locations, thus, they need to have knowledge management systems to facilitate
the sharing and transfer of knowledge. Generally, management studies conducted in
small organizations have been focusing on case studies where the objectives were neither
to examine their perception towards knowledge management and their practices and
development in the area.
McAdam and Reid (2001) compared the perception of knowledge management
between large organizations and SMEs.
Their results showed that SMEs suffered from certain limitations. They tend to
take a more mechanistic view and have limited vocabulary of knowledge, are less
systematic in their approaches for embodying and sharing of knowledge and their
perceived benefits of knowledge management were targeted towards the market rather
than towards the improvement of internal efficiency. In another study in Australia and
Singapore, Lim and Klobas (2000) concluded that there were noticeable differences in
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the value placed by small and large organizations on systematic knowledge management
practices, especially in the adoption of computer based knowledge storage system. They
suggested that the greatest need for small business was to build an effective knowledge
repository system Matlay (2000) found that only a minority of United Kingdom, SMEs
manage knowledge operate in proactive and strategic manner to enhance their
competitive advantage Wong and Aspinwal (2004) noted that Small business generally
lack a proper understanding of knowledge management and that they are slow in
adopting formal and systematic knowledge management practices. As reported by Wong
and Aspinwal (2004), SMEs were just beginning to understand how knowledge
management might assist them. Academics and practitioners have recognized that
knowledge management processes are becoming prerequisites for success in
organizations (Porter, 1980). Some authors suggests that an organizations ability to
generate knowledge is vital (Powel et al 1998). They divided knowledge management
processes into several components that are acquire, collaborate, integrate, experiment,
create, transfer, assemble, integrate and exploit (Teece, 1998). Hence, an organizational
performance can be improved by locating and sharing useful knowledge. The potential
for knowledge management to competitive advantage is positively linked to
organizational performance (Schutz etal 2001). The overall performance of an
organization depends on the extent to which managers/owners can mobilize all
individuals and teams and turn these resources into value creating activities.
Marques and Simon (2006) suggested an instrument to measure the effect of knowledge
management practices on organization performance. The measures consist of capital
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profitability, growth, operational and financial efficiency, stakeholder satisfaction and
competitive position.
In essence, knowledge management can improve an organizations ability to
achieve development results. In its most basic form, knowledge management is all about
converting the available raw data into understandable information. This information is
then placed in a reusable repository for the benefit of any future need base on similar
kinds of experiences. Knowledge management contributes towards streamlining the
ideas, problems, projects and deployment in light of organizational goals driving towards
productivity.
Research Methodology
This study was based on literature analysis and field survey to investigate the
general perception and acceptance of the employees of Nigerian manufacturing sector
toward the implementation of knowledge management processes. The literature analysis
covered the study of several knowledge management system frameworks that have been
introduced in previous studies. From the studies that have been done, knowledge
management system framework that has similarity was chosen as a bench-mark and baseline for the research. A questionnaire was designed based on the selected knowledge
management framework. The questionnaire which was developed by the researcher was
based upon the review of literature to get the most important issues tackling the
knowledge management architecture issues. The survey process was taken into place as
the questionnaires were distributed to twenty small and medium scale manufacturing
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sector in Nigeria. The Likert scales were used for developing the questionnaire that based
on the development of respondent’s attitudes. The attitudes was ranged from strongly
disagree to strongly agree (1 – 5) and each attitude was weighted by interval value. The
cronbach alpha coefficient of 0.88 was used to estimate the internal consistency and
reliability of the measure. The face validity of the questionnaire was ensured through a
pilot study by presenting the questionnaire to fifty respondents. The format of the
questionnaire was later modified according to their comments and suggestions.
Specifically, the respondents were employees of the manufacturing sector in Nigeria that
were considered as knowledge intensive organizations. An independent variable consist
of knowledge management processes that comprises of knowledge acquisition,
conversion, application and protection were adopted from Gold et al (2001). On the other
hand, organization performance as dependent variable consists of growth, profitability,
innovativeness, customer satisfactionand overall business performance were adopted
from Ramanujam and Venkatraman (1988). A list of variables were given to the
respondents and they were asked to indicate their level of agreement based on Likert
scale.
Data Analysis
The statistical techniques applied in analyzing the data consist of:
-
Descriptive statistics: Descriptive analysis was used to indicate the central
tendency of the data. In the study, the distribution was determined by looking
to the skewness and standard error of the skewness.
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-
Cross tabulation statistics was used in order to test and measure the association
of two way tables. In other words, it was to indicate the relationship of two
variables.
Table 1, below presents an analysis using multiple regression to examine the relationship
between knowledge management processes and organizational performance.
Summary of Table 1
Model
1
R
R-Square
0.88 0.774
Adjusted R-
Standard error of
Durbin
Square
the estimate
Watson
0.742
0.68
1.536
Source: Survey Result
Predictor: Acquisition, conversion, application protection.
Dependent variable: organization performance
The result above shows highly positive relationship between knowledge
management process and organization performance (r = 0.88). In addition, eighty-six
percent of variation in organization performance was explained by knowledge
management processes in analysis.
Table 2 below presents that among the knowledge management processes,
knowledge acquisition contributed more to organization performance.
Summary of Table 2
Model
2
R
R-Square
0.83 0.689
Adjusted R-
Standard error of
Durbin
Square
the estimate
Watson
0.649
0.537
13
1.62
Source: Survey Result
Predictor: Acquisition, conversion, application protection.
Dependent variable: organization performance
Conclusions
The analysis shows that knowledge management processes have a significant
relationship with organization performance. The study found that due to small size, the
organizations have the opportunity to gain direct and faster knowledge from their
customers which enable them to sustain in the market. Besides that, they also have the
advantage of obtaining information on competitors’ actions and behaviour, market trends
and other developments.
In addition, based on the results of statistical analysis, the following knowledge
management architecture model was reached out most importantly, the respondents
perceived knowledge management as a major strategic imperative and as a new way to
add value.
Suggestions and Recommendations
The study suggests that Nigerian organizations should enhance the strength and
applications of knowledge management pillars. This study therefore recommend that;
-
Clear knowledge management strategy should be adopted and committed by
top management.
-
Knowledge and skills acquisition should be integrated within knowledge
management pillars.
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-
Future research is necessary to incorporate additional variables to establish
more findings that are conclusive.
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