Knowledge Management and Organizational Design: Confluence and New Perspectives

1. Knowledge Managementand Organizational Design:Confluence and New Perspectives Philippe Baumard Philippe.baumard@iae-aix.com Pbaumard@berkeley.edu Professor of Management, Institut d�Administration des Entreprises Clos Guiot BP 33 13540 Puyricard � France Visiting Scholar, 2004-2006 Institute of Business and Economic Research University of California, Berkeley Haas Business School F502 Haas Building Berkeley, CA 94720-1922 USA

2. The critical role oftacit knowledge Most knowledge cannot be expressed Tacit knowledge is a source of differentiation How knowledge is created, disseminated,accumulated, shared and leveraged?

3. What is tacit knowledge? It�s what we know and cannot express, either as an individual, or as a group or an organization ��We know more than we can tell�� Tacit knowledge encapsulates both the unconscious acquisition of knowledge and the collective mental models shared with other members of a community or an organizations Why is it so important? Most of our learning is automatic or accidental Most of our decisions are fueled by tacit knowing Most of organizational failures are rooted in overlooked tacit knowledge Tacit knowledge influences behavior, that in turn influences performance Why is it so resilient? It�s a core mechanism of human cognition�s consistency (buffering)

4. Researching Tacit Knowledge 1991-1994 : CS Swiss Private Banking Senior Advisors, Qantas Pilots, Pechiney CEOs, � Large organizations do not develop adequate processes to encourage, manage, and preserve �key tacit knowledge� Banks : customer knowledge lost when advisers resign Pilots : TK of pilots is not taken into account by marketers Aluminum : Pioneers have better strategies in the midst of crisis 1994-2004 : Still looking for answers� ;-) Investigating Knowledge Refineries in the Intelligence Community (Indigo, OSS, etc) Knowledge performance relies on respecting its propensity for its autonomous development Developing Mail Agents that learn tacit behavior.

5. Tacit Knowledge�. Automatic Swimming, crafting, art, skills, know how �Workplace Knowledge� researchers (Scribner, Spender, Charue-Duboc, etc.) Blocked I know more than I can tell Deliberate expertise, difficult to express Collective or Embedded into Organizations Organizations achieve more than the sum of their individual cognitive capacities KM & OK researchers (Hedlund, Brown, Sveiby, Nonaka) Behavioral learning : the way people intuitively behave in organizations follow strong programs

6. Tacit vs. Explicit Knowledge

7. Knowledge as mind, process and object

8. Examples of knowledge repositories Important to distinguish between different types of knowledge. well-used categorization of knowledge. articulate vs tacit and different levels of knowledge from ind to nw.Important to distinguish between different types of knowledge. well-used categorization of knowledge. articulate vs tacit and different levels of knowledge from ind to nw.

9. Knowledge that cannot be expressed

10. Four levels of more or less �expressed� knowledge

11. Paradigms of Tacit Knowledge Research

12. Autonomous and Induced Knowledge Transformations(Matrix adapted and extended from Nonaka, 1992 ; Spender, 1993, etc.

13. The Indigo Case : A knowledge-refinery with a taste for the ambiguous The small confidential newsletters publishing firm�s staff develops its own theory about knowledge-generation : (a) Avoiding to write too quickly (maintaining equivocally), (b) Experimenting with unknown settings through blind-tests with hypothetical knowledge (acting on settings, when knowledge itself cannot be acted) (c)�lying in wait while knowledge goes through its autonomous development; (d) keeping socialized to grasp outcomes (as the sole deliberate strategy). The Indosuez case : Learning through mergers and from newcomers is not as easy as it seems� In 1993, Indosuez is hiring a team of derivatives experts from Drexel-Lambert. As newcomers do not cope with over-institutionalized French banks, they threat to resign and leave. A crisis is provoked by CEO, and the breakdown is an opportunity for building a tacit agreement.

