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Articles: Knowledge management

The Future of Knowledge Management Consulting
Author: Alistair Lomax
Source: www.kwork.org

Introduction
Knowledge Management

Research Literature

Organisational Learning
Consultation
From Tacit to Explicit and Back
Methodology
Summary of Results
Implications

Introduction

A new emphasis is on an economy based on services, ideas and intangibles rather than physical product and process is emerging. In tandem with this there is a thrusting imperative to manage organisational knowledge.

For fifty years there has been a settled business equilibrium, dominated by established firms, that is now prone to radical reform (Deighton 1997). In a world of dynamic change, managers can no longer afford to be complacent about knowledge (Nonaka & Takeuchi 1995). More organisations fall prey to their own inertia than those which learn to change and adapt (Starbuck 1983).

This paper examines the phenomenon of Knowledge Management (KM) Consultancy. The focus is on the client's current perception of the KM Consultant. It examines the correlation between a firm's attitude to knowledge itself and its attitude to KM Consultants.

The paper has emerged from an MBA dissertation, supported by the Association of Knowledgework. Alistair Lomax, the author, is a Senior Consultant with Oxford Philanthropic, a management consulting firm providing specialist services in development for the non-profit sector.

The author welcomes comment. Please email Alistair@alomax.fsnet.co.uk

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Knowledge Management

There are few hard facts about Knowledge Management (KM). There is little agreement about its definition by practitioners. Its delivery is fragmented. Though attempts have been made to quantify the market value of its practice, much of the active debate about KM remains at the level of philosophical abstraction.

For the purposes of clarity, a generic definition of Knowledge Management (KM) is advanced:

Knowledge Management (KM) is the term given to the process of capture, refinement, aggregation and sharing of data and information between employees, departments, subsidiaries and partner organisations to achieve a position of knowledge-based competitive advantage.

Those who have attempted to quantify the market value of KM consultancy (Ovum Ltd. 1999) have suggested that it divides into two broad aspects. On the one hand these focus on systems and software. On the other hand the focus is on people and the soft issues of change management. It is claimed that there is currently an underlying trend of rapid growth with a potential for explosive growth -- in both the Knowledge Management software and service-support markets.

  • The value of the Knowledge Management software market worldwide is estimated to have been worth US$515m in 1999 and is forecast to be worth US$3.5bn by 2004 (source: Ovum Ltd.1999)
  • The Knowledge Management services market is forecast to grow from US$2.6bn in 1999 to US$8.8bn by 2004 (source: Ovum Ltd. 1999).

The term Knowledge Management (KM) has perhaps gained more credibility as a means of measuring the value of a software market than as an accepted function of the consulting firm. Whereas strict classification, under the KM label, allows for predictive valuation of an industry sector, many of the established consultancies appear to have deliberately avoided such labeling. Whilst KPMG and IBM run KM Divisions, many other established consultancies (e.g. Andersen Consulting, Deloitte & Touche) have veered away from a bundled offering.

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 Research Literature

Knowledge Management is often described in zealous and imperative tones in the literature. Broadly speaking, the research work in this important field falls into two divergent schools of thought.

On the one hand there are those more concerned with soft issues: finding means of analysing knowledge within a systemic context: culture, values, schema, belief systems, tacit norms, embedded routines (Argyris & Schon 1978; Berkema et al. 1996; Davenport et al. 1998; Eden et al. 1979; Flood 1998; Leonard-Barton, 1992a, 1992b, 1995; Malhotra 1998, March 1991; Nisbett & Ross 1980; Sanchez Heene & Thomas 1996; Sanderlands et al.1987; Schein 1996; Weick 1995). In this study, this school has been called the Culturalists.

On the other hand, there are the empiricists, whose work is concerned with finding means of analysing knowledge as quantitative, discernible, explicit, measurable and strategic (Corrall 2000; Cyert & March 1963; Drew 1996; Galambos et al. 1951; Herschel 2000; Jordan & Jones 1997; Kogut & Zander 1992; Kay 1993; Sarvary 1999; Sveiby 1987). In this study, this school has been called the intellectual capitalists.

