Knowledge Management Systems

2011

LONDON SCHOOL OF BUSINESS & FINANCE Knowledge Management Systems

Student Name: Madhumalesh Prakash Student ID: A4036664 Submission Date: 4th November, 2011 Intake: MBA Batch 8A Module Name: Managing Information Module Code: MI Assignment Title: Managing Information- Critical Evaluation of Relevant Issues Word Count: 4529

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Table of Contents
1. 2. 3. Executive Summary ......................................................................................................................... 3 Introduction: Information Systems ................................................................................................. 3 Environmental and Industry analysis .............................................................................................. 4 3.1. 3.2. 4. PESTLE analysis........................................................................................................................ 4 Porters five force..................................................................................................................... 5

Knowledge management system .................................................................................................... 6 4.1. Enterprise-wide knowledge management systems ................................................................ 7

5.

Implementation of KMS ................................................................................................................ 10 5.1. 5.2. Tools and Techniques............................................................................................................ 10 Building Information system ................................................................................................. 11

6. 7. 8. 9.

Security threats: ............................................................................................................................ 14 Ethical issues ................................................................................................................................. 15 Conclusion ..................................................................................................................................... 16 References .................................................................................................................................... 17

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1. Executive Summary
This report delineates the types of Information system, mainly Knowledge Management Systems (KMS). It also defines tools or technologies used by KMS and methods of building an Information system, in reference to a newly established medium sized accountancy and management consultancy. The size of the report is not intended to go into a great amount of detail on all aspects, but provides overview on all the topics related to knowledge management and Information system in general. Accountancy and management consultancies provide advices for the organisations to improve the performance through the analysis of existing organisational situation and develop new plans for the improvement. They also provide professional advices on accounting and taxation policies.

2. Introduction: Information Systems

The growth of the internet, globalisation and the rise of information economies has raised the importance of information technologies in the organisation and management. Information technology (IT) refers to all the computer based information systems used by the organisations and their underlying technologies. Sometimes, Information technology is confused with Information systems. An information system(IS) can be defined as, a set of interrelated components that collect, process, store and distribute information to support decision making and control in an organisation (Laudon and Laudon 2006). Its clear from the definitions that Information system contains information about the organisation or the environment surrounding the organisation and IT is a fundamental component of any modern IS. There are four major types of Information systems that correspond to each organisational level: Executive support systems (ESS) are the systems which helps senior managers to make decisions in strategic level. Management information system (MIS) serves the management level with weekly, monthly and yearly results. Decision support systems (DSS), also serves management level. Transaction processing system (TPS) is the basic business systems that serve the operational level of the organisation. Information systems can also be classified from the functional perspective such as: Sales and marketing systems, Manufacturing and production systems,

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Finance and accounting systems and Human resource systems. These serve at all organisational levels as well. In the present environment organisations becomes more flexible and productive by co-ordinating their business processes more closely or by integrating these processes to focus on efficient resource and customer service management. To support this enterprise applications are designed, which consists of enterprise systems, supply chain management systems, customer relation management systems and knowledge management systems. In this report let us discuss about the knowledge systems in detail. Before going to the Information system to implement let us conduct an environmental and industry analysis in which the firm is going to operate.

3. Environmental and Industry analysis

Before designing any information system, we need to carry out analysis on the environment where the firm is going to operate. In a wider sense, system environment is all elements outside the system. The factors affecting the environment consist of some general social factors and specific social factors. Many frameworks are used to do environment and industry analysis. In this section we will use PESTLE analysis for environmental analysis and Porters five forces for industry analysis.

3.1.

