Category Archives: Economics

Knowledge management, codification and tacit knowledge

The latest issue of Information Research has a great article by Chris Kimble, entitled Knowledge management, codification and tacit knowledge.

The paper takes an interesting approach; looking at knowledge from the perspective of economists. The idea is to provide a “view of knowledge that allows it to be considered as a stock that is accumulated through interaction with an information flux”.

Kimble looks at two key interpretations of tacit knowledge – from Polanyi and Nonaka. This discussion is very useful. Kimble summarises the key points from both theories in relation to knowledge management and shows the distinction between the two. Purists have argued that Polanyi’s view of tacit knowledge means that tacit knowledge can never become explicit. Nonaka takes a more practical approach, claiming tacit knowledge can be made explicit under some circumstances or approximations. Nonaka was interested specifically in “knowledge conversion”.

Kimble then discusses an interesting approach to the tacit/explicit knowledge issue – a topography of knowledge transaction activities. The typography comes from the following cited work: Cowan, R., David, P.A. & Foray, D. (2000). The explicit economics of knowledge codification and tacitness. Industrial and Corporate Change, 9(2), 211-253.

What is interesting here is that the focus is on where the knowledge transactions take place rather than the form in which the knowledge is contained. Kimble goes on to say: “While Cowan et al. may have little to say about the benefits of codification, their topography does provide a structure to examine its costs. Perhaps the most obvious cost associated with codification is that of creating the codebook.”

Kimble concludes his paper looking at the duality of information and what it means: “By focusing exclusively on codified knowledge, the advocates of codification may lose sight of the intimate linkages between tacit and explicit knowledge.”

Kimble’s paper is well worth a read for stimulating thought about tacit and explicit knowledge; a significant point of discussion in knowledge management over many, many years.

On experiencing context

I want to talk about experiencing context.  I want to investigate what it means to experience something that is really going on rather than what is supposed to be going on.  I want to see what happens in practice as distinct to what the theory might suppose.

I am reading the classic book on urban planning by Jane Jacobs, called The death and life of great American cities.  As a lapsed economic geographer, I am always drawn to the intersection between economics and space and how in practice these two dimensions work.   The first observation, certainly if you are from Sydney as I am originally, is that there is a dark nexus between property developers and urban development.  Much has been made about the power of developer influence on government planning, for instance.

In fact, I recall one big developer wanting to concrete over the beautiful Kuring-gai Chase National Park in the north of Sydney to build more multi-dwelling housing!  The worst part, of course, is that besides giving the developer more profit and more power, the architecture of said multidwelling housing leaves a lot to be desired with their prefab look and feel.

In the introduction to Jane Jacob’s book, she cites an example of a so-called slum in Boston (in the 1950s) called the North End.  To much of Boston, and certainly the city planners, North End was a major slum.  Yet when Jane Jacobs visited the place before a future-planned “redevelopment”, she was amazed by the life and vitality of the place.  She rang a planning friend who confirmed he thought it was a slum, albeit a slum with pretty good health and socioeconomic statistics behind it.  Moreover, her planner friend actually visited North End and found it to have a “wonderful, cheerful street life”, even better in summer.

Jacobs says: “Here  was a curious thing. My friend’s instincts told him North End was a good place, and his social statistics confirmed it. But everything he had learned as a physical planner about what is good for people and good for the city neighbourhoods, everything that made him an expert, told him that the North End had to be a bad place” (page 15).

The story certainly tells me how important it is to experience the context.  I doubt whether it will always be good enough to just look at the theory, or the statistics, or the expert opinion, without experiencing the context for oneself.  More importantly, however, is the finding out about the experience from the people active within it.

It therefore comes as no surprise that in many areas of our professional lives where we have to make decisions, we often rely solely on past experience, our previous training, and the thinking that pervades ourselves and like-minded colleagues.  This is quite insufficient.  We need to explore other ideas and other people’s views, especially the views of the people involved – the real stakeholders.  And if we can break these patterns, either through our own determination or allowing some disruptive thinking to break through from elsewhere, then we can at least look at the world in a different way.

If we can experience context, and include the contextual experiences of those involved, we can make more informed choices and decisions that reflect the real context as distinct from our personal-world-view context.

Knowledge management and the world financial crisis

Since my last blog post, the world financial market has really taken a battering as large finanical institutions in the US, Britain and in Europe collapse under the weight of poor lending practices and even poorer management and control structures. The financial impact alone is enormous.

What has this to do with knowledge management, I hear you ask?

Well, knowledge management is about enabling informed decision-making and taking action. Knowledge management facilitates the information and knowledge assets of a business to drive operational efficiencies, create opportunities for growth and innovation, and establish sound information management practices and systems for preparedness and risk mitigation.

