Knowledge Management as Key Factor in Project Performance

TABLE OF CONTENTS

TABLE OF APPENDICES

TABLE OF FIGURES

ABBREVIATIONS

I. INTRODUCTION
1.1 Background
1.2 Definition of the Problem
1.3 Objectives and Research Questions
1.4 Scope and Limitations
1.5 Structure of the Report

II. THEORETICAL FRAMEWORK
2.1 Knowledge Management
2.2 Information versus Knowledge
2.3 Classifications of Knowledge
2.3.1 Tacit and Explicit Knowledge
2.3.2 Individual and Collective Knowledge
2.4 Knowledge Creation and Transfer
2.4.1 Four Modes of Knowledge Creation and Transfer
2.4.2 The Concept of Ba
2.5 Knowledge Management at Project-Specific Environments
2.5.1 The Project Management Processes
2.5.2 Definition of Project Performance
2.5.3 Knowledge at Projects
2.6 Tools of Knowledge Creation and Transfer
2.6.1 The Importance of Organisational Structures
2.6.1.1 Organisational Culture
2.6.1.2 Reward Systems
2.6.1.3 Management Support
2.6.2 Communication
2.6.3 Lessons Learned
2.6.4 Mentoring and Social Networks
2.6.5 Information Technology
2.7 Summary and Discussion

III. APPLICATION: THE PROJECT XY
3.1 The Case Study Project XY
3.2 Knowledge Management Project at XY

IV. EMPIRICAL FINDINGS AND ANALYSIS
4.1 Current Knowledge Management Practices
4.2 Organisational Structures
4.2.1 Organisational Culture
4.2.2 Reward Systems
4.3 Communication
4.4 Mentoring Programmes and Social Networks
4.5 Information Technology
4.6 Analysis of the Four Modes
4.7 Summary and Discussion of Analysis

V. RECOMMENDATIONS
5.1 Identification of Knowledge Management Strategy
5.2 Information Technology as Support Function
5.3 The Importance of Project Structures
5.3.1 Project Culture
5.3.2 Team Diversity
5.3.3 Reward Systems
5.4 Communication
5.5 Summary of Recommendations

VI. CONCLUSIONS AND FURTHER RESEARCH

VII. BIBLIOGRAPHY

TABLE OF APPENDICES

Appendix I: Spain’s Infrastructure Plan of Transportation

Appendix II: Methodology

Appendix III: Interview Guide

TABLE OF FIGURES

Figure 1: Research Questions

Figure 2: Structure of the Report

Figure 3: Information versus Knowledge

Figure 4: Knowledge Conversion Model

Figure 5: Project Management Processes

Figure 6: Keywords and Tools

Figure 7: Fact Sheet of XY

Figure 8: Key Questions for Lessons Learned Session

ABSTRACT

Most organisations are aware that in today’s highly competitive environment managing effectively their knowledge is the only way to achieve a sustainable competitive advantage. One of the primary areas to which knowledge management can be applied is the field of project management. An increasing number of business sectors are adopting a project approach to carry out a range of essential activities where valuable knowledge is gained. Knowledge from projects is an important resource for further projects, because projects solve innovative and interdisciplinary tasks. However, the majority of organisations do not manage the information gained through past projects. Failure to transfer knowledge from past to future projects leads to wasted activity and unnecessary expenses by ‘reinventing the wheel’. Therefore, knowledge management is a critical success factor for many projects.

The purpose of this Management Report is to approach knowledge management from the perspective of project management. The main objective is to define how knowledge management can be enhanced within a project by analysing suitable tools and relevant theories. The research is based on the high-speed train project XY of the company XXX. This project is an important milestone for XXX to improve its market position in Spain. The knowledge gained through the XY project will be the key factor for the success of the further high-speed train projects.

The main finding of the case study highlights that there is a lack of formal knowledge management activities at the project. The project team focuses mainly on personal interaction for transferring knowledge and information technology is not used to its full potential. A hybrid approach to knowledge management for project environments is suggested, taking into account technical as well as human-specific aspects. The main recommendation is to determine a knowledge management strategy, which preferably focuses on transferring tacit knowledge and gives information technology a support function. Other areas of improvement are creating an open and constructive project culture, including knowledge initiatives in reward systems and fostering documented project review sessions. Finally, general conclusions are provided to answer the main

research question of this management report.

