How to deal with knowledge in small companies? Defining emergent KM approach

Bolisani, Ettore; Scarso, Enrico; Zieba, Malgorzata Working Paper How to deal with knowledge in small companies? Defining emergent KM approach GUT FME Working Paper Series A, No. 2/2015 (27) Provided in Cooperation with: Gdańsk University of Technology, Faculty of Management and Economics Suggested Citation: Bolisani, Ettore; Scarso, Enrico; Zieba, Malgorzata (2015) : How to deal with knowledge in small companies? Defining emergent KM approach, GUT FME Working Paper Series A, No. 2/2015 (27), Gdańsk University of Technology, Faculty of Management and Economics, Gdańsk This Version is available at: https://hdl.handle.net/10419/173323 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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D EFINING EMERGENT KM APPROACH Ettore Bolisani*, Enrico Scarso**, Malgorzata Zieba*** GUT Faculty of Management and Economics Working Paper Series A (Economics, Management, Statistics) No 2/2015(27) January 2015 * Department of Management and Engineering - University of Padua, Vicenza, Italy, ettore.bolisa[email protected] (corresponding author) ** Department of Management and Engineering - University of Padua, Vicenza, Italy, [email protected] *** Gdansk University of Technology, Faculty of Management and Economics, Poland, [email protected].pl 1 How to deal with knowledge in small companies? Defining emergent KM approach Ettore Bolisani 1 , Enrico Scarso 2 and Malgorzata Zieba 3 This version – 29 January 2015 Abstract This paper examines the concept of emergent KM approach in small companies. The origins of consideration are grounded in the theory of strategic management literature and in particular in the distinction between deliberate versus emergent approach towards strategic planning. Using the methodology of case study, we carried out an explorative research to analyse the characteristics of KM approach in two small companies located in Italy and Poland. Both companies appeared to follow emergent KM approach and therefore, a detailed analysis of this phenomenon was feasible. A description of the main features of an emergent KM approach is then proposed. On the basis of research results, implications for both managers and researchers are discussed. Keywords : knowledge management; KM; SMEs; ICT services providers; Italy; Poland JEL codes : L84, M1 1 Ettore Bolisani, PhD, Associate Professor at the Department of Management and Engineering - University of Padua, Vicenza, Italy, [email protected] (corresponding author) 2 Enrico Scarso, PhD, Associate Professor at the Department of Management and Engineering - University of Padua, Vicenza, Italy, [email protected] 3 Małgorzata Zięba, PhD, Assistant Professor at the Faculty of Management and Economics - Gdansk University of Technology; m[email protected]g.gda.pl 2 1. Introduction The body of research about knowledge management (KM) in SMEs is still scarce (Durst and Edvardsson, 2012; Dwivedi et al. 2011) in comparison to the vast number of studies concerning large companies. The relatively few contributions, however, seem to agree on the fact that SMEs do not manage knowledge the same way as their larger counterparts (Chan and Chao, 2008; Wee and Chua, 2013). In particular, SMEs, even when they are aware of the importance of their knowledge, usually follow an unplanned, unsystematic and informal approach to KM (Edvardsson, 2006, 2009; Hutchinson and Quintas, 2008). In the light of this, the paper aims at deepening our understanding of the way SMEs deal with their knowledge assets. Specifically, it intends to investigate the nature of the approach that small businesses adopt when setting up, implementing and using KM tools and practices. The paper illustrates and discusses the KM experience of two small ICT services providers, one Italian and the other Polish. The unit of analysis is represented by the set of KM solutions and practices implemented by these two companies in the last decade. The cases allow identifying and defining what we call an “emergent KM approach”. The study covers two research areas regarding KM in SMEs that, according to Durst and Edvardsson (2012), need more attention and development, i.e. longitudinal studies (namely, studies that analyse the dynamics of a phenomenon over long periods of time) and realistic lens (namely, studies that explicitly focus on the peculiar characteristics of SMEs). As regards the first point, the case studies cover a time span of about a decade, during which the KM approach of the companies has changed and intensified due to two factors: first, the companies have faced new challenges, and second, new tools for managing knowledge became available. Concerning the second point, the analysis has adopted a realistic view of the investigated companies by taking into account the limited resources they have, their particular organisational structure, and the specific business environment where they operate. Since the study concerns only two cases, the idea is not to draw conclusions of general validity, but rather to highlight specific aspects of the ways used by SMEs to approach KM. By basing on the 3 findings, possible suggestions for both researchers and executives can be derived, as well as ideas for new hypotheses about the peculiarities of KM in SMEs, which can be tested in future research. The paper articulates as follows. The next section proposes a brief review of the literature on KM in SMEs. The third section examines various approaches to KM identified in the literature. Section four illustrates the research methodology adopted, while section five describes the findings of the empirical investigation. The sixth section discusses what originates from the study, and the last section makes some conclusive comments, illustrates the limitations of the study, and suggests possible future research directions. 