Strategic Knowledge Management: Intellectual Capital in Organizations

This essay delves into the critical role of strategic knowledge management in organizations, emphasizing the significance of intellectual capital as a driving force for success. It explores how organizations can leverage knowledge to achieve their strategic goals, focusing on the processes of gathering, generating, and distributing knowledge. The study examines various business case studies to illustrate the practical application of knowledge management principles and the impact of intellectual capital on organizational performance. Key aspects such as knowledge management environments, communities of practice, and the measurement of intangible assets are analyzed. The essay distinguishes between explicit and tacit knowledge, and discusses the SECI model for knowledge creation. Furthermore, it highlights the importance of communities of practice in knowledge sharing and the role of social networks in fostering intellectual capital. The analysis underscores the need for organizations to align their information capital with strategic objectives to gain a sustainable competitive advantage in today's dynamic business environment.

Running head: STRATEGIC KNOWLEDGE MANAGEMENT
Strategic Knowledge Management
Name of the Student
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Introduction
Any organised operation needs various types of information to develop the
foundation, to form the target and to establish the pathway to achieve those targets. In the
context of business management this information is called knowledge. Strategic utilisation of
Knowledge in any organisation implies the process and infrastructures that an organization
use to accomplish, generate and distribute Knowledge of strategy formulation and strategic
decision making (Dasgupta and Gupta, 2009). By using strategic knowledge management
process an organisation can align its information capital and capabilities to the intellectual
requirements of its strategy. In this strategic operation of information gathering and
knowledge handling the Intellectual Capital or IC is a necessary strategic asset (Marr, Gray
and Neely, 2003). In this era of expanding business environment and globalisation of
industries gathering and processing knowledge and driving the organisational operations in
accordance with the results have become the most essential part of a business. Achieving this
level of management competency can also provide a sustainable competitive advantage
through to a company.
The purpose of this study is to discuss the significance of developing IC as a base of
strategic knowledge management in organizations. In order to evidently discuss the strategic
knowledge management, Intellectual Capital and other associated strategic aspects of
business, various business case studies will be qualitatively analysed in this essay. On the
basis of this aim, the current study present several aspects of Knowledge Management and
Knowledge Environment, Challenges in Measuring Performance of Communities of Practice
and Interest, knowledge management, and Purpose of social networks in intellectual capital.
Different articles case studies have been reviewed to form a clear and coherent foundation of
understanding Knowledge management and the significance of utilising Intellectual Capital
comprehensively. In the following section the knowledge management and environment,

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Community of Practice, intangible capitals of business and performance measurement
strategies have been discussed sequentially.
Discussion
Intellectual capital is a major attribute of Intangible assets of any business
organisation. Intangible asset implies the asset of a business enterprise that does not have a
physical form, however can develop a physical asset or can be developed from physical asset
such as other tangible assets and working capital. The intellectual capital allows business to
efficiently work by being the primary contributors of employment and profitability of the
company. Intellectual capital is also recognised as assets that are ascribed to an establishment
and helps improving competitive position of the enterprise through accumulating values for
the major stakeholders (Carlucci, Marr and Schiuma, 2004). In the context of knowledge
management, intellectual capital is the muscle through which an enterprise can gather,
manage and create knowledge. Intellectual capital also known as knowledge capital allows a
company to move towards knowledge economy as a powerful competitive advantage.
The major attributes of Intellectual Capital in organisational context are Structural
Capital, Relational Capital and Human Capital. Human Capital implies the employee or
working bodies in an organisation that continuously shape the business. From owner to
genitor level employees all human involvement in an organisation is called human capital.
Human capital increases the potentiality of an enterprise to operate business operations
simultaneously and comprehensively. Structural Capital or Organisational Capital is the
structure of an organisation. It includes both designation based hierarchy as well as
operational infrastructure (Nahapiet and Ghoshal, 1998). The product or service life cycle of
any business is a great example of structural capital. The relational capital is the social aspect