ABBREVIATIONS

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I. INTRODUCTION

The aim of this section is to provide background information about the researched area. In the beginning, the concept of knowledge as a key to sustainable competitive advantage will be examined. This is followed by the problem discussion and some of the obstacles related to knowledge transfer between projects. Further on, the objectives and research questions will be presented. As a final note of this section, the limitations and the structure of the report will be introduced.

1.1 Background

Over the past several years there have been intensive discussions about the importance of managing knowledge within organisations (Davenport et al., 1998).

Most organisations are aware that in today’s highly competitive environment managing their knowledge effectively is the only way to achieve sustainable competitive advantage (Drucker, 2001). To achieve this advantage, the ability to create, capture, transfer (share) and apply knowledge is essential (Davenport and Prusak, 1998).

One of the primary areas to which this knowledge management approach could be applied the field of project management.

In recent years the number of tasks and the amount of work within a company, which are managed in projects, is growing immensely (Disterer, 2002). This trend is increasing because key characteristics of project organisations address success factors of companies: high flexibility, interdisciplinary work, and promoting innovation (Katzy et al., 2000).

An increasing number of organisations at different business sectors are adopting a project approach to carry out a range of vital operational and innovative activities, and the influence of project-based activities on overall company performance keeps intensifying.

Consequently, the significance of excellent performance in the management of projects is also increasing.

Demanding environmental pressures, uncertainty, shrinking time for projects, decreasing time to market for project results and high quality requirements are influencing the ability of organisation to perform successful project management (Disterer, 2002). Therefore, gained knowledge from projects is an important resource for following projects because projects solve innovative and interdisciplinary tasks.

1.2 Definition of the Problem

Most organisations are running projects where valuable knowledge is gained, including success and failures, lessons learned and best practices. However, the majority of organisations do not capture, manage or use the information they gain through their projects. Another related problem is the fact, that most project managers do not explicitly budget for resources to perform knowledge transfers (Alderman et al., 2001).

What occurs to knowledge gained after the completion of a project and at the beginning of the next project? Learning from the past is how things should work, but it rarely happens. Failure to transfer gained knowledge from former projects to future projects leads to wasted ‘reinventing the wheel’ activities. Thee organisations incur new expenses as they search for similar solutions and repeat mistakes of past problems (Tiwana, 1999). Therefore, an important concern is how to generate knowledge for a given project in a way that makes it available not only during the project and to other projects, but also to future projects (Katzy et al., 2000).

In contrast, there exist various challenges for knowledge transfer in project environment. Significant barriers include the dissolving of a project team, lack of formal management support, an inadequate project culture and essentially the reluctance of employees for knowledge sharing.

The discussion about the importance of knowledge in projects has become of interest since there has been an increase of project approaches at organisations. However, very little published research deals directly with the issue of knowledge management at projects.

Furthermore, traditional project management literature still offers a limited view of knowledge and knowledge management. But this view is understandable considering certain differences between project management and knowledge management. First, projects are by nature finite endeavours, whereas knowledge is a resource that should stay around as long it is useable, typically far beyond the life of a single project (Katzy et al., 2000). Second, project management is goal oriented and happens in spite of potential differences in culture, whether it is at the level of project teams, organisations, or even national entities (Katzy et al., 2000). Moreover, projects also create their own distinct team and culture. Knowledge management, on the other hand, is not necessarily an end itself. Knowledge is generated and shared as project activities occur where the socio-cultural context has an important influence on this process (Leseure and Brookes, 2004).

In conclusion, this report adopts the viewpoint that knowledge management is a fundamental basis of project management. Projects create the necessity to manage knowledge across time and in a multi-context setting, because knowledge has proven to be one of the most critical enablers within a project. Therefore, project knowledge should be captured and retained so that other projects can retrieve and apply the knowledge to future tasks. Companies not securing systematically knowledge gained in projects for later usage, risk to reinvent solutions, repeat mistakes and incur unnecessary expense to relearn the same lessons (Tiwana, 1999).