Some researchers (Hofstede 1980, Nonaka & Takeuchi 1995) have inferred that such schismatic differences might be the result of cultural and national difference. The concept of the East-West divide is used here as an intellectual tool.

Nonaka & Takeuchi (1995) have developed this notion by differentiating between Japanese and Western models of knowledge. In Western firms knowledge is characterised in a reductionist mode as a commodity: something formal, controllable, quantifiable, explicit and systematic. In Japan the emphasis is on tacit, as opposed to explicit, knowledge: not visible or easily expressed, highly personal, hard to formalise or emulate, deeply embedded in individual subjective perception and experience, ideas, values, beliefs and emotions.

It was the theoretical proposition of this study that firms would display clear preferences for one orientation over the other.

This proposition builds, in part, on the work of Hansen & Nohria (1999) which modeled knowledge management strategy into two distinct schools each with a different prescriptive Knowledge Management strategy. The different strategies rely on the level of emphasis on formal and explicit structuring of organisational knowledge. These were called Codification and Personalisation strategies respectively according to the level of formal process in place. These researchers concluded that these different strategies required different IT infrastructures to support the dissemination of knowledge. They argued that for the codification strategy a higher level of IT support is required than for a personalisation strategy.

After work by Hansen (1999) it was hypothesised that the schools will demonstrate different preferences for one KM Strategy over another. In our case this focuses on the use of the external KM Consultant. The Culturalists, with an emphasis on internal resources -- akin to the self--sufficiency model of the Eastern firm proposed by Nonaka & Takeuchi (1995), will be less inclined to value such consultants. The Intellectual Capitalists, with a more results-orientation will be more inclined to value the input of such consultancies. They are more likely to justify this in a higher value perception of the input of consultants as they are prone, by type, to justify and measure the effect of things in general.

A dichotomous view of Knowledge emerges from the literature. Gathering the elements of this dichotomy into a model, a new theoretical model, which formed the basis of the quantitative analysis, was proposed. This is called the Knowledge Orientation model:

Culturalists  Versus Intellectual Capitalists
Tacit   Versus Explicit
Abstract Versus Quantifiable
Informal Versus  Formal
Subjective Versus  Objective
New Knowledge Versus  Existing Knowledge
Holistic  Versus Empirical
 Values & Beliefs  Versus Systemic
 Proactive  Versus  Reactive

        Source: This paper Knowledge Orientation Model

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 Organisational Learning

Of course learning and knowing go hand in hand. The management of knowledge cannot be considered independently from organisational learning. New knowledge is only generated as the result (or product) of learning (Argyris & Schon 1978; DiBella & Gould 1996; Drew 1996; Eden et al. 1979; March 1991; Nonaka & Takeuchi 1995; Schein, 1996; Senge 1990).

The way an organisation manages its knowledge might be linked to its learning potential in a direct way. These are characterised by an emphasis either on quantification of existing knowledge or the generation of new knowledge. Again there is a divergence between the Intellectual Capitalists and the Culturalists.

The Intellectual Capitalists are perhaps more likely to focus on existing knowledge, whereas the Culturalists focus on the cultural and infrastructural issues might enjoy a higher potential for learning, for generating new knowledge. For the first school, it follows that the Knowledge Management imperative is reactive (controlling existing knowledge), whereas for the second school it is proactive (monitoring existing knowledge at the same time as generating new knowledge).

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 Consultation

  • What is the role of the consultant in the knowledge management process?
  • What might motivate firm to engage/ commission a consultant?

The role occupied by consultants has been defined by Humphreys (1999: 10) as:

those who temporarily occupy subject positions within the organisational space of convention and decision-making procedures.

