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Knowledge Management; Organizational Cognition; Strategic Management; Competitive Advantage.
Abstract:
The knowledge base of an organization is considered its intellectual capital, and is increasingly emphasized as a vital source of competitive advantage. Engineering, managing, and leveraging knowledge (individual-, group-, and organizational-level knowledge)
are becoming strategic activities in many organizations for achieving competitive advantage. In this context, building organizational capabilities to acquire, create, and disseminate knowledge on a continual basis has become a key challenge for strategy and organizational design experts. While the research and practice in this regard has focused extensively on Information Technology (IT) capabilities for building knowledge communities, the process dimension of learning, knowledge creation, and dissemination has received less attention. This paper articulates the need for cultivating the various learning as well as socio-cognitive routines to create and leverage knowledge and suggests how this approach would help formulate better strategies and enhance employees’ commitment. This article also highlights the importance of a dynamic approach to managing organizational cognition, a critical factor in organization survival. We further discuss the implications for strategic management and organization development practices.
Introduction
A firm’s ability to continually acquire, create, and disseminate knowledge across various levels of the organization is vital to its survival and to securing competitive advantage. The organizational capability to learn from internal and external environments
is essential to manage emergent opportunities/threats. Many organizational scholars have recently recognized that this dynamic learning capability is a valuable, inimitable, and socially complex resource that can help an organization renew itself and overcome the challenges from complex business environments. This capability is a systemic process that leverages individual creativity, manages the organizational mindset (or mental models), and facilitates employee interactions at various levels for sharing individual- and group-level knowledge throughout the organization. This paper articulates how a knowledge-centered strategy
process will foster collective learning and dynamic capabilities and highlights the role of certain organizational development practices
in building a knowledge enterprise.
Cognitive routines, learning, and knowledge creation
To manage the complex and ever-changing environment, managers have to challenge and modify their practices on a continual basis. This will happen only if managers and employees learn to generate innovative solutions. As suggested by Simon (1993), ‘effective organizational learning is essentially shaping the future that involves anticipating the character of uncertain future, generating new plans, and successfully implementing new plans’. In many organizations, knowledge creation is constrained because the learning routines are rigidly structured by industry norms, rules of thumb, and deductive data-driven analyses
that reduce the scope of variety in managerial/ employee cognition (Schwenk, 1988; Simon, 1993). Because such learning processes
are not suitable in complex and dynamic business environments (Holland et al., 1986), there is a need to blend or use flexible cognitive/ learning heuristics along with deductive learning processes. We believe that the use of inductive heuristics such as intuitive reasoning, story-telling, employing metaphoric puzzles and analogies in discourses and problem-solving enhances the cognitive flexibility and variety required for effective organizational learning.
Cognitive psychologists suggest that in situations that are complex, inductive learning is more effective and less risky than analytical
learning (Holland et al., 1986). The inductive mode of learning involves the use of inter-substitutable probabilistic cues and is therefore ‘uncertainty geared’. Inductive learning results in knowledge characterized by a preponderance of ‘approximately’ correct decisions/ solutions with relatively few judgments that are erroneous (Brunswik, 1956). On the other hand, analytical learning is ‘certainty geared’ and results in knowledge characterized by a preponderance of either precisely correct decisions or entirely erroneous decisions (McKenney and Keen, 1974).
Thus, in complex problem situations where small departures from precision are tolerable — but where extreme decision errors may lead to debacle — the inductive approaches are better problem-solving/ decision-making methods than analytical methods. Studies on human cognition suggest that people are capable of detecting most of the relevant variations/changes in the environment
provided they are motivated and allowed to take cognitive risks in their learning process (Holland et al., 1986). Because inductive reasoning allows for parallel development of multiple mental models, and creates competing inferences about the problem situation, it can be considered a ‘coevolving’ and ‘adaptive’ learning process. Thus, to develop a flexible knowledge structure within the organization, inductive learning and experiential knowledge of individual employees have become important in strategic management process. By utilizing the diverse experiential knowledge that resides at various organizational levels for problem-solving, a firm can enhance its creative capacity and resource variety.
Effective use of such inductive approaches to enrich the learning and knowledge-creation process is a complex managerial task. Many knowledge-intensive firms are creating systems and group processes to tap the experiential knowledge of individuals for the benefit of the whole organization. Instead of enforcing top management’s singular formula/recipe, knowledge-driven firms encourage employees to take cognitive risk in interpreting various cues from the external and internal environments. By facilitating the exchange of individuals’ personal, experiential knowledge/insights through dialogue, organizations can develop a knowledge pool of ideas and alternatives to solve organizational problems. The views and actions of individuals and groups within the organization become more dynamic and flexible in the knowledge-based framework. How a knowledge-based model of strategy process enhances creativity, innovation, commitment, and continuous learning needs further explanation.
Given the emphasis on continuous knowledge creation and sharing, there is a need for managers to develop and use appropriate social rules, verbal protocols, and communication channels that facilitate dynamic inferences and exchanges of knowledge. Fostering a climate of dialogue with the intent of exchanging ideas and learning from one another is critical for building a
knowledge-based organization. Dialogue allows individuals to articulate their subjective knowledge through metaphorical puzzles, analogies, and stories. Because all stakeholders are considered significant contributors to knowledge creation, it is essential that the organization distribute and receive information synergistically both inside and outside. If firms are standoffish to their employees, customers, suppliers, and other stakeholders, communication channels become blocked and distorted with misinformation.
Good working relationships with various stakeholders are vital for the flow of valuable knowledge. For example, knowledge-centered
organizations such as Microsoft, Hewlett-Packard, and Motorola have formed complete information ecosystems to unite
employees, suppliers, and distributors into an intellectual community.
Having emphasized the importance of knowledge-based strategy process, this article encourages further dialogue on the role and
effectiveness of knowledge management techniques in formulating and implementing competitive strategies. This article delineates the connections among learning, decision-making, and socio-cognitive advantages, and explains how these mechanisms are related to superior decisions, performance, and competitive advantage. This article further reiterates why the issue of creating, acquiring, and sharing knowledge becomes a central concern in strategy process and recommends establishing formal knowledge management initiatives to link knowledge and strategy.
(For a full article, please see the link to the website). http://www.business.bgsu.edu/faculty_staff/senthil/Minding-cognition_Senthil.pdf
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