16. Ambiguities are critical times for knowledge� (purpose) Ambiguities are opportunities for knowledge renewal Ambiguities are unstable (e.g. antithetical but compatible meaning) Ambiguities create tensions in knowledge evaluation Therefore, ambiguous situations are good opportunities to study knowledge transformations (e,g, infusion of new knowledge) How organization theory deals with ambiguity�? (Angle) �Engineering of choice� (March, Olsen, 1975) Events are not obvious, reasons for events are unknown, we don�t know if the event is good or bad In theories of choice, ambiguity is usually seen as a sin. What were we aiming at ? To understand how knowledge is �acknowledged� To describe possible processes that display regularities To challenge the �sin� view of ambiguities To unveil the link between the organization, its members, their coupling and knowledge creation

17. What is going on when people face ambiguity ? Either, they become �univocal�� �We proceed as if we were faced with a choice between the univocal and the ambiguous, and we come to the discovery� that the univocal has its foundations and consequences in ambiguities� (McKeon, 1964, p. 243). Ambiguities are dealt through �forcing� a choice Incompatible knowledge subsists, but is either ignored or left aside Incompatible knowledge is discarded (believed as inappropriate = unlearning) Ambiguities are dealt through �clearing premises� Preferences, motivations, beliefs are rationalized as to fit with environmental ambiguous settings Or, they �thrive in the fog� (they become ambiguous) Ambiguities are dealt through �indecision� (no choice is made) Contradictory knowledge is taken for granted Incompatibility of knowledge is used as a means of flexibility (e.g. political discourse) Ambiguities are dealt as opportunities When specification would become a threat (e.g. after a merger, organization members do not make their claims specific as to survive rationalization) When new knowledge is awaited (as not to force an interpretation against another, as to give time to new knowledge to emerge)

18. How ambiguity and (un)learning interact ?(inspired from Levine, 1985; Hedberg, 1981; March, Olsen, 1975; Quinn, Cameron, 1988; Starbuck, 1983; Weick, 1976; Baumard, 1996; Brown & Duguid, 1991)

19. Findings and Propositions Organizational Settings that Reduce Ambiguities Because they are designed for it� The Multi-Divisional Form Various forms of Hierarchies They tend to make knowledge univocal Organizational Settings that Produce Ambiguities Unpurposefully : Joint-Ventures and Strategic Alliances Fusion with Two Different Cultures Matrix Purposefully : Small knowledge refineries that thrive in the fog (Indigo) Large firms that want to change their brand equity (Mercedes/Swatch) Insurance companies that enter the pension funds market (AXA) Airlines alliances with FFP with other carriers (SAS-Lufthansa) They induce new knowledge of their markets By exploiting equivocalities and developing new communities of practice

20. Propositions & Conclusion Organizations produce new knowledge through equivocalities Of their market interface (i.e. Airlines, Mercedes-Swatch) Of their market commitments (AOL - Time Warner) Organizational knowledge generation relies on three forms of trust : Affective Trust (linking individuals� knowledge) Cognitive Trust (importing experts� knowledge) Moral and/or performative trust (assembling new collective knowledge) Knowledge generation need Hierarchies Because people need institutional trust in delivered knowledge To lever resources (financial markets, investors) To be able to sanction and punish (through a depersonalized frame)

21. KnowledgeSharing & Transfer Why people do not share? Processes that impede KS Processes that ameliorate KS

22. Knowledge sharing Why don�t they share their knowledge? No knowledge about others needs No understanding about the value of own knowledge No connections No appropriate media It is more beneficial not to share They are not rewarded Does design can help? A better organizational design can encourage knowledge sharing The goal of designer is to improve flows of bot tacit and explicit knowledge

23. Knowledge Flow Knowledge flow in an organization is fundamentally driven by communication processes, human interactions and information flows. Knowledge flow is most likely influenced by four factors: knowledge transferred, source, recipient, and context in which the knowledge flow takes place.