PESTLE analysis

Pestle analysis looks at political, economic, social, technology, legal and environmental factors which affect the organisation (Dransfield 2001). Political: Political factors include Government stability, taxation policy, foreign trade regulation and social welfare policies. The UK is one of the most prosperous and influential nations in the world and has a very major role to play on the international stage. Economic: This contains factors like Inflation, unemployment, interest rates and money supply. UK had a high growth rate of 2.8% in 2007, but economic deceleration started in 2008. In 2009, the economy contracted by 4.9% as external demand remained weak because of global economy. The economy recovered in 2010 at a very slothful rate of 1.6% (UK country profile 2011). Recently experts have warned that the economy is stagnating and in grave danger of a second recession (London evening standard 2011). Socio cultural: Factors like population demographics, income distribution, lifestyle, consumerism and social mobility comes under Socio-cultural factors.

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Technological: This includes factors like new discoveries/developments, speed of technology transfer and rates of obsolescence. UK is one of the few globally competitive manufacturing sectors, supporting more than 276,000 jobs. According to Science and Innovation framework, the knowledge intensity was 1.9% and will be increased to 2.5% by 2014(UK country profile 2011). Legal: Legal laws like competition law, employment law, computer misuse act, defamation act and copyright and rights in database regulations act needs to be considered. Wall Street Journals Index of Economic Freedom 2011 ranked UK as the 16th freest economy worldwide and UK was ranked fifth in the Doing Business indicators of the World Bank for 2010. Environmental: Any organisation should consider these factors like environmental protection laws, waste disposal and energy consumption.

3.2.

Porters five force

Industry analysis can be done by the Porters five force framework for better understanding of which information system to develop (Johnson et al 2006). The threat of substitutes There are lot of consultancies which have established their names in the UK industry. The threat of new entrants New opportunities are emerging for medium-size firms that deliver customer satisfaction, good value, and flexible service. The power of suppliers Need to have good relation with suppliers of software and hardware. Also, need to have many suppliers. Relying on one supplier may be a risk if supplier fails to deliver at time. The power of buyers The inflation or economic downturn affects the buying power of the customers. More customers are likely to become price sensitive. Competitive rivalry There is danger of intense competition from the rivalries. So, to be competitive we need to improve our knowledge and information resources. Hence, to improve the knowledge resources of our organisation I recommend adopting a Knowledge Management System (KMS). In the next part of the report we will understand about knowledge, different types and processes of KMS, and impact of it on the organisations.

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4. Knowledge management system

Thomas Watson, the CEO of IBM, stated, All the values of this company is in its people. If you burned down all our plants, and we just kept our people and our information files, we should soon be as strong as ever. And according to Nonaka, In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. These quote clearly implicates that knowledge is a very important asset for IBM and other organisations. Coming to the definition of knowledge, it can be seen as a blend of actionable information built over time based on accumulated experiences. Knowledge can be categorised with respect to its object as: Knowing what- is based on the ability to collect, categorize and absorb information. Knowing how- is predicted on the ability to create an order of steps needed to complete the task or an activity. Knowing why- is based on the understanding of cause and the laws that govern the phenomenon. Knowledge can also be categorised with respect to its type as: Explicit knowledge: This type of knowledge can be articulated, codified and transferred easily. An example is providing training for the use of software like SAGE in accounting. This can be by a manual or any of the associates. Implicit knowledge: is the type of knowledge which individuals posses but find it difficult to articulate, codify and transfer. For a clear and basic example, a cricketer asked about a difficult shot he played, he often refers to instinct developed by his experience. The term Knowledge management refers to the set of activities and processes used to create, codify, gather and disseminate the knowledge in the organisation. Number of technologies is used to enable the various aspect of the knowledge management in an organisation: Creating, Capturing, Storing and Disseminating (Picollli 2008). Laudon and Lauodon (2006) have stated the organisational processes in other words as acquiring, storing, distributing and applying knowledge which means the same as described by Picolli. Also, Knowledge management can be viewed as three levels of techniques, technologies and systems that promote the collection, organisation, access, sharing and the use of workplace and enterprise knowledge (OBrien 2004). Let A4036664 Madhumalesh Prakash

