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Feature

posted 18 Mar 2002 in Volume 5 Issue 6

Towards a knowledge-based economy

The Hong Kong experience

In most economies knowledge management has long been recognised as a source of competitive advantage but companies in Hong Kong have been slow to fully accept and embrace the discipline. Trevor Lui describes the evolution of KM in Hong Kong and outlines the role the Hong Kong Productivity Council plays in fostering awareness of the benefits knowledge management has to offer.

Customer demands and expectations are constantly getting higher. Being a leader in terms of cost is no longer enough to satisfy customer demands. Organisations must provide higher quality products or services at lower costs and with shorter lead times if they are to survive. Effective generation and leveraging of knowledge are becoming the key sources of competitive advantage.

‘Knowledge for profit’ organisations are poised to dominate the 21st century. Many large professional organisations are developing management strategies and systems to harness their greatest asset: knowledge. Over the past ten years enterprises strove to keep more data and information within their organisations because they believed that whoever was able to retain the most would have the power and ability to dominate the market. In recent years this trend has moved one step further. Enterprises are beginning to realise that data and information alone are not enough to compete. Rather corporate success depends on a company’s ability to utilise both tangible and intangible assets. They must therefore be able to identify critical knowledge assets and disseminate them within their organisations so that every employee is able to access these assets quickly and easily.

The trend in Hong Kong

Most Hong Kong companies of today are primarily run on the insights gained from the successes of the capital-intensive manufacturing economy of the past. These companies have fallen or are rapidly falling out of alignment with future trends as the world transforms from the industrial economy to an intellectual capital and technology-based global knowledge economy.

Recently knowledge management has established a presence in Hong Kong. During the industrial era of the 60s and 70s factories were the key assets and manufactured goods the dominant products in the economy. When the information era arrived sometime in the 80s and 90s information became the key asset and instead of manufactured goods information-based products and services came to represent key products. Today we are entering the knowledge era. Knowledge is becoming the critical asset and knowledge-based products and services the key products.

Ideas creativity innovation and knowledge workers are now becoming the driving forces of Hong Kong’s economy. In the past ten years the unemployment rate has jumped from around 1-2 per cent to about 5.5 per cent. Among those currently unemployed most are not ‘knowledge workers’ further illustrating the swing in Hong Kong towards a knowledge-based economy.

From benchmarking to knowledge management

The Hong Kong Productivity Council (HKPC) responded to this by founding the Asian Benchmarking Clearinghouse (ABC) in October 1998. It started its mission with benchmarking and has since taken the logical next step of delving into knowledge management. Since its inception the ABC has developed global alliances with leaders in the international benchmarking field including the American Productivity and Quality Center and the Australia Quality Council as well as with numerous national productivity centres in Asia.

Benchmarking is a continuous and systematic process that allows organisations to identify compare and share best practice. The purpose of benchmarking is not merely to measure your performance against another organisation’s but to exploit better approaches and adapt them as your own. Many forward-looking companies also use benchmarking to create a sense of urgency or to find a compelling reason to change existing work practices.

With the development of best practices through benchmarking organisations are able to transfer these practices into their own units and divisions so as to improve overall productivity and efficiency. But best practice transfer can at times be tough. Barriers originate from a lack of motivation to adopt new practices and from inadequate processes relating to identifying understanding and adapting these processes. Inside each organization lies – unknown and untapped – a vast treasure house of knowledge know-how and best practices. If exploited this information could yield huge gains in speed customer satisfaction and organisational competence. The sharing of valuable knowledge is a long and challenging process that must be carefully managed and executed as it will inevitably involve the interaction of employees from different units.

Although most enterprises are aware that knowledge management is critical to their business success and their future development and expansion far fewer really understand what knowledge management is. In response to this the HKPC has undertaken a great deal of educational activity. Between 1998 and 2000 several briefing sessions were organised. In addition the HKPC has co-ordinated two Asia Knowledge Management Conferences each of which drew more than 100 participants. When people know more about what knowledge management can do and what the benefits are they will begin to change and eventually embrace the idea.