Spender (1989) has suggested that ideas are often generated outside the conventional structure of an organisation. Nonaka & Takeuchi (1995) differentiate between Japanese and Western firms, suggesting that the use of consultants is a phenomenon peculiar to the West. They assert that Japanese firms generally develop internal mechanisms for creative innovation. Western firms, on the other hand, often require some form of artificial and outside intervention to counter a lack of internal resource. This difference may also be observed between firms within the same national culture; between both Intellectual Capitalists and the Culturalists.

As Scott (1998) has indicated, the size and configuration of a consultancy firm (considered in the wider category of the Professional Service Firm), will be directly influenced by the size, dynamic and configuration of its clients. This might be taken further in the KM context. The consultancies will divide into those which serve Culturalist firms and those which serve Intellectual Capitalist firms. The strength of the firms' orientation towards either typology is, therefore, highly significant.

Many motives have been cited in the literature leading to the engagement of consultants. These may be summarised as follows:

  • Provide skills not within firm
  • Counter internal constraint
  • Counter cognitive constraint
  • As an aid to action without the brake of internal politics
  • Endorsement of client's preconceived programme of action
  • Mitigate risk
  • Promotion of an executive agenda
  • Mainly advise on IS/IT
  • Change/ challenge status quo
  • Overcome internal resistance to change
  • Achieve change with greater speed than allowed by internal organic change
  • legitimacy and endorsement rather than expertise
  • Pressure from Stakeholders

Eden et al. (1979) defined the inherent tension between an individual's private and internal sense of reality and the problem of finding a means of articulating that reality. They suggest the role of the consultant provides a cogent and explicit form. Providing a model or artifact around which dialogue can develop (p6-7). This model emerges as an antidote to the bounded limitation of the individual [manager's] capacity to interpret an increasingly complex world and the dysfunction and conflict that this might imply. Starbuck (1992), in a more cynical vein, has suggested that clients engage consultants (or experts) to obtain legitimacy and endorsement rather than expertise. Another factor might be speed. The consultant, being an external party, is not mired in internal politics of the organisation. This is because of the prevalence of blame culture, the power-conflict-resolution, and decision--making process involved in the commission of consultants. With an emphasis on external reporting, and the growing influence of larger numbers of stakeholder groups (e.g. shareholders and regulatory bodies), employing consultants to defend a preconceived commitment to action might be a valid decision factor. The question as to whether the engagement of consultants leads to perceived safer outcomes is an important one.

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From Tacit to Explicit and Back

If during the firm's interaction with an external consultant tacit knowledge is to be made explicit, it is important to define the conceptual difference between these forms of knowledge:

  • Tacit (or implicit) knowledge: mental models, experiences, stories, rituals and skills residing in the individual and private mind.
  • Explicit knowledge: formal models, processes, rules and procedures which can be communicated externally

(Nonaka & Takeuchi 1995, Vail 1999).

In a general sense all knowledge is derived from tacit sources. Levitt (1991) has said that much of what is most precious remains inaccessible and incommunicable. Polanyi (1966) viewed knowledge as a construct that could not be divorced from its social context, asserting that all explicit knowledge had its roots firmly in the tacit. For Nonaka & Takeuchi (1995), the most critical function is not the managing of existing knowledge as such, but the generation of new knowledge, or learning. They describe this in terms of a gradual evolution in the organisational cultural paradigm:

To create knowledge, the learning that takes place from others and the skills shared with others, needs to be internalised reformed, enriched and translated into the company's self-image and identity. P11

Nonaka & Takeuchi (1995) describe the knowledge-creation imperative as a dynamic and continuous process involving the acquisition, accumulation, creation and exploitation of new knowledge. Central to this is the conversion -- in dynamic interaction -- from tacit to explicit with a final reconversion to tacit norms. Spender (1989) has also written about the assimilation of knowledge through a process of ritual socialisation. Nonaka & Takeuchi's (1995) critical assumption follows this: human knowledge is created and expanded through social interaction between tacit and explicit knowledge.