24. Knowledge Flow- Barriers to Knowledge Flow

25. Knowledge Flow- Barriers to Knowledge Flow

26. Case StudyDupont�s Knowledge Management Vision

27. Dupont�s Identified Major Opportunity Areas Capability to capture information 88% of DuPont�s top salespeople have over 30 years of experience. 40% of DuPont engineers will be pension-eligible in the next two to four years. 38% of a person�s time is wasted trying to manage information. No central repository of intellectual capital.

28. Capability to find right information and people 20% of a scientist�s time is spent searching and accessing information. 75% of the info people need to effectively work is not in �transaction backbone� data. No capability to locate experts/expertise across company. Dupont�s Identified Major Opportunity Areas

29. Ability to collaborate and share info and expertise 20% of a person�s time is spent repeating answers. 25% of info that a company owns is used. 65% of a company�s design work is duplicated. Success and business intelligence depend on readily available knowledge. Dupont�s Identified Major Opportunity Areas

30. Dupont�s Key Learnings Ease-of-access to knowledge assets is critical. Minimize time required to find/reuse knowledge. Management support is critical. Tacit knowledge capture is much more difficult than explicit. Knowledge management is a culture change

31. Knowledgein competition Competitive knowledge Dimensions of competition

32. Competitive Value of Knowledge The uniqueness of the knowledge that organizations possess and its discretionary use, is their main competitive advantage (Baumard, 1997) Competitive value of knowledge resides in four dimensions Superiority of individual and/or collective cognitive processes Better ability to manage transitions between the tacit and the explicit Superior capacity of deploying communities of practice on a large scale basis Making knowledge actionable with a perceived distinctive competency

33. What Kinds of Knowledge Have Value to an Organization? Human knowledge (intellectual capital, relationships) Skills (tacit knowledge, difficult to imitate) Causal ambiguity between outputs and skills Learning curve and experience Business knowledge (financial, market, customers, relationships) Systematic knowledge production in cooperation with industry partners Capacity to influence the knowledge standard of the industry (trend setter) Iintellectual property (patents, classes, research) Capacity to develop knowledge rents Technological Knowledge Capacity to translate know-how into technological achievements

34. Turning knowledge into competitive adavantage Knowledge management in large firms Large firms undertake extensive expenses for common knowledge They usually disregard sophisticated and superior knowledge (Wilensky, 1967) They strategize having access to the same information (Starbuck, 1992) Research on knowledge management (1991-2004) Insight: Tacit knowledge in organizations is a key resource when firms face crises and ambiguous situations (Baumard, 1994, 1999) Strategic issue:: How to develop a sustainable competitive advantage from knowledge rents with partners ?

35. Assumptionson Knowledge & Competition Competitive advantage derives from rich, superior knowledge Knowledge-based view of the firm (after Penrose, 1959) �: growth is explained by idiosyncratic managerial resources that are superior to competitors� (Spender, 1989�; Scribner, 1986�; etc.) Structural perspective of strategy (Porter, 1980, etc.)�: superior intelligence of competitors� capacities, moves, intents leads to superior plans Confusion between scarcity and superiority�; secrecy and value The Cola formula might not be superior knowledge, but it�s secret�; as Michelin tires �; DeBeers� extraction processes �; etc. When knowledge is scarce, people tend to believe in its superiority (Wilensky, 1967) i.e. Orange County administrators� belief in the superiority of derivative products or Indosuez�s hunt for derivative experts �; readers of confidential newsletters (Baumard, 1994)

36. Knowledge used in competitionis generally poor... Poor as opposed to Elaborate Superficial, driven by beliefs (as opposed to Geertz� �thick understanding�) �: simple loop learning without impregnation �Poor as opposed to Articulated Unsystematic, not coded, unorganized Poor as opposed to Extensive Learning from samples of one (March, Sproull, Tamuz, 1991) Poor as Conjectural and Purposive Driven by results rather than the search for truth (i.e cunning, Hollis,1987) Combined from opportunism and flair, rather than reason and analysis (D�tienne & Vernant�s m�tis, 1974)