2. Managing knowledge in small companies. KM initiatives are gaining an increasing attention not only of large companies but also of their smaller counterparts (Bozbura, 2007; Wei et al., 2011). In point of fact, KM can provide several benefits to SMEs, such as better communication, improved customer satisfaction, better external relationships, faster response times, enhanced innovativeness, greater efficiency in processes and procedures, and reduced risk of loss of critical capabilities (Edvardsson and Durst, 2013a; Migdadi, 2009). In this regard, Dotsika and Patrick (2013) highlight that the implementation of KM initiatives in SMEs may be even more crucial, as knowledge can be their single key resource. In spite of this, the literature that examines KM in SMEs is still scarce and provides fragmented insights (Durst and Edvardsson, 2012; Dwivedi et al., 2011; Ribière and Christian, 2013). Also, different approaches to KM by SMEs have been identified (Sparrow, 2001). In any case, many authors agree that it would be wrong to assume that SMEs can practice KM in similar ways to large organisations (Desouza and Awazu, 2006): KM in small businesses cannot simply be reduced to scaled-down versions of large companies’ experience (Wong and Aspinwall, 2004). Actually, SMEs have some unique features (e.g. limited financial and human resources, flat structure, informal managerial styles, centralised decision-making, focus on day-by-day business operations) that deeply influence the way they can approach KM. Also, as Nunes et al. (2006) affirm, managers of SMEs are not prepared to invest highly on long term KM goals, whose value added they may find it difficult 4 to assess. Thus, KM activities in SMEs tend to be performed in an informal way, and are not necessarily supported by purposely designed ICT systems. Hutchinson and Quintas (2008) state that to understand KM in SMEs it is necessary to look beyond the introduction and practice of formal or nominal initiatives. SMEs, in fact, without “being fluent” in the language of KM or even being unable to recognize their behaviours as KM, are often proactively engaged in what can be called “informal KM practices”. Also, Coyte et al. (2012) underline that strategy and governance of knowledge processes in SMEs are not formalized. In an earlier paper, Edvardsson (2006) had already noted that explicit KM strategies in SMEs were lacking, and many small companies treated KM at an operational level, i.e. at the level of systems and tools. Lastly, Edvardsson and Durst (2013b) deem that, compared to larger firms, SMEs tend to be more oriented towards the management of tacit knowledge. They are also less successful in sharing knowledge by means of formal systematic approaches. To sum up, in SMEs, KM can be practised even if it may be not recognized as such (Salojärvi et al., 2005). 3. Emergent approach to KM The analysis carried in the previous section raises a key question: to understand KM practices in small businesses, do we need a new concept of KM and new interpretive frameworks that are different from those normally adopted in the case of large firms? The answer to this question can be the approach to KM that can be called “emergent”. The idea of “emergent” KM development, especially when it comes to SMEs, has been already proposed in the literature, but in a fragmented way. For example, as particularly regards actions and mechanisms that support knowledge sharing in an organization, Van den Hooff and Huysman (2009) distinguish between engineering and emergent approach. The engineering approach focuses on “managing and controlling organizational knowledge for the purpose of securing a competitive advantage”; it is assumed that knowledge, seen as a strategic resource of a company, can be shared and transferred in an organization by providing goals, context and means to do so in a “top-down fashion”. In an emergent approach, these processes are seen under a practice-based perspective. Here the 5 situated and collective nature of learning is stressed: organizational members learn from and with each other during their day-by-day activities, and KM practices and tools “emerge” from the bottom. Similarly, Sparrow (2005) refers to a contrast between an idea of KM “emergent” development in small companies and those of “investigative/diagnostic” and “event-based” KM development. There is, however, the necessity to define more precisely what an emergent KM approach can be. To do that, it can be useful to refer to the strategic management literature, and particularly to the distinction between deliberate vs. emergent approach towards strategic planning (Mintzberg and Waters, 1985). A purely deliberate or planned approach to strategy can be defined as an explicit and rational formulation of goals, plans and means that originates from precise intentions of the company. In this case, all is generally decided by central leadership, progressively articulated in more detailed tasks that involve different parts of the organization, and backed up by formal controls in top-down logic. Essential pre-conditions are that the internal and external environment can be considered benign, controllable or predictable, and that there is full understanding, adhesion and acceptance of the different parts of the organization to the various tasks and processes that the goals and plans require. Conversely, in a perfectly emergent approach to strategic planning, actions result to be consistent over time, but in the absence of intentions, clear leadership, and predefinition of goals or plans. In other words, in an emergent approach, goals and plans of a company result from an ex-post formalization and co-ordination of actions, decisions and tasks that have proven to be effective and beneficial to the organization. Although, as Mintzberg and Waters (1985) highlight, a purely emergent approach is impossible in real life, there are situations that are (more or less) close to that abstract definition. Recent surveys (Bozkurt and Kalkan, 2013) support the idea that this is especially