1.3 Objectives and Research Questions

At this report knowledge management will be approached from the perspective of project management. The main objective is to define how knowledge management within a project can be enhanced by

- analysing suitable tools of effective knowledge management from relevant theories and
- creating a framework to enable and support a transfer of knowledge across project frontiers.

As exposed in the definition of the problem, there exist several challenges to ensure the essential process of knowledge transfer after the completion of a project. To investigate these challenges, this report will try to answer the following questions (figure 1).

Research Questions

How can knowledge be captured and transferred to enhance project performance?

1) Which theoretical tools do influence the processes of knowledge capture and transfer?
2) Which activities does the project team accomplish to capture and transfer knowledge?

Figure 1: Research Questions

Source: Own

The main question is viewed from management perspective in order to determine areas of improvement for managerial practices. The purpose of the two sub questions is to answer the key question based on the findings of the literature review as well as the case study.

In order to respond the first sub question, Nonaka and Takeuchi’s (1995) model of knowledge conversion is presented and discussed. Tools are derived from this model to establish a theoretical framework on how to improve knowledge management processes in a project-specific context to improve performance.

In the practical part the analysis of a project should create the understanding to answer the second sub question. The research in the practical part of this report is based on a long-term engineering project at XXX: the high-speed train project XY.

The findings of both parts might determine the solution for the main objective: to give recommendations on how to implement an effective knowledge management programme at the project XY in order to improve project performance and secure the knowledge gained during the project for further high-speed train projects at XXX.

1.4 Scope and Limitations

When analysing knowledge management processes in a project-specific environment, there are important facts to consider.

First, due to the main objective of this report, the focus is mainly on the process of knowledge transfer (sharing) in a project-specific context, not on the whole knowledge management process. Moreover, a Japanese model will be applied to a Spanish subsidiary of XXX Germany, assuming that this model is applicable to the organisational and national cultures of the investigated case.

Finally, this report will adopt a holistic approach to knowledge management, e.g. addressing not only technology solutions but mainly concentrating on human-specific factors within the project environment.

1.5 Structure of the Report

The first chapter of this report encompasses the introduction to the problem, the main objectives and research questions. The function of these research questions is to enable the link between the research part and the purpose of the report. The parts of this report are summarised at figure 2.

illustration not visible in this excerpt

Figure 2: Structure of the Report

Source: Own

The methodology used for this report is explained in Appendix II, and the interview guide employed for the collection of empirical data can be found in Appendix III.

II. THEORETICAL FRAMEWORK

In order to determine whether the concept of knowledge management is a necessary approach for improving project performance, or if it is just ‘the emperor in new clothes’, a review of various literature sources is necessary. This chapter focuses on the theoretical framework of knowledge transfer and is divided into two sections. The first illustrates on a theoretical background of knowledge transfer. Issues like general knowledge management, a comparison of information and knowledge as well as different classifications of knowledge are discussed at this part. The second one addresses the discussion of Nonaka and Takeuchi’s (1995) model of knowledge creation and transfer. Further, project-specific aspects for knowledge management will be discussed. As a final note, tools will be derived from the theoretical models and analysed. This chapter should provide the answer to the first sub-question asked in this report “Which theoretical tools do influence the processes of knowledge capture and transfer?”

2.1 Knowledge Management

There are forces of change such as globalisation, new technology, increased competition, different costumer demands, and changing economic and political structures which are reshaping businesses. Companies and academics have highlighted the importance of knowledge as the basis of competitive advantage (Drucker, 2001; Boisot, 1998). Numerous organisations are recognising that technology-based competitive advantages are temporary and that the only ones are the employees (Black and Synan, 1997) and their knowledge. Though, knowledge has always been a valuable asset but what is knowledge management?

Knowledge management is a fast-moving field that has been created by the collision of several others such as human resources, organisational development, and information technology (Bukowitz and Williams, 1999).

The growth of this strategy has emerged from two fundamental shifts: downsizing and technological development (DiMattia and Oder, 1997).

For this report, knowledge management is defined as “the process by which the organisations generate wealth from its intellectual or knowledge-based assets” (Bukowitz and Williams, 1999, p. 2). It is mainly characterised by four processes: generation, capture, transfer (sharing) and application of knowledge (Alavi and Leidner, 2001).