Knowledge management is therefore about establishing the internal operational conditions for making effective and knowledgeable choices and decisions across the business domains of a firm – and those business domains are where profits and losses are created.

An organisation’s codified knowledge and information (explicit knowledge), capacity for research and analysis, and capabilitiy to locate and disseminate this information will inform a workplace and the people within it; for decision-makers and for taking action.

At the same time, knowledge management involves people – the information and knowledge exchanged, re-articulated and reformulated by humans within particular contexts. The knowledge and experiences of people are unique, co-evolving, and able to be shared to develop or create new knowledge. This is what is commonly referred to in the knowledge management literature as tacit knowledge.

Knowledge management facilitates this interplay between explicit and tacit knowledge out of which organisations make decsions and take action. Knowledge management is therefore ongoing, cumulative and regenerating.

Knowledge management also works to reduce costs through improving workflow, facilitating efficient and effective information capture, access, and dissemination, facilitates conversation and human networks, and enhances collaboration and connectivity between individuals for common purpose.

Knowledge management is therefore about providing the infrastructure and capability for organisations to make informed decisions. As knowledge managers, we like to think that the outcome of knowledge management is Innovation and competitive advantage – and sometimes it is. But just as importantly is the strategic importance of using knowledge and information assets wisely to improve operational effectiveness, decision-making and governance issues – profit making and risk mitigation.

On the cost side, knowledge management drives down the cost of doing business through more efficient and productive operations (saving time is one of the obvious manifestations). Being able to find the right information at the right time is critical, as is preparedness through awareness. Being aware and having quick access to information and the right people allows for organisational agility and responsiveness that impacts on how opportunities are found and change is managed.

A strategic knowledge management approach to organisational perfomance is an excellent way for companies to make improved decisions for profit generation and risk mitigation while also saving costs and speeding up interaction within people networks for collective thinking and collaborative advantage.

Knowledge management offers a foundation, many paths and a network. Yet it’s true that senior management and executives choose which way to jump – and the frying pan at 700 or 870 degrees is one route. Wall Street, if it’s not to late, take heed!

On showing some interest in KM

The Reserve Bank of Australia announced an increase in interest rates this afternoon. Interest rates will rise by another .25% and the expectation is that another increase is likely in the near term.

Since interest rates are supposed to reflect the cost of capital, it is not surprising that high interest rates impact on the bottom line of both businesses and individuals.

What I find particularly fascinating is the attention business gives to interest rate increases of .25% when many of the same businesses show a lack of interest in discovering and delivering .25% improvements to the bottom line by improving work practices and knowledge flow.

When I was in Brazil as part of a speaking tour for Rabobank Australia in 2003, I saw sugar companies seeking to make incremental improvements to production in the order of 0.1%, and when accumulated over the year, made substantial savings. I even saw a computer program that looked at the costs associated with parking a truck and unloading sugar cane in various positions at various times and in various combinations! There was a real effort in determining how to unearth savings associated with better ways of doing things. And importantly, the effort was made before it was clear what cost savings could actually be unearthed that way.

To a large extent, this commitment of effort (or lack of) to discovery and delivery is what confronts knowledge management. Where can a business make a .25% improvement to the bottom line, and how? Perhaps savings can be achieved in workplace processes by effectively harnessing people and technologies to improve timeliness, reduce costs associated with duplication and re-inventing the wheel, and putting people in touch with information and people at just the right time. There are plenty of knowledge management strategies to consider for a range of problems and contexts.

And since I am studying some marketing subjects this term, I already have a slogan: “Show some interest – let knowledge management do it right for you” (apologies to Tony Packard and his former car dealership)!

On tagging (3)

Chance encounters often reveal positive results. I came across this November 2006 blog post by Joshua Porter on why scale matters in tagging systems.

A point I want to tag onto (pun intended) is the one about the rights of the individual to tag anything with any tag the individual likes. Joshua illustrates with his comment about the New York Yankees. Some people will say (and tag) that the New York Yankees are the best baseball team in the US and some will disagree, and some (like me) couldn’t care less – test cricket is far superior!

Joshua says: “Even if a few people tag things incorrectly, most people won’t. This doesn’t have to do with the fact that most people are Good, it’s just that if we ask enough people the same question or have them observe the same phenomenon, where their experiences overlap will tend to be the reality of the situation” – the wisdom of crowds phenomenon.

Actually, it is the same argument promoted by the free-market economist Adam Smith with his concept of the invisible hand – each individual acts to maximise self-interest but in aggregate, society benefits. But does this really happen in practice – if the majority of people in rich countries want to continue to pollute the planet, is this a good thing for society or not?