true in the case of small businesses. In accordance with the mentioned literature, we define emergent KM approach as follows: Emergent KM approach is an approach where practices, tools and methods of managing knowledge originate from the daily practices and learning processes of company’s employees. In substance, employees develop their own methods of learning, storing, retrieving and sharing knowledge in relation to their actual needs and practical problems to solve. Those 6 methods and tools that prove to be effective, useful and/or compatible with the daily business practice are later developed to become established practices, and in the end can be recognized as “the KM approach” of the company. This contrasts to a deliberate or planned KM approach, where KM goals, methods, and tools are defined by the top management based on an analysis of company’s needs, objectives and resources. As defined, emergent KM approach is different from: - “informal” KM, as intended for instance by Hutchinson and Quintas (2008), Coyte et al. (2012), Nunes et al. (2006), or Wee and Chua (2013). The term “informal” simply indicates that the set of KM practices and tools adopted by a company are not explicitly formalized in a structured plan. Indeed, informality can characterise the early stages of an emergent KM approach, but later there can be the need to put things in a formal way; - the management of purely “tacit knowledge” (Edvardsson and Durst, 2013b). Although tacit knowledge is often important in SMEs, small companies also have explicit components of knowledge to manage: hence, an emergent KM approach does not necessarily focus merely on tacit knowledge; - the idea of progressively “mature” KM. KM maturity models (e.g. Khatibian and Jafari, 2010) presume that a company becomes increasingly aware of and engaged in a more and more complete KM approach. Instead, with emergent KM, we assume that a company does not necessarily reach a “highly complex” KM level, but rather that its KM practices (being these complex or simple) progressively emerge and become part of the business. 4. Research question and methodology Based on the definition provided in the previous section, this paper addresses the following research question: What are the characteristics of an emergent KM approach in SMEs? 7 Specifically, to answer that question we based on the experience of two small companies. We used the case study approach given the descriptive and exploratory nature of the research, and the complexity of the investigated issue (Leedy and Omrod, 2005). In particular, it can be seen as a revelatory case in Yin’s terminology (Yin, 2003) since it offers the opportunity for an in-depth analysis of internal features that are generally less accessible to outside researchers. The purpose of the case study approach is to answer a combination of “how” and “why” questions concerning the management of knowledge by small companies. The cases have been elaborated by using information provided by various people in the companies, and from documental sources. As regards the generalization of the findings, the idea is not to draw conclusions of general validity, but rather to derive some implications concerning the approach followed by SMEs in the adoption of KM practices and systems, as well as to provide suggestions for further analysis or for implementation in similar situations. The unit of analysis is represented by the practices and projects to introduce and use KM that the companies have carried out in the last years to support their business activities. 5. Empirical evidence 5.1. Adoption path in Company A Company A is a small ICT company located in the North East of Italy with 30 employees and 5 external collaborators; the annual turnover is about 5 billion Euros. Company A designs and installs high-level custom-made IT platforms. Provided services include: cloud computing, data centres, virtualization, and business continuity. The company is organized into five main Departments: Management, Accounting, Sales/Marketing, Delivery and Support. The last two are its technical heart: the first one deals with design, development and implementation of new brand solutions, while the second provides technical assistance and maintenance of installed systems. Company A has undergone a huge evolution in the last decade. Until 2003, it was a typical small company run by the owners who had little managerial competence. It worked only on a job-order basis, and provided ICT infrastructures. At that time, the company counted 12 people including the owners. These, being aware that the firm would not have been able to grow without taking on more managerial 14 With the increasing availability of computers, employees started using them to greater extent for creating and storing knowledge contents. Documents were created in an electronic form and over the years this form became more popular. Furthermore, with the development of the Internet, employees started using e-mails as a tool for information and knowledge exchange. Although files were easily exchanged via e-mail, the problem of file size appeared at a certain stage. To solve it, employees started using external disks for transferring large files between each other. This solution, however, was not very efficient. The situation changed in 2011, when the company began carrying out much larger projects which involved more people at various stages. Designing of smaller projects could be handled by one person (in the past, it was just one person that would deal with a project), but larger-scale projects required the engagement of a greater number of staff from the stage of service design, trough preparation for implementation, implementation itself and preparation of documentation. Therefore, it was necessary to have a place where employees would keep their knowledge and make it available to others, and to implement some knowledge exchange tool that would help in this process of larger-scale project