Knowledge management has received a widespread attention in recent years, but despite of the its popularity of as a source of competitive advantage, its literature has been criticised for a lack of empirical evidence and the strong emphasis on the conversion of individual knowledge into organisational knowledge through the use of information technology (Pan and Scarbrough, 1999).

Moreover, the concept of the ‘management’ of knowledge has also been subject of intensive debate. Some critics argue that knowledge, due to its intangibility, cannot be managed. However, organisations have previously applied the management of other intangible phenomena, e.g. motivation or creativity (Davenport and Völpel, 2001).

It is useful to consider knowledge management programmes in the context of the resource-based view of the company (Penrose, 1959). The knowledge-based view, foreseen by Drucker (1988), is a further development of the resource-based view focusing on knowledge as an organisational resource (Grant, 1991). It has originated the discussion of knowledge management systems and the role of information technology for management strategy and competitive advantage (Alavi and Leidner, 2001).

While the knowledge-based view focuses mainly on information technology, many scholars agree that knowledge by itself cannot be the source of competitive advantage (Grant, 1996). In contrast to this technology-driven view, some authors have suggested that the novel contribution of knowledge management is to reveal the importance of collaboration at all levels of collective forms of work (von Krogh and Roos, 1996).

Consistent with these new interpretations, the underlying concept of this report focuses on the critical role of the human factor in knowledge management programmes, considering these initiatives not only as a technological phenomenon. This is according with Chase (1997) who argued that knowledge management is mainly about “encouraging people to share knowledge and ideas to create value-adding products and services” (ibid, p. 84).

The practice of knowledge management has benefited from several key concepts, although the majority were not created within the knowledge management movement. Relevant key concepts will be described in the following.

2.2 Information versus Knowledge

In literature three concepts of knowledge are commonly used: data, information and knowledge.

A hierarchy can be perceived from data over information to knowledge with each stage possessing different values of context, usefulness, and interpretability (Alavi and Leidner, 2001). These types of knowledge form a so-called ‘knowledge value chain’ (Shankar et al., 2003). Here, data is defined a set of discrete facts about events, transaction records or numbers (Shankar et al., 2003). By adding certain context, data transforms to information. According to Davenport and Prusak (1998) knowledge is a mix of framed experience, values, and contextual information that provides a framework for evaluating and incorporating new experiences and information. In organisations, it often becomes imbedded not only in documents but also in organisational routines, processes, practices, and norms (ibid, 1998). For the purpose of this report the definition given by Davenport and Prusak (1998) will be adopted due to its general acceptance and applicability.

From a theoretical view it appears fairly simple to separate the concepts of data, information and knowledge. In the practical area distinction between these terms are often used interchangeably.

The multinational organisation IBM, for instance, focuses mainly on tacit knowledge (Snowden, 2003). In order to outline the difference between knowledge and information, IBM communicates its vision in the following manner (figure 3):

“The story I most frequently use to distinguish between knowledge and information is to use the metaphor of a map and a human guide.

A map is a set of data organized into a coherent and reusable form – it is information. The guide, on the other hand, is knowledgeable. She does not need to consult a map, takes into recent experience and has the ability to relate my ability to her knowledge of the terrain. The guide is the fastest way to achieve my objective, provided that I trust her. If I do not have the trust, and am not prepared to take the risk of experimentation, then I will fall back on information - the map.

It should also be noted that someone with knowledge of the territory has created the map. If I share the same culture and background as the mapmaker then I am able to use the information. A different background may mean that the map is just data – useless stuff without context.”

Figure 3: Information versus Knowledge

Source: Snowden (2003)

2.3 Classifications of Knowledge

Numerous ways of classifying and describing the concept of knowledge can be found in literature. Nonaka and Takeuchi’s (1995) theory, for instance, illustrates the difference between tacit and explicit knowledge and the division of individual from collective knowledge. In contrast, Penrose (1959) stresses on objective and experimental knowledge, while Hayek (1945) separates between scientific and practical knowledge.

This section will mainly focus on the first two classifications of Nonaka and Takeuchi (1995). Throughout the report, these types of knowledge will appear in the theoretical as well in the empirical study. The mentioned classifications of tacit versus explicit and individual versus collective knowledge have also a high impact on the discussion about knowledge transfer.