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us discuss the processes involved in managing knowledge and types of Knowledge management system as described by Laudon and Laudon (2006). The activities involved in knowledge management systems are: Knowledge acquisition: Organisations acquire knowledge in many ways depending on the type of knowledge. Knowledge management system try to build library of documents, cases and presentation based upon the previous experience. In some cases organisation acquire knowledge by setting up online expert networks through which employees find the expert in the company. Knowledge storage: Once the knowledge is acquired it needs to be stored so that it can be retrieved and used anytime by the employees. Management must encourage employees to update and store the documents properly by rewarding them. Knowledge dissemination: technologies like portals, e-mail, instant messaging and search engine technology have resulted in knowledge dissemination. These technologies have added to an existing array of groupware technologies where employees can share documents, data, presentation and graphics. Knowledge application: knowledge that is acquired and disseminated, if not applied in the practical problems facing the organisations does not add business value. Organisational knowledge must become a part of decision making, i.e. decisions and processes in an organisation should be based in informed knowledge, not on guesswork. There are generally three types of knowledge management systems: enterprisewide knowledge system, knowledge work system and intelligent techniques. In this report we are designing information system for a medium sized consultancy firm, so let us use enterprise-wide knowledge systems as it is designed for general purposes. The other two types are for specialised workstations and for scientists, engineers and knowledge workers which includes CAD, 3D visualisation and virtual reality.

4.1.

Enterprise-wide knowledge management systems

The figure shown in the next page provides an overview of technologies and capabilities found in enterprise wide knowledge management systems.

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Fig 1. Enterprise-wide Knowledge management system The enterprise-wide knowledge management system can be further sub divided into three systems (Laudon and Laudon 2006): Structured knowledge systems: This system consists of documents, reports or presentations, which already exists in the firm. Structured knowledge is explicit knowledge that exists in the form of formal documents. We need to develop this system in our consultancy in order to store structured documents and engagement-based repositories of reports from consultants who are working with particular clients. The reports may include detailed description of consulting objective and practices used to achieve clients objective. These reports can be stored in databases which can be used later for training of new consultants. For instance, in KPMG, an international tax and accounting firm with 95,000 professionals serving the clients through 1,100 offices in 150 countries have developed Webbased knowledge environment KWeb which contained databases organised around internal and external knowledge domains of interest to its consultants and partners. Semi-structured knowledge systems: This type of knowledge is the digital information which is not available as a formal document or a report written by a designated author. This type of knowledge are in folders, messages, memos, proposals, emails or presentations or even in videos which are created in different formats and stored in many locations. This may be not legal under the influence of laws such as Sarbanes-Oxley Act of 2002, which requires financial services to hold records of all corporate documents, including e-mails and presentations. In our consultancy to track, store and organise documents like client details and emails, and presentations we need to develop a database and technical infrastructure

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that can collect such semi structured documents and organise them in a logical fashion. For example, Hennigan Bennet and Dorman LLP, was overflowed with backup tapes of hundreds of thousands of e-mail messages. They adopted Hummingbirds integrated knowledge system which automated the capture, manipulation, and distribution of document based knowledge embedded in e-mail. This made the attorneys easier to access through electronic searches. Knowledge network systems: This system address the problem that arises when the appropriate knowledge is not in the form of documentation but instead resides in the head of the experts in the organisation. Knowledge acquired from this system can be referred to tacit knowledge. This system also looks at turning tacit knowledge into explicit knowledge, i.e. solutions that are developed by experts are documented in the database. For instance, in TCS consultants access to nearly 40 years of experience and best practices, arranged by engagement, technology in use and customer requirements. Also they used Just Ask system, where employees could blog or post questions that other employee or experts could answer. Many companies are building knowledge management systems (KMS) to manage organisational learning and business know-how. Information systems create value for the firm in organisational, management and technological aspects. Organisation: As we saw Information system has become an integral part of an organisation and in companies like accounting and management solution, there would be no business without Information systems. KMS helps knowledge workers to create, organise and make available important business knowledge, wherever and whenever its needed in an organisation. For example, Tata Consulting services (TCS) created Process Asset Libraries which contained information related to technology, processes and case studies which were made available to all centres through intranet (Sethi and Sethi). They also can improve business performance by providing feedbacks to knowledge workers and encourage behaviour changes by employees (OBrien 2004). Management: As we saw before managements role is to make decisions in some uncertain and critical situations. But also managers must also do more than what already exists like creating new products and services. This is a creative work driven by knowledge and information. Technology: As we saw in introduction, Information technology is a major tool used by the managers to cope with change. This dimension of information system can be seen in two aspects for KMS. i. Storage technology: Includes both physical media for storing data such as discs and the software governing the organisation of the data on this physical media. For example, AT&T Lab maintains a