delivery. The employees of the Service Design and Service Implementation Departments were the first to note this need, and they started to look for a solution. The natural choice was to set an internal platform with disk space, where employees would be able to store documents and files for their own use and for the use of other staff. This solution was satisfactory from the point of view of employees (i.e. easy to use and fulfilling their needs) and also from the point of view of management (namely, inexpensive and easy to implement). What is worth to underline here is that it was the employees that noted the need and implemented the solution: the management was involved only at the stage of costs acceptance. At first, the solution was available only in the company, with access via computers located in place. Later on, employees manifested a need to access the repository of knowledge from outside the company, i.e. during implementations at customers’ site or when working from home. This need was highlighted by employees who delivered services to customers – sometimes they missed some crucial 15 piece of knowledge of the customer’s installation. One of these employees designed the solution: a tool for accessing the knowledge repository via VPN (Virtual Private Network). It allowed searching for and downloading the necessary knowledge also from outside the organization. Presently, this platform can be accessed by all the people working in the company or outside and there are no restrictions or limits of access. Theoretically, each person from the organization can gain access to all the files and folders. Initially, when the platform was introduced, it was the employees of the Service Design and Service Implementation Departments that used it to the greatest extent. Later on, Service Maintenance and Service Preparation Departments started using it as well. As the last group of users, Administration Department joined the platform. Each group uses it for their own purposes and in their own way. With the growing complexity and scale of realized projects, it became necessary to exchange knowledge between employees more often and with the help of additional tools. Sometimes when a problem occurred during an installation at a customer’s firm, the employee had to get back to the company because he was not able to solve the problem by himself and needed the colleagues’ support. It was necessary to find a way to allow sharing knowledge and expertise via the Internet in real time. As a solution, TeamViewer was introduced. It helped in sharing knowledge of experts, using their support not only during implementations, but also during designing and maintenance activities. Its implementation was the idea of the same employee who designed the VPN solution - a person dealing with installations and also serving as an IT specialist in the company. TeamViewer is a professional software suite used for remote access, online meeting and online presentation. Among the remarkable points and success factors of the KM roadmap in Company B, one is the key role played by the employee who designed the KM solution properly fulfilling the knowledge needs, and practically implemented it. More generally, it should be specified that the need to implement certain KM solutions originated from two Departments – Service Design and Service Implementation. These are the core departments in the organization as they deliver solutions to be implemented to customers, and have the greatest need to store and exchange knowledge. A great importance in the successful 16 identification of knowledge needs and their fulfilment has the management style practiced in the company. There is a very broad delegation of duties and power in the company. The management does not interfere in the way employees perform their tasks: it is assumed that they do their best and there is no need to control them. That is why the introduction of various KM solutions, in a trial-and-error approach, was possible without the delays usually connected with convincing the management. Another factor that supported the implementation of the KM solutions was the fact that many employees are IT literate, so they got acquainted with the KM systems quite easily. As far as some obstacles to the implementation of KM solutions are concerned, there was a small resistance by some employees not willing to use the common platform at the initial stage. They were afraid that they would waste time or that some of their files might be missing. These reservations dropped down when employees noted the benefits of the KM tool and observed the process of file placement. Another problem is the way files are named and categorized on the platform. Each employee does it in his own way, which makes searching for appropriate piece of knowledge quite a challenge. This could be easily overcome by the introduction of a common system of files naming and categorizing, but according to employees, presently there is no such a need. 6. Discussion: KM in SMEs as emergent practice There are several issues that need to be highlighted on the basis of the research findings presented above. The practices of both companies correspond to what we defined an emergent KM approach: the two companies managed their knowledge without much planning and the KM tools were developed based on the emerging needs of the business. This emergent approach to KM appears to have some specific characteristics (table 1). Firstly, the solutions adopted by the examined companies were chosen on the basis of the current employees’ needs, and the management role in this process was not of a major importance. In both cases, the KM problems were noticed by employees working “on the ground”, and the solution suggested by themselves. Such an approach can be denoted as bottom-up (Baxter and Connolly, 2014). Actually, the 17 top management has a role in the KM development, but this role is mainly that of accepting and establishing the KM