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of intellectual capital that includes the relationship with the consumers as well as the
relationships with internal entities such as management and employees.
There are several external drivers that influence the relational capital and capital
handling of any organisation, such as local community, political environment and market.
Consumer Social Responsibility is a major activity of a business that is driven by external
relation capital. The Network based Capital Control Approach helps any organisation to
understand the flow of knowledge across the organisation. It also helps to recognise the
potential downside of interactions. It is also highly dependent on social capital that recognises
the complication of communications, which may possess a mix official, informal, private and
organisational characteristic. Developing trust is the major goal of any social capital approach
(Marr, Gray and Neely, 2003). Trust is a strong indicator of the strength of relationships
within networks. Relationships help to build the knowledge and information base of an
enterprise. Social capital helps Knowledge transfer is a potential consequence of network
relationships.
In this context the case study of AFS, SKANDIA is very relevant. AFS started a new
set of working policies in its Knowledge management framework that increased it decision
making capacity, volume of knowledge gathering and integrity. In this organisation the
network based training through computer platform is used to decrease travelling and
expenditures for competency development training. ASF adopt this new process as their
strategic intellectual capital enhancement process. However, AFS has begun to articulate and
create tangible, ratios for the systematic leadership of each staff knowledge, abilities and
professional experience and at the same moment to jointly articulate the shared
understanding, abilities and experience of all employees. As a result, in new office it has
reduced start-up time significantly that yielded 30% growth rate in the new businesses,
through adequate servings of expenditure (Cohen and Kaimenakis, 2007). In case of AFS,

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intellectual capital has increased the value of the company while making the business
operations more efficient.
Knowledge can be acquired through learning or experience and that implies the
awareness, awareness, or familiarity that Knowledge can also be regarded as an asset that can
be stored, measured and transmitted (Empson, 2000). In an organisation the transformation of
knowledge needs people and communication. The knowledge of any business organisation
mainly associated with People, Process and Technology that the organisation needs to
balance to achieve its potentiality. Depending on the utility and structural properties the
organisational knowledge can by segregated into two categories namely Explicit knowledge
and Tacit knowledge (Corney, 2015). Explicit knowledge is codified or ' objective
information ' is transferred throughout the organization in a formal systematic language. On
the other hand, Tacit knowledge or “Implicit Knowladge” is personal, context specific. The
major difference between these two types of knowledge is that the process of communicating
Tacit knowledge is very difficult in organisational environment.
As discussed earlier knowledge can be gathered and even be created through logically
processing other information. In 1995 Nonaka and Takeuchi introduced a knowledge creation
cycle effective for any organisation. For example when Tesco uses their consumer feedback
forum for collecting the feedback of consumers about their experience, the company actually
generates a new sets of knowledge named “consumer voice” from those external knowledge.
The knowledge creation cycle introduced by Nonaka is known SECI Model. The name of this
model is based on its four major components namely Socialisation, Externalisation,
Internalisation, and Combination. According to the model, Socialisation is useful to decode
tacit knowledge to other tacit knowledge (Nonaka and Takeuchi, 2007). Externalisation is
the strategy to decode tacit knowledge to explicit knowledge. Internalisation is useful to code

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explicit to tacit knowledge. However, Combination strategy is required to decode explicit
knowledge to other explicit knowledge.
Knowledge environment is the environment within which the knowledge has been
created and managed effectively. The knowledge environment uses human capital through
social and communicational approaches. An organisation has to use their intellectual capital
through communicational networks to develop an effective knowledge environment where
knowledge can be transferred within different part of the organisation securely and efficiently
(van den Berg, 2013). Knowledge Transfer Within Professional Services Firms is another
essential part of organizational procedures that includes the integrity of knowledge workers
as well. In this context the former Knowledge Management Head of US Nuclear Regulatory
Authority clearly stated in an interview that gathering, storing and processing the previous
experiences as a set of knowledge is a key to take more risk free and profitable decision for
improving business performance. He firmly believes that acquiring adequate knowledge
through proper Knowledge and information management (K&IM) with the help of
Intellectual Capital handling practices is essential to ensure the benefits from new business
ventures (Corney, 2015,).
The knowledge management environment can provide an organisation a dynamic
platform where the organisation can shorten their product cycles and even adopt new
business procedures as per the changing customer demands. Effective knowledge gathering
and internal knowledge creation which is known as knowledge and learning an organization
can increase the resource-based view beyond the end product phase to identify the resources
and capabilities the company have that enable it to perform well. Knowledge based learning
helps an organisation to innovate new products, service plan and even business model that
can increase long term profitability. At the same time, an organization must be design their
structure, strategies, communication practices and reward system to encourage innovation