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ii.

26-TB data warehouse which holds 2 years of detailed records telephone calls on AT&T network. This system runs on 10000 servers with 2,670 discs for storage (Mc Gee 2004). Communication technology: consists of both physical device and software, which transfers data between two or more components in different locations. A network links two or more computers to share data or resources. Internet is the worlds largest and most widely used network and is of special interest to organisations and managers. For example, In Siemens, colleagues in the Netherlands provided technical data through ShareNET (a website containing chat rooms, search engine and database) to help the sales rep prove that Siemens system would be substantially more reliable (Ewing 2001).

5. Implementation of KMS
In this section let us discuss briefly about few tools or techniques required for implementing the knowledge management system proposed in the previous section and about how to build an information systems.

5.1.

Tools and Techniques

Technologies like Internet and Intranet websites, groupware or teamware, data mining, data warehouse, knowledge bases and online discussion groups can be used in KMS. Intranet- This is a powerful tool that, when used correctly, can enhance communication and collaboration, streamline procedures, and provide just-in-time information to a globally dispersed workforce (Barnes 2002). This tool can be used to implement the knowledge network systems as discussed in previous section. And also can be used in structured knowledge management system to share documents reports among the employees within the organisation. For instance, London School of Business uses LMS (Learning management systems) to update all its students with course materials and announcements. Groupware or teamware- This tool provides capabilities for supporting enterprise-wide communications and collaborative work. Individual, teams and workgroups at different locations in an organisation can use this tool for writing and commenting or projects, sharing documents, or for conducting electronic meetings. Data warehouse- is a data repository that collects and consolidates data from multiple source systems; it may be either internal or external, with the purpose of enabling analysis (Piccoli 2008). This can be used in

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structured and semi-structured knowledge systems to store documents and reports. For example, Trimac, a bulk hauling and trucking firm based in Calgary, Alberta, Canada had developed data warehouse and uses it with Business intelligence tools for multidimensional analysis of data such as account information, products, customers and scheduling (Rosencrance 2001). Data mining- is the process of automatically discovering relationships in larger databases. In data mining, data in data warehouses are used to reveal hidden patterns and trends from historical business activity (OBrien 2004). For example, Bank of America uses data warehouse and data mining to develop accuracy in marketing and pricing financial products. Data mining discovered that a certain set of customers were 15 times more likely to purchase a high lending product which helped the bank to create a final list of quality prospects for solicitation (Nance 2001). Knowledge base- The knowledge base contains facts about a specific subject area and heuristics that express the reasoning procedures of an expert. The knowledge in the knowledge base is represented in form of cases, that is, example of past performances and experiences or it includes methods of processes from experts (OBrien 2004). These tools are also used in structured knowledge management systems where you can access case studies of previous experiences. For example, TCS started documenting the problems and solutions they faced, and documented around 1500 cases studies which were made available to the employees through intranet (Sethi and Sethi).

5.2.