37. The strategic objective : building long term competitive advantage on rich knowledge Rich knowledge in ethnographic terms (Geertz, 1983) Dense, rich descriptions, intensive use of qualitative data, sense-making driven organizations Rich knowledge in terms of intensity (KIF) Concentration of know-how in minimal teams, intensity of expertise, renewal of know-how Rich knowledge in terms of variety (scope) Large scope of knowledge bases, organizational culture that favors diversity Downstream & customer designed and derived Expertise and know-how is constantly internalized from lead users

38. Competitive interactions in oligopolies Collusive equilibrium can rely on the scarcity of signals Making intentions explicit impedes members� ability to hide their strategic intents (Stigler, 1964�:46) Explicit sharing of information violates Anti-Trust regulations Members expect self-discipline from the other oligopolists (Lange, 1944�: 41) Shared explicit knowledge is also a source of coordination In order to retaliate selfish behaviors, i.e. to enforce the collusion To ensure a common ground of understanding, since information is not readily available (Pennings, 1981�: 447) To ensure predictability of competitors in a turbulent environment with a mutual fate (Clarke, 1983�: 384)

39. Socially Embedded Knowledgein Oligopolies Industrial districts are communities of practitioners Oligopoly members in a strategically interdependent situation behave as a family or a clan, with its codes, tacit rules, values (Ibert, 1997) Socialization is intense and informal meetings numerous because explicit exchange of formalized information may be interpreted as a limitation of competition (Ibert, 1997) Oligopoly boundaries accentuate idiosyncratic collective knowledge Members develop jargons and industry recipes (Spender, 1989) Traditions, rites, and implicit knowledge is used as a barrier to entry to the collective territory or field of expertise (Baumard, 1997)

40. Knowledge and Interfirm Organization The role of the interfirm organization (Phillips, 1960) It has an �identity apart from individuals of which it comprised� (P. 604) �Unwillingness to engage in price competition (�) arise as unconscious sensitivity to certain stimuli (�) No verbal communication of any kind is necessary� (P. 605) An unstable, ambiguous and informal knowledge It allows to keep on cooperating when flow discontinuation is counter-productive (high fixed costs of oligopolistic markets demand a continuous flow of orders and operations) �Quasi-agreements� (Fellner, 1949) give explicit recognition to group decision making (group confluence is priority over all other matters)

41. Discussion�: Knowledge and Competition �Valid Learning� vs. Deep Understanding To believe that firms favor a deep understanding of their environments is an �academic bias��: findings are consistent with Starbuck�s �action generators� (1983) or March, Sproull, Tamuz�s �learning from samples of one� (1991) Profitability of studied firms does not appear to be linked with their consultants� expertise Formal knowledge structures serve as institutional �fa�ades� Observations corroborate Fahey & King�s findings (1977) �: firms are informal and unsystematic in their interpretation. They favor collateral and transient organizations (Zand, 1981�; Wilensky, 1967). Poor knowledge favors determination & destroy bonds Aggression is an auto-reinforced process. Excess of knowledge impedes determination (i.e. success of Branson in the airline industry) Build knowledge with complementors to secure long-term competitiveness & survival

42. Managing Knowledge inNetworked Organizations Knowledge dynamics in networks Key factors

43. Network Organizations Definition: A network organization is a cooperative venture among two or more organizations Pool complementary resources Improve competitiveness Increase productive industrial power Automobile manufacturing Electronics Pharmaceuticals Apparel Etc. Recent growth in the number of such organizations has been phenomenal Most industries are becoming ��system-industries�� Based on the articulation of multiple components Based on real-time service integration between multiple partners Based on the ability to capture and exploit customer�s knowledge cooperatively

44. Motivations for Forming Network Organizations Resource dependencies (supply chains) Spreading risk (joint development) Speed to market (leveraging specialized expertise) Cost reduction (outsourcing) Flexibility (rapid changes in production capacity) Learning from other firms Neutralizing or blocking competition Etc.