solution in the company once this has proven to be effective for the business. Secondly, the way of managing knowledge was an evolving one, definitely not planned or deliberate. It was even called a “budding” approach by one of the respondents. Generally it built on the current needs and intuition of employees: if a KM solution was needed by employees, it was selected and implemented by them, in a progressive adaptation path. What is more, KM needs in these companies were changeable, which also influenced their KM approach. The solution that was in use for a while, might appear to be unsuitable, and in that case a new solution is searched for. That is probably one of the reasons why SMEs lack a formal KM approach, as stated by Nunes et al. (2006): a too formal approach would hinder flexibility in changing KM solutions. In addition, in both cases, under a “trial- and-error” perspective towards KM, the solutions that prove to be useful or that fit the particular situation of a company are selected, adopted and possibly developed or spread to the rest of the company. Also, SMEs cannot invest great resources in complex KM plans. In both cases, the adopted KM solutions were proposed by people that were not given a formal assignment on KM: they continued working in their main area, but at the same time they developed and proposed the KM solution. Investments in KM were kept as low as possible and internally designed tools were preferred. Finally, there were no preliminary reflections on KM theories, models, concepts, or processes: the KM practices emerged from the ground, and only later their recognition as KM practices started. 18 Table 1. Characteristics of an emergent KM approach in the examined cases No formal plan KM solutions emerged from the actual needs Business-driven KM Strict connections with daily practices of employees Bottom-up approach KM solutions developed by employees “at the bottom level” and later validated and accepted by the management Trial-and-error KM solutions selected through an experimental process Flexibility Change of needs reflects on change of KM solutions Low-cost KM No KM office; low investments; in-house design is preferred No preliminary reflections on KM KM practices emerged from the ground; their recognition started later 7. Conclusions: implications and future research directions This study confirms that emergent KM approaches exist in small companies and are characterized by certain features. Both approaches described in the study are non-formal, bottom-up, originating from the daily practices and learning processes of company’s regular employees. Solutions are chosen on the trial-and-error basis and when they do not fulfill company’s KM needs anymore, they are modified or abandoned. Therefore, the definition of emergent approach proposed in section 3 of the paper might be valid and well-illustrative for the ways of managing knowledge in small entities like those examined here. The study presented in the paper has some obvious limitations. The first one concerns small sample size. Although the study is of exploratory character, analyzing two cases is an obstacle in drawing general conclusions. Also, both companies are ICT services providers. Secondly, the study is of preliminary character and additional analyses are required to examine extensively emergent KM approaches and their role in SMEs functioning. Despite the limitations, several implications for both research and practice originate from the study. Firstly, the findings show that KM approaches well fit the particular features of smaller companies. Secondly, the notion of “emergent approach to KM” can be useful to help researchers identify and 19 analyze the rich variations of KM-based approaches that can be found in such companies. In terms of practice, the study shows that although emergent KM approach is unplanned, companies should become aware of its characteristics to better understand it and be more efficient at its implementation. Additionally, KM education programs should include the topic of emergent KM, to make future managers and executives acquainted with the need to apply a different KM approach in small companies than the one used in larger firms. On the basis of what previously discussed, some potential research areas have been identified. First of all, the topic of emergent KM approach could be further examined in qualitative research. This would allow identifying a variety of emergent approaches and classifying them in taxonomy. Secondly, additional quantitative study on the popularity of emergent KM approach among SMEs could have significant practical implications for managers and owners of SMEs. Thirdly, as implementation of KM may serve as a source of competitive advantage for SMEs, such companies should be interested in the ways of successful application of KM approaches. Both quantitative and qualitative examination of emergent KM approach might give insights into this. 8. 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Yin, RK (2003) Case Study Research. Design and Methods, SAGE Publications, Thousand Oaks, 3rd ed. 22 Original citation: Bolisani, E., Scarso, E., Zieba, M. (2015). How to deal with knowledge in small companies? Defining emergent KM approach. GUT FME Working Paper Series A, No. 2/2015(27). Gdansk (Poland): Gdansk University of Technology, Faculty of Management and Economics. All GUT Working Papers are downloadable at: http://www.zie.pg.gda.pl/web/english/working-papers GUT Working Papers are listed in Repec/Ideas http://ideas.repec.org/s/gdk/wpaper.html GUT FME Working Paper Series A jest objęty licencją Creative Commons Uznanie autorstwa-Użycie niekomercyjne-Bez utworów zależnych 3.0 Unported. GUT FME Working Paper Series A is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Gdańsk University of Technology, Faculty of Management and Economics Narutowicza 11/12, (premises at ul. Traugutta 79) 80-233 Gdańsk, phone: 58 347-18-99 Fax 58 347-18-61 www.zie.pg.gda.pl