Building Information system

Several methods exist to build information systems. The primary difference between these methods lies in who writes the code. The four basic methods are: (1) program the entire application from scratch, (2) pay an outside company to develop the application, (3) assemble an application by customizing various purchased components, (4) purchasing the entire application from another company (Anderson 2003). As we are designing a KMS for a medium sized firm, second and third option will be expensive and unnecessary. Anderson (2003) has developed many approaches for the building of information system in his textbook. The different approaches are: Systems Development Life cycle (SDLC), Prototyping, Extreme Programming, JAD and RAD, and End-User development. In the following section let us discuss about SDLC and Prototyping which is used majorly.

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System Development Life cycle This approach is a comprehensive method and encompasses five basic stages: i. Feasibility and planning: This step comprises of a quick examination of the problems, goals, and expected costs of the system. After the feasibility is determined, a plan and schedule id created. ii. System analysis: First step in this is to determine how the system works and locate problems. Technique is to break the system into pieces as smaller systems are easier to analyse. At the end of this analysis, problems and needs are documented with text, data flow diagrams and other figures. iii. Systems design: This is a major step of SDLC design for the new system is done on paper. The objective of this step is to describe the new system as a collection of modules and subsystems. iv. System implementation: This involves installation of the designed system and changeover the previous system. We have to be extremely careful in implementing new systems as the users will be new to the systems and nervous and if something goes wrong they may never trust the system. v. Maintenance and Review: Once the system is installed, the computer systems need to be upgraded in a regular basis. And, it is also important to assess the effectiveness of the particular development process. This approach had advantages like control on the systems, detailed steps, well defined user input and monitor large projects. It also disadvantages like increases development costs and time, rigidity, and hard to estimate the costs. This drawback of SDLC makes the managers of medium firms think about an alternative approach. Prototyping Prototyping is a method for systems that are not complex and do not involve too many users or analysts. Early versions of the systems are built in the first position and these systems are then continually modified until the user is satisfied.

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Fig 2. Prototyping model

Any system development methodology uses the five steps discussed above. Prototyping also involves these steps but they differ in how much time spent in each section and degree of formality involved. The first step in the designing in prototyping is to talk to the user and then related tools are used to create approximately what the user wants. This step generally requires only a couple of weeks. Then the user works with the prototype for certain time and suggests some changes. The analyst makes the changes and hands it back to the user and this cycle repeats until the user is satisfied or decides that the system is of no use. To obtain advantage from this approach, we need to emphasize on getting a working version of the system to the user as fast as possible. Once the working model is approved by the user, next step is to maintain and evaluate the system. Advantages of this system are that users receive a working system much sooner than they would in SDLC approach and users have more input so they are more likely to get what they want. Systems designed in this approach are much easier to change because it was designed to be modified from the start. Only disadvantage of this approach in a medium firm is large portion of time will be spent making changes.

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6. Security threats:
Information systems discussed above concentrate data in computer files that can potentially be accessed by large number of people both inside and outside the organisation. When data are stored in electronic form they are more vulnerable to many more kinds of threats than when they exist in manual form. Some major threats for the information in KMS are (Anderson 2003): Disasters: like fires, floods hurricanes and other physical disaster do not happen often. But, when a disaster hit a companys data centre then company will be destroyed. This threat can be overcome by using hot site or cold site, which mainly aims in backing up of the companys data. For example: It would have taken years for the people and companies to recover from the September 11 attack on World Trade Centre in New York. But, within minutes after the attack, businesses activated backup plans and rushed to SunGrad backup data centres in Philadelphia. Because of all these backup plans. It was possible to reopen stock markets on September 17 (Iwata and Swartz 2001). Employees and Consultants: Employees are the heart of a company. Companies function and succeed trusting their employees; however there may be chance that one employee will use the companys knowledge and experience to misappropriate resources. For example: Though its fictitious, in the movie Die Hard-4 movie, the villain of the story hacks all the traffic control systems and mainframe systems of America to steal whole of the financial assets from his computer. He was a formal intelligence officer in FBI who was abused and suspended for some reason. General ways of controlling this is by constant monitoring, hiring workers carefully, treat employees fairly and have separation of jobs. Outsiders: There is some threats from the outsiders who might dial up your computer and guess a password. Laudon and Laudon (2006) refer them to hackers who tend to gain unauthorized access to a computer system. This threat can be tackled by using appropriate firewalls and intrusion detection systems. Firewall is placed between the firms private network and public network to protect against unauthorized traffic. For example, Citizens bank in North Carolina, adopted Entercept- intrusion detection and prevention software which decides whether to permit a system request into a server from an external network source based on the signature of the request or behaviour rules (Alexander and Hamblen 2002). Viruses: These are form of software programmes which brings threat to the operating system of the system. These programmes can be hidden