45. Misleading assumptions about Networks �Networks have less inertia� Maybe Not The Structure Finance industry and the Barrings Case. When self-deception is collective, if there are no formal devices to counter-balance, consequences can de damageable. �Networks have an autonomous ontological status� Maybe Not Do �networks� exist on their own ? With no link to organizations ? �Networks are better in circulating knowledge� Maybe Not They may circulate ignorance, conformity, and blind-faith �Trust is versatile. It is independent from the tangible� Maybe Not We trust Skandia, SAS, Gant because they have or they had, and one does not know they don�t have any more, buildings, capabilities, addresses. Research 1 : Measuring the effects on trust level of customers when they learn that Gant is an IO Research 2 : The Nike Effect : Customer Loyalty and Degree of Intangibility of the Core Organization ??? Knowledge is the key-resource of new organizations Maybe Not Who works on the �organizational fa�ade� hypothesis ? Who works on the �control� hypothesis ?

46. Knowledge as a Key Networked Resource Claims that the key role of an organization is creating, storing, and applying knowledge effectively (Dyer and Nobeoka 2000) (Seely Brown and Duguid 1998) Network organization amplifies this role (Kogut 2000) Specialization and variety in markets and networks Ability to access additional knowledge Coordination guided by principles of network organization Availability as a knowledge repository Competitive advantage through access to intellectual property rights

47. Knowledge Sharing & Transfer Amongst Organizations To acquire knowledge and expertise quickly Acquire or merge with a firm that has the desired resources Form a network organization with one or more other firms Forms of knowledge to be shared Tacit knowledge Intense interaction between organizations Gradual creation of a single social community Explicit knowledge Documented (e.g. patents, software, etc.) Easier to transfer, more difficult to protect

49. Knowledge Applications�

50. Some Barriers to Knowledge Transferin Network Organizations Cultural incompatibility Lack of community (including a common language � natural or professional) Lack of leadership Lack of trust Lack of executive-level support

51. Factors Affecting KM in Network Organizations

52. Factors Affecting KM in Network Organizations (continued)

53. Factors Affecting KM in Network Organizations (continued)

54. Developingknowledge rentswith complementors Building value on knowledge rents Building customer loyalty with complementors

55. Developing Knowledge Rents Customer Relational Knowledge 1-to-1 relations : personalization of preferences, interface, knowledge of behavior, preferences (like & do not like), matching (e.g. musicmatch.com) Communities of customers : Group behavior, pattern recognition, management of groups / clans / communities. Industry Knowledge License management & preemption : interpersonal knowledge between negotiators R&D and creative streams : upstream head hunting ; early preemption of innovations ; downstream co-development (implication of lead users in product design) Tacit collective knowledge : �style� Patterns of implicit learning valued by the customers

56. Customer relational knowledge The value is not in the relation between the company and its customers, but between customers themselves �Community behavior� favors personal, protected, singular collective knowledge The company must give customers the tools to apprehend, make sense, organize, disseminate & valorize their own knowledge Discovery => Adoption => Deformation => Appropriation Discovery costs to the company Adoption costs to the customer (�learning barriers�) Deformation helps the customer to defend its own identity (�clans�) Appropriation gives value to the product / service The company should do whatever it can to help customers to increase their own knowledge, without being intrusive

57. Building the community of sense-making Combining two types of �relational knowledge� Company-Customer : operational effectiveness, interpersonal trust Customer - Customer : community of practice & sense-making

58. Case study NTT DoCoMo�s i-Mode Learning from users Early adopters associated to the creation of new games (e.g. the �cops & thieves� on-line I-mode game in Japan) Cross-domain transfer of lessons (successes/failures) Business Model from games development transferred to other divisions Alliance ecosystems (co-sensing, co-creation) A business model based on a flat royalty fee for complementors Software Development Kits, and partnerships on customer trends and behavior

