Essay on “Why Managers Haven’t Embraced Complexity”
The current essay is concerned with evaluating the importance and challenges of information and knowledge management. The essay also presents a discussion on the relationship between corporate strategy, information management, information system, and ICT.
Data and information are the two vital elements in the operations of an entire organisation. Data are the unprocessed facts, figures, graphs, statistics, and numbers whereas these data when processed results in the formation of information. In other words, information is the processed data that are aimed to add value to the organisation. In this context, B Ell et al. (2008) mentioned that information is a vital source of competitive advantage. However it is also important for an organisation to ensure that the competitive advantages enjoyed by it are sustainable in nature. This calls for efficient information and knowledge management. Knowledge refers to the pool of information at the disposal of an organisation. As mentioned by Chrolrs and Otler (2006), knowledge is the concise and proper collection of information in a systematic way that adds value and meaning to the information. Therefore, it would not be improper to state that information is the source for knowledge. In addition, both cognitive and analytical ability is highly required for the creation of knowledge but cognitive ability is not essential for the information.
Information and knowledge together forms the source of long-term sustainable advantage of a firm. This increases competing capability of an organisation. Customer base is a vital form of information and knowledge that has a direct impact on the ales revenues and profitability of an organisation. Organisations, as a practice keep records of its existing customers. Vital information such as name, age, gender, address, contact number, and other details of the customers need to be kept recorded by business enterprises. Customer information helps business organisations in the introduction of new products and services (Cross and Baird, 2011). An organisation can use this information and knowledge to approach its existing customers at the time of introduction of new products and services. As mentioned by Davenport and Glaser (2006), relationship management is dependent on organisational knowledge management. A company can send best wishes and courtesy messages to the customers during various festivals. This enhances long-term relationship of the organisation with the customers.
Financial, accounting, and statistical information is one of the most vital forms of knowledge that enables a company to conduct analysis of past business performance to identify and interpret past performances. As mentioned by Dyer and Obeoka (2012), analysis of historic data is crucial for future forecasting and budgeting. Therefore, an organisation can prepare better estimated budgets through sound analysis of past information. This results in lower variances between estimated and actual business performance. In addition, Earl (2010) stated that appropriate and accurate forecasting increases competitive advantage of a firm. Sound forecasting of future revenues and expenses allows a firm to develop effective business strategy. The success of the implemented strategy is enhanced. However, managers often fail to recognise the importance of information and knowledge as a source of competitive advantage. Instead, these managers look for external resources to increase competitive advantage of the organisation.
The operational information like daily, weekly, monthly, and yearly working hours, output level, defective percentage, scrap value, and absenteeism are useful in increasing the effectiveness of the operational strategy of an organisation. As stated by Galbreath (2007), the principle objective of operational strategy is to increase productivity and reduce cost of production. However, reduction of defectives and production wastage is also considered as prime concerns for an enterprise. Idle time and machine down time are yet other areas that require control by business enterprises. Proper information system and efficient knowledge management enables an organisation to understand its own capability in meeting customer demand by analysing past trends of production and operations.
In the view of Hansen et al. (2009), human capital is vital source of competitive advantage and that human inventory can help in the development and implementation of better human resource policies. Human inventory contains vital details of the employees of an organisation like name, age, date of birth, qualification, experience, and others. The management can make use of this information to ensure fair and equitable performance appraisal across the organisation. Organisational conflict can also get reduced by this. Therefore, information system and knowledge management are key elements in the formulation of strategic options for an organisation.