2.3.1 Tacit and Explicit Knowledge

Most knowledge experts agree that there are two specific types of knowledge (Havens and Knapp, 1999). The challenge in knowledge management, however, is to determine how each knowledge type can be codified and transferred in an organisation.

The concepts of tacit and explicit knowledge were introduced by the philosopher Polanyi (1962) with his theory about personal knowledge. His statement “we can know more than we can tell” (ibid, p. 4) implies that tacit and explicit knowledge should be seen as inseparable dimensions of knowing, outlining the assumption that certain knowledge cannot be expressed and formulated explicitly.

The Japanese knowledge management scholars, Nonaka and Takeuchi (1995) describe Polanyi’s two concepts in more precise terminology. According to them, an individual or an organisation can possess tacit and explicit knowledge. The latter is easily articulated, coded and transferred and is written or recorded in manuals, patents, reports, documents, assessments, and databases (ibid, 1994). This suggests that explicit knowledge can be transferred through more technology-driven, structured processes such as information systems (Hansen et. al, 1999).

Tacit knowledge on the other hand, is more difficult to articulate and derives from individual experiences. It is essentially related to human action and unlike information, it consists about beliefs and commitment. Therefore, it is highly contextual and culture-bound (Nonaka and Takeuchi, 1995). This fact suggests that tacit knowledge may be transferred through interpersonal means and using less structures processes. Mentoring, teamwork, personal intranets, opportunities for personal communications such as group dialogue, or personal reflections on experiences as lessons learned sessions are common examples.

However, both structured, technology-based approaches and less structured, personal-based processes are necessary for effective knowledge transfer. Organisations should consider the knowledge as a critical factor when deciding about the process to transfer knowledge.

2.3.2 Individual and Collective Knowledge

Additionally to the division between implicit and explicit knowledge, a second classification of knowledge is described by Nonaka and Takeuchi (1995): individual and organisational. They argue, similar to Polanyi’s (1967) theory, that knowledge can only be generated by an individual and that organisational knowledge represents collective knowledge, i.e. knowledge that is shared and transformed by individuals within the organisation. This is described ironically in the statement ‘if organisations only knew what they know’ (Pfeffer and Sutton, 2000).

According to Nonaka and Takeuchi (1995) knowledge value is created through the transformation between tacit to explicit knowledge and vice versa. They describe this as an ever evolving knowledge spiral that moves from individual tacit knowledge to explicit organisational-wide knowledge (Nonaka and Takeuchi, 1995). Consequently, an organisation which aims to implement strategic knowledge management, should focus on capitalising individual knowledge and turn as much of it into organisational knowledge (Davenport and Prusak, 1998).

Contrary to this view, Brown and Duguid (1991) state that knowledge is created and held collectively in communities of practice. Von Hippel (1994) refers to this knowledge as sticky, since it evolves from the interaction of practitioners and is difficult transferred outside these communities. To exploit this knowledge, the problem solving needs to be moved into the community instead of trying to transfer the knowledge away from it (von Hippel, 1994). Does this assumption imply that transferring knowledge between projects is impossible?

The above mentioned discussion demonstrates that scholars diverge to some degree where knowledge resides. Consequently, there exist difficulties to clarify where knowledge capturing, sharing and transfer occur. This problem involves managerial implications, for instance, to determination of the measurability and control of knowledge. The next section will provide a deeper insight into how knowledge is created and transferred.

2.4 Knowledge Creation and Transfer

For the project to manage knowledge, the focus should be on the processes of creating and transferring (sharing) knowledge. Therefore this section is a fundamental part of this report. Nonaka and Takeuchi’s (1995) model ‘the four modes of knowledge conversion’ is presented and discussed. Based on this model and considering particular aspects of projects, tools are derived to establish a theoretical framework on how to enhance knowledge management processes in a project-specific environment to improve project performance.

Before introducing this model, it should be noted that this report assumes that the creation of knowledge also involves the transfer of knowledge and vice versa. This view supports the opinion of Davenport and Prusak (1998). They claim that unless knowledge is absorbed, it cannot be transferred, and merely making knowledge available does not mean that include its transfer. Therefore in this report, the terms knowledge creation and transfer (sharing) are used in the same manner, adopting the view that these processes are interlinked and cannot be differentiated clearly.