59. Industry knowledge Customers value ��industry knowledge�� Being knowledgeable on the future evolution of service Being knowledgeable on potential technological breakthroughs Industry knowledge should be shared with customers Transparency Cooperation Co-design & co-management of critical processes Customers can help to increase customer knowledge Weak signals Making sense of emerging trends Lead users can participate in the �ecosystem� & life of the service

60. Tacit knowledge Tacit knowledge is �style !� & �differentiation� ! The more commoditization, the more value has idiosyncratic tacit knowledge Collective tacit knowledge is built by customers Increases appropriation Builds barriers to mobility Prevents from imitation from competitors Tacit knowledge is built from real-time on-going socialization Necessity to include service managers with the same culture that customers Necessity to let customer design the service

61. Capturing and retaining customers Building a personal relation Organizational & interpersonal memory Customers are known by their names or aliases Software engines learn their on-line and off-line behavior so to adapt the mode of interaction to behaviors (on line text, vocal chat on IP, voice) Implication Lead users (hard core gamers) are involved in the constant design of the man-machine interface Creation of GOA-Aids and GOA-Leaders : recognition Appropriation All users are given Extranet tools to build their own knowledge & practice sharing space

62. Can we hold all the necessary knowledge ? The answer is NO A single company does not hold all the necessary knowledge to acquire the competitive knowledge NEED TO MANAGE CUSTOMERS WITH COMPLEMENTORS The new front offices are new entrants & new players Customers trust their peers (PEER TO PEER) Customers trust intermediaries who are not biased (e.g. musicmatch.com, ebay, amazon) Industries are less and less vertical Complex and components-driven More agile and better informed customers

63. Who are the complementors? Complementors are companies that TOGETHER complete a solution that fully satisfies the customer Interdependence in serving the same customer Complementary in their offers But, completely STRATEGICALLY INDEPENDENT Complementors include service providers, equipment manufacturers, middleware producers, individuals, & other organizations who have an interest in the actions of our organization and who have the ability to complement it

64.  Complementors &Competitors:The Supply Side A player is your complementor if it�s more attractive for a supplier to provide resources to you when it�s also supplying the other player than when it�s supplying you alone A player is your competitor if it�s less attractive for a supplier to provide resources to you when it�s also supplying the other player than when it�s supplying you alone

65. The Supply Side:Examples Compaq & Dell compete with each other for the latest Intel chip complement each other in defraying Intel�s R&D costs American & Delta compete with each other for landing slots and gates complement each other in defraying Boeing�s R&D costs Microsoft Xbox & France Telecom Compete with each other on serving communication needs of young people Complement each other on providing broadband access to on line gaming consoles

66. Multiple Roles Competitive threat or complementary opportunity? Movie theaters & video rentals ? Traditional & Internet booksellers (BookZone) ? Instant messaging providers & telecommunication operators? ATM machines & on line loan/banking (e.g. Egg) ?