The iterative process advanced by Nonaka & Takeuchi (1995) characterizes the knowledge-generative process moving through four realms in its journey from tacit-explicit-tacit: socialisation, externalisation, internalisation, combination (illustrated below):

  Tacit Knowledge to Explicit Knowledge    

Tacit Knowledge

From

Explicit Knowledge

Socialisation Externalisation
Internalisation Combination

Figure 2.20.1 Four modes of knowledge conversion

Nonaka Ikujiro, Takeuchi Hirotaka, 1995 The Knowledge Creation Company: How Japanese Companies Create the Dynamics of Innovation, Oxford: University Press: 62

  • Externalisation is defined as the process of articulating tacit knowledge into explicit concepts via such means as metaphor, analogy, hypotheses or models (Nonaka & Takeuchi 1995: 67)
  • Internalisation is defined as the process of embodying explicit knowledge into tacit knowledge through socialisation (Nonaka & Takeuchi 1995: 69)

Though the organisation can provide a framework within which this process may be encouraged, Nonaka & Takeuchi (1995) argue that the interaction between tacit and explicit is performed by the individual employee rather than by the organisation. The best the organisation can do is to establish and endorse a framework.

Nonaka & Takeuchi's (1995) view of the learning process is perhaps mirrored in Western organisations through the process of external consultation. Tacit knowledge is made explicit via the very process of exogenous consultation. In extension of this argument, it might be said that explicitly articulated problems, solutions and recommended courses of strategic action are made tacit again once the external consultant's report has been assimilated by the commissioning manager and communicated with staff.

Whereas the structure of such Japanese firms, many of which are documented in Nonaka & Takeuchi's case-study-enriched work, creates a kind of internal self sufficiency, the established Western firm frequently relies on derived input and thought from exogenous sources. This, of course, happens informally in daily interaction with suppliers, stakeholders and customers, but for many firms new thinking is the result of formalised interaction with consultants.

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Methodology

The following variables were examined via a cross-sectional questionnaire:

  • Two divergent schools of knowledge management
  • The client's perceived value of Knowledge Management Consulting firms
  • The contemporary relevance of Knowledge Management
  • Motivating factors leading firms to commission consultants in general

The strength of the respondent firms orientation to the following dialectical model of knowledge orientation was tested:

  • The culturalists were mainly concerned with the softer issues of knowledge: culture, values, schema, belief systems, tacit norms, embedded routines.
  • The intellectual capitalists were described as empiricists, concerned mainly with knowledge as quantitative, discernible, explicit, measurable and strategic.

Perceived value was measured against indicators of the following:

  • Client satisfaction
  • Client confidence
  • The service the client received against their expectations

Those firms in group A (Culturalists) were also hypothesised to be less driven by results than those in group B (Intellectual Capitalists). Possible cognitive constraints faced by the firm were discussed. Several aspects were prominent. Against a theory of constraints, knowledge management consultants might be engaged to:

  • Counter organisational blind spots
  • Counter managerial cognitive constraint
  • Overcome organisation myopia
  • As an alternative to tried-and-tested formulae (heuristics the way things are done round here)

The following motivational factors behind the engagement of consultants were identified as of measurable significance to the client firm:

  • Consultants have greater expertise than internees
  • Cost effectiveness
  • Speed is of the essence
  • Overcome internal resistance to change (politics)
  • Justify action to wider stakeholder groups
  • Risk Mitigation: Hiring consultants leads to safer and more accountable outcomes

The contemporary relevance of Knowledge Management was established. A consensus emerged in the research literature as to its importance and relevance. The following key factors were identified underpinning the new contemporary importance of knowledge management:

  • Prevalence of service/ideas over product-orientation
  • globalisation and the resulting need for adaptation
  • change and speed (of change)
  • the increased premium of specialist knowledge in answer to these pressures
  • attrition of a skilled workforce in rapidly expanding service and manufacturing industry
  • perceptions of knowledge as a depreciable asset

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Summary of Results

The research instrument was a cross-sectional questionnaire, with a Purposive Sample of KM Clients. This population was internationally dispersed. For ease of distribution and return, the questionnaire was hosted online.