Determining an approach to knowledge management

According to the definition provided by Knowledge Associates knowledge management is the discipline of enabling individuals teams and entire organisations to collectively and systematically create share and apply knowledge in order to more easily and effectively achieve business objectives. The goal is to help organisations as a whole create new knowledge assets leverage existing knowledge assets and manage and measure the development and profitable exploitation of those knowledge assets.

Two perspectives dominate traditional understanding of knowledge management: the product view and the process view. According to the former knowledge can be represented as a physical object which can be located and manipulated; it is also possible to capture distribute measure and manage knowledge. This perspective focuses primarily on knowledge assets their creation storage and re-use. On the other hand the process view regards knowledge management as a social communication process. It is only feasible to promote motivate encourage nurture or guide the process of knowing and the idea of trying to capture and distribute knowledge seems senseless.

Know-Net an 18-month research project conducted in 1998 was built around a knowledge-networking approach that is a unique fusion of the product (content) perspective and the process (context) perspective of knowledge management. It has shown how knowledge management is concerned with strategically aligning the corporate vision mission strategy and objectives with a knowledge management strategy new processes systems structures and technologies to systematically and collectively create share and apply knowledge across the entire enterprise – to accelerate business strategies to better achieve business objectives.

Three areas should be paid special attention namely people process and technology. People play a major role in knowledge management. It is people who possess the essential knowledge that needs to be transferred through knowledge management. Without their co-operation the whole implementation process will result in failure. Besides people an appropriate process is critical to the success of knowledge transfer. In general the process can be separated into five stages: knowledge creation and acquisition; knowledge analysis; knowledge packaging; knowledge dissemination; and knowledge usage. Unfortunately there is no formula for determining the ‘correct’ process; it changes from company to company as every organisation has different cultural issues. Technology can be of enormous value in helping to support the process but many people fall into the trap of becoming over-reliant on its use. This frequently results in the creation of an extremely advanced system that is nevertheless lacking in meaningful content.

Identifying critical knowledge assets

Before considering the application of knowledge management it is important to evaluate the benefits that knowledge management can bring to a company. This is a difficult process however as the effects of KM relate primarily to the human side of operations and no standard formula or evaluation tool currently exits. In order to tackle this problem Know-Net identified three types of knowledge assets which offer clearer guidance on how to measure the benefits of knowledge management.

A knowledge asset is an intangible asset that can be defined as the accumulation of the knowledge bases of all the individuals within the organisation and the social knowledge embedded in the relationships between these individuals. The three types of knowledge assets identified by Know-Net are human knowledge assets structural knowledge assets and market knowledge assets.

Human knowledge assets are the specialties and capabilities possessed by individuals that are valuable to the company and its clients. They comprise staff capabilities experience skills innovative ideas and creativity. The growth of human knowledge assets will lead to an increase in the concentration of skills and the level of innovation and participation within an organisation.

Structural knowledge assets reflect an organisation’s ability to meet market requirements. They include the capabilities experience skills innovative ideas and creativity left in the organisation when its employees are removed from the equation. This could include for instance patents methodologies administrative systems training seminars etc. With the growth of structural knowledge assets the capabilities of the organisation become more abundant staff will be better supported and overall organisational performance will be improved.

Market knowledge assets incorporate the value and goodwill created from an organisation’s relationships with people in other organisations that result in further business opportunities. They encompass brand name trademarks and a company’s image and relationship with its customers partners and competitors. In order to build up more market knowledge assets an organisation needs to be responsive to sudden market developments to provide practical feedback to customers and to work closely with its partners.

It is often difficult to distinguish between information and knowledge which makes it even more important to identify the knowledge assets that are essential to the continued success of the company. In order to do so the organisation first needs to know which area of the business it wants to focus on. The next step is to look for the critical knowledge assets that will be most likely to lead to the organisation’s success. To help it achieve this task the organisation can either benchmark its progress against that of industry leaders and learn from their best practices or formulate its strategy based on its competitive advantages and look to identify the critical knowledge assets that are important to the continued development of these advantages.