But what has this to do with communication and knowledge management? Well, besides the tagging phenomenon itself, the concern in this aggregation and crowd argument is that opinions and thoughts that lie outside the “consensus” view are too easily ignored.

We also need to listen and hear to what people outside the crowd are saying because all too often, there is something special and innovative there that the pack of individuals in the crowd missed or hadn’t thought of, not to mention the danger of Groupthink!

And knowledge management needs to deal with both the consensus view and the outliers. How we can do this effectively all the time is indeed a challenge.

On KM Australia 2007 (Part 3)

The highlight of the KM Australia 2007 conference was the presentation on the afternoon of Day 1 by Michel Bauwens on “Peer to peer: the new paradigm for social innovation”.

Michel believes that free agents are becoming the dominant form of economic activity in the post-dot com world. As a result, people and their networks are becoming increasingly important as individuals rely on each other for information and collaboration within a trusted relationship. The new social computing technologies have enabled peer to peer networks to grow rapidly, Facebook being a prime example. The value from these networks is created by the individual. Michel calls this the “wealth of networks”.

Michel argues that institutions, such as corporations and governments, have become less accountable to the public and trust in them has fallen significantly. Trust between peers has become the most important trust relationship. At the same time, a new generation of young, mobile and independent workers have emerged to find new meaning from the traditional work relationship between employer and employee. Combined, the individual is becoming more reliant on peer to peer networks in both work and social contexts, based on peer production, peer governance, and a common inclusionary network culture.

Michel also notes the importance of the “passionate user”, an individual with an intrinsic and positive motivation to do things for non-monetary reasons. As the threshold for voluntary particpation increases, aided by inexpensive social technologies, the peer to peer network increases, and the opportunity for creative innovation is enhanced. Michel gave the example of Linux that was started by volunteers, and the success of the open source movement. Innovation becomes social and flexible, the antithesis of traditional workplace heirarchies.

Michel posits that we are entering a fundamental shift in the economic landscape, moving to a peer to peer mode of production. After all, with knowledge and a computer, Michel says that individuals can now control the means of production.

The social network becomes the competitive advantage. Quoting Fernanda Ibarra: “The main source of value creation is shared knowledge and collective intelligence, not land, labour, or capital. It is that shift in the basis of value creation, what propelled virtual communities in the limelight as collective players with largely untapped potential for radical innovation”. The collective intelligence of the network, peer governance, and the democratisation of innovation will be the defining features of the peer to peer networked world.

I enjoyed the positive and enthusiastic vision of the future, especially the democratisation of production and the ability of individuals to choose their own destinies.

For me, the impact was twofold. Firstly, the importance of the virtual social network became clearer to me. Social computing is the lead instrument for many people today in connecting with other people who they may never actually meet in person. At the same time, new ways of using social networks do provide opportunities for later face-to-face interactions. Michel cited the example of CouchSurfing where people make available couch accommodation in their homes for visitors and tourists, people who they have an association with through networks despite never having physically met them. I guess it’s not really too far removed from word-of-mouth that was so prominant (and primitive in retrospect) when I was backpacking around Europe and Africa in the 1980’s looking for safe places to stay at low cost.

Secondly, the new economic model in which individuals are empowered in the labour market by their knowledge and their social networks is very interesting. I see how this is happening now with the high rate of labour mobility in the workforce but wonder if this is sustainable if economic conditions worsen and economies plunge into recession. Moreover, I wonder whether heirarchical organisational structures are really breaking down and whether the associated power relations inside those organisations are changing for the better. Certainly, autonomous networked individuals working collaboratively for the common good is an attractive proposition.

Over the coming weekend, I will conclude my overview of the KM Australia 2007 conference with some notes on some of the other presentations.

Finally, I have Patrick Lambe’s presentation from the NSW KM Forum last Tuesday evening and will make it available shortly.

On Alfred Chandler Jnr.

I was saddened to hear of the death last week of American, Alfred Chandler Jr., aged 88. Chandler was widely regarded as the father of business history, particularly industrial history.  He was the author of the ground-breaking Scale and scope: the dynamics of industrial capitalism.

I came across “Scale and Scope” in my Economics degree in Sydney (many years ago!) in a unit on economic history. The book was brilliantly researched, beautifully written, and became the stimulus for my interest in industrial archaeology. That interest remains with me today as a member of the UK-based Association for Industrial Archaeology.

I remember reading Chandler and feeling how alive he made economic history, very much a skill on a somewhat dry subject. Compared to the torturous Wealth of Nations by Adam Smith, Chandler’s work was a real pleasure to read.

“A pleasure to read” – a motto that should be at the forefront of all writing today, whether it is in academia, business, e-mail or on the web.