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and change. Therefore, in order to transfer new knowledge into an action an organisation
needs to apply proper organizational routines with proper Intellectual Capital in order to
influence the overall behaviour and profitability of the organisation.
For knowledge sharing and creation any business needs a special organised tool that
can accumulate collective knowledge in a systematic way. Communities of Practice imply an
organised strategic practice that is focused on knowledge sharing and creation (Cox, 2005).
In contemporary understanding of knowledge sharing, the strategy of transferring knowledge
was focused only on more structural development of information. However, now companies
are seeking to explore the relationships within different segments of organisation to ensure an
effective and continuous flow of knowledge through managing and controlling their
intellectual capitals. Social exchange is the principle of Community of practice. Here,
community is a social capital that holds the foundation of interacting stakeholders and
departments. In this social capital which is also a major part of intellectual capital, the
information or knowledge is shared in a structured way which is called practice of knowledge
transfer or communication policy.
Some aerospace companies conceptualised CoPs through knowledge management
procedures for valuable technology through effective cooperation of generating, exchanging,
and sharing knowledge within the existing information management system. In this industry
the CoP of aerospace companies a group of employees are assigned to produce high quality
knowledge. Even, CoP is considered as another form of operational group that holds
independent collective opinions and choices. Through this concept the previous forms of
collaboration are “transformed” or “evolved” into modern Community of Practice. As an
example Raytheon Logistics Council has been changed or evolved to the Raytheon Integrated
Logistics Community of Practice (RILCOM) (Su, Wilensky and Redmiles, 2012). Previously
the council had“limited cross business knowledge sharing” and “limited standardization of

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processes,”. After this evolution the CoP shares “knowledge broadly across organizational
and functional boundaries,” revealing “expertise and tacit knowledge faster”. In aerospace
industy CoP is used as a bridging agent for disparate groups. In aerospace industry for many
Knowledge Management practitioners, the confidential nature of the aerospace and aviation
industry has a major obstruction to the doctrine of CoP based knowledge sharing (Cox,
2005).
In some cases, Communities of Practice contains specific members who have a
specific role to fulfil. These formalized processes assign predefined “roles” are parts of a
formalized process that requires sponsorship. CoP can be also considered as a similar
organisational operation to collaborative technologies. At the same time, CoP and
technology are even used almost simultaneously to have an optimum knowledge sharing
network (Kothari et al., 2015). Similar example can be found in Boeing Rocketdyne Canoga
Park which has a divisive practices for Communities of Pactice. They have different complex
methodology to execute CoP within the organisation to avoid the attacks on the technologies
of communications. Some of those communities use different shared drives while others
developed diffeiernt Web sites and e-mail distribution lists for knowledge sharing (Su,
Wilensky and Redmiles, 2012). Recently some of these communities are pursuing a more
complex process of virtual collaboration tool for virtual team based communications in order
to generate Knowledge Management for resulting their efforts in effective outcomes.
Communities of practice (CoPs) can be also developed through informal way of
communication that enables an organisation to handle tacit knwoladge. Some aerospace
companies allows their employee groups to share their concern, a set of problems, or a
passion about a topic in a social network based platform. Monitoring on this responses
diplomatically, is helping these organisations to achieve their potential employee engagement
level that also influences their operational performance. By using both formal and informal