67. Demarcation et substitutability

68. Who is really making our offer different ?

69. What can happen ?

70. Review of Complementors Management Process Identify key complementors Diagnose them along two critical dimensions of potential for threat and potential for cooperation (position complementors on the Delta Triangle) Formulate appropriate strategies both to enhance or change current relationships with key complementors and to improve overall situation (How to Lock-In Complementors? Are they Vital Interests, Pivotal, or Buffers ?) Effectively implement strategies Another fundamental stakeholder management strategy is to transform the stakeholder relationship from a less favorable to a more favorable one. Then, the stakeholder can be managed using the generic strategy most appropriate for that �new� classification. Rather than simply collaborate with a mixed blessing stakeholder by supplying reservation systems to travel agents, for example, airlines could try to strengthen the relationship to turn travel agents into a supportive stakeholder. Aggressive public relation-building or stock bonuses to the agencies might work. Having built a more positive relationship, the organization could continue to manage the agency through less intensive strategy of involvement. Again, show slide with 2x2 diagram to illustrate successful strategy, i.e., how to move stakeholder from unfavorable quadrant to more favorable quadrant. An organization could also collaborate with a labor union in a quality of work life program of productivity enhancement combined with gain sharing to union members. Such an effort may succeed in enhancing the union�s potential for cooperation. If this program were successful, the organization would have succeeded in moving the labor union from nonsupportive to a mixed blessing. This approach is quite different that simply defending against a nonsupportive union stakeholder (i.e., our previously suggested generic strategy) by attempting to break the union or hiring consultants to help in labor-management bargaining. IN essence, the union�s stake in the organization will have changed. For example, GM averted a strike by the UAW in 1987 by promising job security to union members contingent upon productivity gains to be developed by labor-management committees.Another fundamental stakeholder management strategy is to transform the stakeholder relationship from a less favorable to a more favorable one. Then, the stakeholder can be managed using the generic strategy most appropriate for that �new� classification. Rather than simply collaborate with a mixed blessing stakeholder by supplying reservation systems to travel agents, for example, airlines could try to strengthen the relationship to turn travel agents into a supportive stakeholder. Aggressive public relation-building or stock bonuses to the agencies might work. Having built a more positive relationship, the organization could continue to manage the agency through less intensive strategy of involvement. Again, show slide with 2x2 diagram to illustrate successful strategy, i.e., how to move stakeholder from unfavorable quadrant to more favorable quadrant. An organization could also collaborate with a labor union in a quality of work life program of productivity enhancement combined with gain sharing to union members. Such an effort may succeed in enhancing the union�s potential for cooperation. If this program were successful, the organization would have succeeded in moving the labor union from nonsupportive to a mixed blessing. This approach is quite different that simply defending against a nonsupportive union stakeholder (i.e., our previously suggested generic strategy) by attempting to break the union or hiring consultants to help in labor-management bargaining. IN essence, the union�s stake in the organization will have changed. For example, GM averted a strike by the UAW in 1987 by promising job security to union members contingent upon productivity gains to be developed by labor-management committees.

71. Assessing Complementors

72. Aligning Knowledge with Corporate Strategy The Delta Model How long term strategy relies upona ��knowledge strategy��

73. THE DELTA MODELDiscovering new sources of profitability in a networked economy Zack, (1999) �� the most important context for guiding knowledge management is the firm�s strategy. Knowledge is the fundamental basis of competition. Competing successfully on knowledge requires either aligning strategy to what the organization knows, or developing the knowledge and capabilities needed to support a desired strategy.� M. Porter : the five forces, generic strategies�. ��Strategy is war�� G. Hamel et C.K. Prahalad : core competencies ��Strategy is real estate�� Arnoldo Hax & Dean Wilde contribution: ��Strategy is bonding � Strategy is based on different degrees of ��customer bonding�� Implies that implementation and strategy are thought & deployed simultaneously

74. A revised strategy formulation process

75. The virtuous circle

76. Strategic Options

77. Conclusion

78. Quick overview of key learnings On Design, Knowledge and Management Design can flow knowledge generation, capitalization and efficiency People can be cognitively programmed as much as they are behaviorally programmed Acclimation and ��fine tunning�� to flawed knowledge is a mainsource of organizational failure On Tacit Knowledge, Sharing and Competition Most critical knowledge in organizations is tacit. Articulating tacit knowledge is vital. Competitive advantage can rely on difficult to imitate tacit knowledge (��signature��) Competition can rely upon poor knowledge. Determination is greater, if bond is weaker. On Designing Strategy to Encompass a Knowledge Advantage Most organizations compete having access to the same information nowadays The difference between them lies in their ability to produce distinctive knowledge from it Integrating knowledge into strategy and strategic thinking is critical