2.4.1 Four Modes of Knowledge Creation and Transfer

The process-oriented approach considers knowledge creation and transfer as a continuous process between people and technology as well as tacit and explicit knowledge. Prahalad and Hamel (1990) and Earl (1997) adhere among others to this view, but the process-oriented approach mainly takes its starting point in the research of Nonaka (1994).

Nonaka and Takeuchi (1995) developed the Knowledge Conversion Model or SECI model in order to examine four distinctive conversion processes between the tacit and explicit knowledge. The SECI model functions through the interaction between tacit and explicit knowledge and its purpose is to heighten the quality and increase the quantity of knowledge (Nonaka et al., 2000). The model consists of four different interacting processes (Nonaka and Takeuchi, 1995):

1) S ocialisation (from tacit to tacit) refers to the transfer of tacit knowledge between individuals. Tacit knowledge can be acquired through sharing experiences in a certain context or by observation. In a business setting this is similar to apprentice learning or mentoring programmes.
2) E xternalisation (from tacit to explicit) is considered as a knowledge creation process in which tacit knowledge becomes explicit by using metaphors, concepts or models. Methods as dialogue and collective reflection play an important role. The externalisation process allows knowledge transfer among individuals within a group.
3) C ombination ( from explicit to explicit ) is seen as a process of systemising concepts into a knowledge structure. Key pieces are documents, databases, and meetings where explicit knowledge is interchanged. In a business setting, for instance, combination occurs when management break down corporate goals of the organisations and visions to operational goals or the presentation of organisational documents on the intranet. The process of combination allows knowledge transfer among groups across organisations.
4) I nternalisation ( from explicit to tacit ) in a business setting is similar to the concept of ‘learning-by-doing’. Knowledge is verbalised into manuals or through oral stories. The internalisation process transfers organisational and group knowledge to the individual.

The interacting processes are part of the Knowledge Conversion or SECI model, presented in the following figure 4.

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Figure 4: Knowledge Conversion Model

Source: Nonaka and Konno (1998, p. 43)

The SECI model describes organisational knowledge creation as a dynamic process involving a continual interaction between explicit and tacit dimension of knowledge through processes of socialisation, externalisation, combination and internalisation. Nonaka and Konno (1998) illustrate this transformation as a knowledge spiral. This spiral can commence from any of the four modes, but generally begins with socialisation. The knowledge base is growing with the constant movement of the knowledge spiral.

Two approaches to knowledge transfer exist based on the distinction of tacit versus explicit knowledge (Hansen et al., 1999). The codification approach is used by companies which rely mainly on repositories of explicit knowledge; contrary, the personalisation approach implies the principal idea that knowledge transfer occurs at interactions between individuals (Hansen et al., 1999).

Both are considered at this report, although the main emphasis is on the personalisation approach agreeing with Davenport and Völpel’s (2001) statement “Managing knowledge is managing people; managing people is managing knowledge” (ibid, p. 218).

2.4.2 The Concept of Ba

To address the question of fundamental conditions, i.e. having an enabling context, of knowledge processes, Nonaka and Konno (1998) introduced the concept of ‘ba’, a Japanese word for place. They proposed that different types of ‘ba’ act as promoters of different knowledge processes. Ba can interpreted as a shared space for emerging relationships within a physical space (office, dispersed business space), a virtual (e-mail, teleconference), mental (social networks, shared ideas, models), or any combination of them (Nonaka and Konno, 1998). Thus, the originating ‘ba’ is suggested to promote socialisation. Socialisation within the appropriate ‘ba’ provides a significant platform for natural interaction to transfer knowledge (Handzic et al., 2004).

For this report, organisational structures will be analysed as a factor derived from the model of having an enabling context or the appropriate ‘ba’. Organisational structures (the enabling context) are, for instance, emphasised through organisational culture, reward systems and generally, management support. Due to the fact that these aspects belong to Nonaka and Konno’s (1998) ‘ba’ of shared ideas and model, they will be integrated as essential tools for knowledge capture and transfer.

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