It is important to understand the key challenges in the effective use of information as a source of competitive advantage. Security is one of the major issues related to information and knowledge management. Data sharing is highly important for smooth and efficient Knowledge management. However, Hmadjian and Incoln (2012) stated that data sharing reduces security and protection of information. Therefore, managers are often reluctant to allow all employees to access vital organisational resources. Lack of adequate motivation among workforce is often a key problem in the use of knowledge as a source of competitive advantage. Organisations often develop tools, strategies, and techniques to enhance the effectiveness and efficiency of the flow of information across the organisation however lack of motivated workforce might prevent the implementation of these strategies and tools. Keeping pace with technological advancement is often found to be hampering the spirit of knowledge management. It is often a major challenge for an organisation to determine the process in which knowledge is to be dispensed and shared quickly because of the rapid advancement in the technological environment. This might require an organisation to spend additional expenditures towards the procurement of advanced software and hardware to keep pace with the technological advancements. As mentioned by Huber (2006), backdate technologies acts as a barrier to the effective utilisation of information.
Problem of knowledge measurement acts as a major barrier to the optimum utilisation of the existing data and information. As mentioned by King and Ko (2010), quantification is a key issue related to knowledge management. It is quite difficult to quantify knowledge. The process of knowledge measurement is also very complicated which often results in a lethargic attitude among managers towards the proper implementation of knowledge management. Therefore, the focus of knowledge management needs to be on sharing of key purpose rather than on outcomes. Dilution of leadership is a key limitation of knowledge management (King and Lekse, 2007). The concept of knowledge management requires participation of employees in the decision making process which might affect the quality of leadership because of lack of adequate skills and experience among the employees. Hence, these issues need to be overcome to utilise information and knowledge as a source of competitive advantage. Data are the source of information which in turn becomes source for knowledge. Data are gathered from different employees or teams of an organisation. Therefore, there remain high chances of these data being wrong. Incorrect data would lead to wrong information which in turn would make the knowledge management ineffective. Therefore, proper validation of the data is highly essential prior to the processing of these information. As mentioned by King et. al. (2008), updating information through elimination of wrong, old, and undesired data is a continuous process in an organisation. Interpretation of the collected data is essential to make the information useful to all the organisational members however poor data interpretation might result in incorrect decision making. Information supplied by one department needs to be standardised to enhance the usefulness of the information. However, this involves both time and costs which acts as a barrier in the effective utilisation of information. Irrelevant data badly affects the information sharing process. Data needs to be relevant to meet the requirements of the users. Processing of irrelevant data involves unnecessary costs, time, and labour. However, managers are often reluctant to validate the collected due to excessive workload. The focus of these managers are short-term rather than on long-term. These hindrances the process of communication and knowledge transfer across the organisation. As stated by Lee and Cole (2010), irrelevant data reduces competitive advantage of business enterprises instead of increasing the same. Knowledge management is a continuous process. Hence, improper rewarding of employees might affect the motivation level of employees. Therefore, the success of the knowledge management depends to a large extent on the employees engaged in the process of information transfer and knowledge management process. Hence, it is important for organisations to reward active participation and contribution of employees in the knowledge management process. However, organisations often fail to reward such employees due to financial constraints. This might affect the motivation level of workers. Thus, the entire process of knowledge management might get affected due to low motivation of the employees.
Today’s contemporary business organisations are trying to produce and maintain unique strategies to create higher brand value in the global market. A cited by Martinez-Fernandez et al. (2009), most of the business organisations are focused to capture significant amount of data within a highly structured database management system. Eventually, these data is being transformed into the information and knowledge. Considering the fact, Menon and Pfeffer (2006) stated that in order to create unique identity, organisations need to grab every opportunity that exists in the global market. Knowledgebase acts as multidimensional resource of an organisation. On the other hand, Nonaka (2007) argued that communication technology can be treated as another strategic resource that could help organisations maintaining good relationship with the consumers.
The online communication process and technological improvements have made organisations to tap knowledge for all members and sharing and accessing of information is done accordingly without any complication. It helps organisations to involve a synthesis of diversified and supporting procedures to bring a sustainable environment by enabling the knowledge to be exploited for creating higher value for the organisation (O’Dell and Grayson, 2012). Furthermore, the arrival of ERP system has made organisations to track every transaction made in the past and the overall operations associated with it. Technical, functional knowledge and the experience value of the employees are treated as strategic organisational resources that would help organisations to succeed in the global competition. Sharma et al. (2009) stated that digital communication and its implementation have introduced radical changes in the overall communication process. It has allowed organisations to communicate with millions of customers in a shorter time span. Not only can this, by maintaining the potential database, organisations can approach their customers about the new arrivals and offerings of products available within the firm. It would help organisations to create and maintain brand identity in the global market.