Knowledge management implementation

Although this sounds straightforward the implementation process can be very long and difficult because it involves the interests of a number of different parties within the organisation. In order to ensure effective implementation a knowledge management initiative should be broken down into a number of small manageable projects but without losing sight of the big picture.

Strategic planning is an important stage of a knowledge management project as it will help an organisation focus on the knowledge that counts and delivers real value to the enterprise. Based on the corporate objectives a clear knowledge management strategy needs to be defined to help the organisation set out the criteria for choosing what knowledge it plans to pursue and how it will go about capturing and sharing it.

Future direction for Hong Kong

Knowledge management is a relatively new topic in Hong Kong. The challenge right now is for someone to take the plunge and achieve a degree of early success. These first movers will not only benefit their own companies but will create a new dimension of opportunity to share with the rest of Hong Kong.

Hong Kong has nevertheless been more reluctant to embrace knowledge management than the US for instance. In Hong Kong a new technology concept or management model has to be proven by successful implementation before it is widely accepted. Companies will want to look carefully at whether there are real tangible benefits in applying knowledge management before they themselves make any big change. The key for the HKPC at the moment is to help set up the successful cases first.

Government backing is also very important for knowledge management to flourish. If a government supports knowledge management this will also generate interest in the private sector. As such the HKPC will look to keep the Hong Kong government informed about what is happening in the world of knowledge management.

In contrast to the situation in Hong Kong the Singaporean business community has been a whole-hearted supporter of knowledge management for several years. The Singaporean government heavily backs knowledge management initiatives and has invested a lot of time and money in promoting the concept. Furthermore Singapore’s corporate excellence awards include seven knowledge management elements in their criteria. Nevertheless we are optimistic about knowledge management in Hong Kong. If companies make a commitment to catch up with their international peers they will inevitably do so.

In our opinion and based on our experiences and local knowledge it is clear that if Hong Kong companies are to implement knowledge management successfully and smoothly they will have to:

  • Regard knowledge management as a holistic discipline;
  • Ensure knowledge management consultants practice what they preach;
  • Ensure that their clients are gaining real business benefits from knowledge management;
  • Remember knowledge assets are the key assets for a knowledge-driven enterprise;
  • Provide critical knowledge workers with the appropriate skills training.

As knowledge management gains in popularity we can expect to see further developments in the field. But if corporations remain conservative in their attitudes and reluctant to adopt knowledge management practices their knowledge assets will disappear rapidly and the organisations themselves will quickly be marginalised in the knowledge economy.

Trevor Lui is a senior consultant for the Asian Benchmarking Clearinghouse part of the HKPC. He can be contacted at: trevorl@hkpc.org

Sidebar:

I had the privilege to be invited as a guest speaker at KM Showcase 2002 organised by the Hong Kong Productivity Council (HKPC). The venue attracted a large number of high-profile participants in spite of the current difficult economic climate which demonstrates that KM is now very much on the agenda in Hong Kong. In particular I was impressed by the enthusiasm of the KM professionals I met at the event and I am convinced that we will see major progress in the near future in Hong Kong.

Among the most interesting aspects of KM in Hong Kong is its role in the SME market and in governmental institutions (or government-related organisations). As is explained in Trevor Lui’s article there are many SMEs in Hong Kong with a relatively low number of knowledge workers. Their challenge is on the one hand to compete with firms from mainland China and on the other to modernise and move up the value chain. Knowledge management is one of the most important drivers that will help them achieve the necessary changes.

In the SME environment it is particularly important to focus on the practical aspects of KM though still based on an understanding of the overriding concepts. The HKPC is playing an important role in bridging the gap between KM theory and practice. The relationship between KM and socio-economic issues as addressed by Lui is also very interesting since it can demonstrate once more that knowledge is driving a whole new society where people and nations live together and compete in a new and inspiring ways.

Paul Louis Iske chief knowledge officer ABN Amro.


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