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interactions the members of a CoP members utilise their skills and knowledge regarding a
particular common topic. In specific contexts, the management of social relationships in a
relevant setting are more important than managing the knowledge coming from external
business area such as consumers, market, competitors and others. Organisations are centered
on activities that can offer a focus for the CoP (Kothari et al., 2015). Therefore, there are
many' procedures' being conducted that can provide a means of comprehension and creating
the networks that underpin organizational exercise with the help of the Intellectual Capital of
organisation. Knowledge can be blocked-often as an illustration of the strong place of
somebody. It is therefore useful to consider how authority exists within relationships in order
to fully understand how knowledge can be produced and communicated.
Measurement is driver
Measurement of the knowledge management efficiency and intellectual capital is
equally important as other business component measurement. Measuring these intangible
company elements enables to comprehend present knowledge flow dimensions, record how
to work, decrease the complexity of knowledge management activities, improve
controllability, and create a more efficient strategy. Being an Intangible Intellectual Capital,
however, is very hard to assess and therefore the efficiency of knowledge management
(Melnyk et al., 2014). At the same time, there are certain indirect measurement techniques
that can help to measure these intangible components of a business. One of the most
successfully used measures is Key Performance Indicators or KPI.
KPI is a particular, measurable, achievable, realistic and time-based goal that helps
any organization measure how well their company units, projects or people perform relative
to their strategic aims and objectives. A well-designed set of various KPIs can function as an
organization's essential navigation tool that provides a clear knowledge of present

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achievements and additional needs (Micheli and Mari, 2014). These performance
management and navigation helps to develop the knowledge based of an organisation through
using their intellectual capital. KPI acts as an inspiring target for encouraging innovation and
the company strives for continuous improvement. The way of paying attention to the target
framing and measurement of organisational performance has huge impact on organisation’s
behaviour and profitability.
A new innovative performance management approach was introduced by Essex Police
introduced called “Plan on a Page” aiming to bring simplicity to a complex law and
enforcement system (ap-institute.com, 2015). The purpose was to minimise the complexity of
the landscape while improving the low and enforcement performance in regular life with
constrained resources. Plan on a Page was a robust and leadership-driven approach that was
based on communications strategy within an organisation with security. Through this
performance management approach Essex Police recognized numerous practical initiatives
about the managing of on bail offenders. Usually the because of the longer bail the evidence
becomes less valuable. Through this new strategy, the law enforcement has been supporting
crime resolution and bringing offenders to justice faster and more obviously. In addition,
Essex Police, among other improvements, was also able to drive higher discipline and
stubbornness in optimising digital possibilities of following a crime. As the key performance
management structure for the merged Essex and Kent Support Services Directorate, the Plan
on a Page technique has also been introduced (ap-institute.com, 2015).
All of these operations are focused on collecting the information and processing it
through the intellectual capital-based knowledge environment to create most extensive
business process architecture. Innovation is typically recognized as the effective
implementation of something fresh and helpful, such as implementing new methods,
techniques, procedures, or products and services that are new or modified. In this process any

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organisation can incorporate fresh knowledge into existing knowledge system though a
collective work process and individual work process or both to develop a more effective and
profitable procedural rule (Melnyk et al., 2014). Unless they are rewarded for using inner
understanding, members of a control unit are unlikely to transfer expertise from other
components of the organization. Companies try to replicate understanding within their limits
despite imperfect limitations. Unless a company can improve their individuals '
understanding or transform their abilities into'' organizing principles',' it will stay a tiny craft
store forever. Therefore choosing proper combination of Intellectual Capital for each type of
knowledge is functional in different production stages can reasonably be expected to have an
impact on performance.
Conclusion
It is clear from the above discussion that the Intellectual Capital of a company should
be one of the key considerations in formulating strategy and one of the main constants on
which a company can identify and frame its strategy. In this context, Knowledge can be also
considered as an asset that can be stored, measured, and transferred. It has been found that the
process of communicating tacit knowledge is very difficult in organisational environment.
Now companies are seeking to explore the relationships within different segments of
organisation to ensure an effective and continuous flow of knowledge where Social exchange
is the principle of Community of practice. Sometimes, communities of practice contain
specific members who have a specific role to fulfil. This essay recognizes intellectual capital
as assets of knowledge that allows a company to move towards knowledge economy as a
powerful competitive advantage. Performance measurement through explicit knowledge
management acts as an inspirational target where innovation is encouraged and the company
is determined for uninterrupted upgrading. All of these activities are concentrated on

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gathering the data and processing it to generate the most comprehensive business process
architecture through the intellectual capital-based knowledge environment.

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