Information system strategy consists of six pillars which create the overall framework. These pillars are responding to the business need, Data Base Management system, sustainability of support and management system, selection of strategy and coordinate planning followed by continuous improvement.
Porter and Millar’s Five-Step process’ model:
Assessing information intensity: This model would help organisations to assess the information intensity depending on the dependency of the customers to the organisation. As cited by Van de Ven, (2007), intensity would become high if the customers and suppliers are highly dependent on the organisation. This implies that organisations might achieve greater opportunity in the global context.
Determine the role of Information technology in the industry structure: It would help organisations to know how the competitors, suppliers and buyers can be influenced by the implementation of information technology.
Identification and ranking the ways to create competitive advantage: This step would help organisations to analyse particular links of value chain the ways these are getting affected by the system.
Investigation about spreading new business: This step would help organisations to identify the gaps and opportunities of the organisation. Not only this, Wright et al. (2010) stated that it would draw a framework about the existing capacity that might create an opportunity to start up new business.
Action plan development: This is the last stage of the whole process. After analysing all threats and opportunities, the organisations could execute a potential action plan. The final action plan needs to be business driven rather than technology driven.
Today’s business organisation mostly uses ‘Creativity Techniques’ while formulating and implementing information system strategy. As cited by Sale et al. (2006), environmental uncertainty carries a vital position while formulating strategy and it cannot be predicted at all. Hence, it has become mandatory for the organisations to create collective innovations to overcome the problem situations (Mallin, 2011). Considering the fact, most of the business organisations are focusing on contingency planning based on the contingency theory of strategic threats exists in different layers of the firm. It would help the firm analysing two dimensions of complexity high and low and the rate of change associated with it. Depending on the matrix, organisations could identify whether internet structure is more formal or not or how much alteration is required to formulate a new strategy. It would help to create a unique identity in the global environment by formulating and implementing IS strategies within the business organisation.
The corporate strategy, information management, information system, and ICT of an organisation are inter-related and each one is affected by the other. However, it is important to understand the key elements of an information system to identify the relationship between corporate strategy, information management, and ICT of an organisation. As stated by Karol (2009), the key elements of an information system are hardware, software, data, procedures, people, and communication system. Hardware refers to the physical peripherals associated with a computer system without which the computer cannot work. Monitors, printers, keyboard, central processing unit, and mouse are some of the examples of hardware. Software refers to the set of instructions or programmes that are fed to a computer for processing of raw data into information. Data are the raw inputs without which software cannot function. Procedures refer to the policies, methodologies, and strategies followed by an organisation. As mentioned by O’Dell and Grayson (2012), rules, instructions, and guidelines are the basic elements of organisational procedures. People refer to the employees engaged in the information system and knowledge management. The data are entered into the computer system by these people. These people also perform all necessary functions towards the fulfilment of organisational objectives. Communication can be defined as the processing of connection between two parties or individuals.
Development of corporate strategies is highly dependent on the information technology, information system, and integrated communication technology. Corporate strategies are determined after proper analysis of internal and external environment. Thus, the top management requires information related to the competitors pricing strategy, customer demand, inflation rate, stock price trends, changes in government policies, and others. However, Menon and Pfeffer (2006) stated that the validity of data diminishes with the flow of time. Therefore, speedy communication process is essential for the development of effective corporate strategies. ICT is highly useful in accelerating the process of communication. ICT ensures that all the key elements of the information system are properly integrated to meet the basic objectives of information system. Inefficient information system would not allow organisations to utilise information to create sustainable competitive advantage over the rivals.
The role of information and knowledge management has been discussed and the model of Porter and Millar’s Five-Step process’ model have also been discussed in the essay. The essay has also highlighted the key barriers to the success of information and knowledge management.
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