Respondent

Frequency

Percent

Valid Percent

Board Member

12

17.4

17.4

Senior Manager

33

47.8

47.8

Middle Manager

12

17.4

17.4

Staff

12

17.4

17.4

    Table 4.2.1 Respondent's Position Within Firm

The above table illustrates the level of seniority of respondents. Almost half (47.8%) were at the level of Senior Management. The remaining respondents were equally spread across three other nominal ranks (Board Member/ Middle Management and Staff ) accounting for 17.4% respectively.

Valid

Frequency

Percent

Valid Percent

UK

31

44.9

44.9

USA

28

40.6

40.6

N. Europe

3

4.3

4.3

Eastern Europe

1

1.4

1.4

SE Asia

1

1.4

1.4

Australasia

2

2.9

2.9

Scandinavia

3

4.3

4.3

    Table 4.2.2 Location of Respondent's Firm

The majority of respondents' firms were located in the UK (44.9%) and the USA (40.6%). This perhaps reflects the level of debate and reflection in these countries regarding KM. The large proportion of respondents' firms had less than 100 employees

The number of clusters in each respective group -- strongly in favour of a Culturalist orientation within this research population -- is recorded:

Cluster 1: Culturalists

41 Firms

Cluster 2: Intellectual Capitalists

28 Firms

Table Knowledge Orientation of Respondents

The results substantiate the theoretical foundations of each of the three hypotheses.

  • The Intellectual Capitalists were found to express a higher level of confidence in the services of KM Consultants than the Culturalists
  • Both groups (Intellectual Capitalist and Culturalists) expressed similar levels of confidence in the services of external consultants in general
  • Both groups expressed an equally high awareness of the imperative to Manage Knowledge

The results describe a parity of agreements between client firms about the importance of the challenge they face; the Knowledge Imperative. However, the results describe less parity of view between types of firm about the validity of using external consultants.

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Implications

The main management implications of this study are relevant to the KM Consulting Firm rather than their clients.

With the divergence of the between -- groups value perception described by this study, KM consulting firms might adapt their marketing strategy to access firms with an inherently Intellectual Capitalist orientation more actively. With the results -- orientation of such firms, it might be necessary to adapt current offerings towards more easily defended (quantifiable) results. This might be achieved via case studies of proven Return on Investment (ROI).

The high level of acceptance between groups of business consultancy services per sť has management implications. For a new product (KM consultancy) within the conventional consulting portfolio, a higher resource allocation might be allocated from the marketing budget in order to achieve a sustainable position within a growth market.

If the bias in favour of Culturalist firms responding to this survey is an accurate reflection of firms actively seeking KM Solutions, and the Intellectual Capitalists have a higher perceived value of KM, then the Consulting firm might allocate more resources to firms in the first group.

KM is going through a process of evolution. Providers of KM services fall broadly into two camps: those who offer services as a distinct product or functional division and those which don't. In marketing terms these might be considered in terms of firms which bundle service and those which unbundle their service provision.

So, what will the future look like for KM Consultancy? In the near future, along the same lines as Hansen & Nohria's 1999 work, greater clarity will emerge to reflect a dichotomy. The respondent firms [to this study] demonstrated a clear orientation towards either Culturalist or Intellectual Capitalist orientation. As KM Consultancy gains maturity, it is predicted that provider firms will migrate towards either end of a resulting continuum. It is likely that this will be characterised by the following:

  • KM Consultancy firms responsive to Culturalist clients at one end and those responsive to Intellectual Capitalists at the other
  • KM Consultancy firms will migrate towards one or other of the above
  • This orientation will reflect the knowledge orientation of core clients
  • Each will be supported by different software applications
  • Each will attract different kinds of staff and service the needs of distinctive client sectors

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Alistair Lomax is a Senior Consultant with Oxford Philanthropic, a management consulting firm in the UK providing specialist services in development for the non-profit sector. For more information on the work of Oxford Philanthropic, please contact us by email: consult@oxphil.com or call 00-44-(0)1865-744300
Article used with permission