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inside a document, sideshow, database or an e-mail. This threat is controlled by installing anti-virus software like Norton which is designed to check computer systems for these software programmes and eliminate it from the affected area. One of the famous virus infections attacked IBMs mainframe-based network during Christmas in 1987, when the network was brought to standstill for the loading of chain-letter Christmas card (Robson 1997).

7. Ethical issues
Information systems, with their penchant for enabling new ways of doing business, constantly introduce potential for ethical dilemmas (Piccoli 2008). In general the ethical dilemma faced by IS are argued by Masons acronym PAPA (Robson 1997). They are: Privacy: IS may pose questions regarding disclosures about a person and his interactions. The common good may encourage using IS capabilities to uncover socially damaging situation. For example, patterns in data stores that indicate criminal activities. Accuracy: Is may pose questions with respect to achieve informational accuracy and redress from inaccuracy. The error created, represents a potential for individual wrong or social damage. For example, 21 patients died in November 2000 because of the radiation poisoning in National cancer Institute of Panama. This was mainly because of misuse of a software system by a physicist (Gage and McCormick 2004). Property: IS may pose questions regarding the ownership of information and its transfer channels. In general, we can give an example of overstocking of common grazing land, where unregulated individual responses destroyed the asset for all Access: Is may pose questions with respect to access in information and technological logical capability. As the introduction of Information system in our firm, encourages the employees to use internet services more for connection and collaboration, risks may arise of non-work related activities in workplace like pornography. For example, in a cases study Mark Vernon (2002) has mentioned 72% of UK companies have faced this problem. This can be controlled by monitoring how and when internet is used by the employees. By doing this company may breach the law if individual privacy. This can be tackled by including a clause in the contract while employing and get consent of the employees to monitor them.

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8. Conclusion
Information system is an indispensable management tool which helps the organisation to attain competitive advantage. IS when coupled with complementary changes in organisation and management, it provides foundation for new services and ways of conducting business. As we discussed knowledge management is a set of processes to create, store, transfer and apply knowledge in the organisation. IT promotes learning by increasing the ability of the organisation to learn from its environment. Knowledge management systems can provide considerable value if they are well designed and enable employee to locate, share and use knowledge more efficiently. Finally, you being a information manager should consider the growing security threats and some ethical dilemmas before planning any Information system.

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9. References
Alexander, S. and Hamblen, M. (2002). Top-Flight Technology, Computerworld, September 23, 2002, p 30-32. Anderson, P. (2003). Systems development, Management Information Systems, 3rd edition. McGraw Hill: New York. Barnes, S. (2002). Implementing Knowledge management: Knowledge management systems, 1st edition. Thomson Learning: London Dransfield, R. (2001). Scanning the environment: Corporate strategy. Heinemann Educational: Oxford. Ewing, J. (2001). Sharing the Wealth, Businees Week e-biz, March 19, 2001. Gage, D., McCormick, J. (2004). We Did Nothing Wrong, Baseline magazine, March 2004. Iwata, E. and Swartz, J. (2001). Tech Firms Jump in to Help Companies Mobilize to Rebuild Systems, Reclaim Lost Data, USA Today, September 19, 2001. Johnson, G., Scholes, K. and Whittington, R. (2006). The Environment, Exploring Corporate Strategy, 7th edition. Prentice Hall: United Kingdom. Laudon, K.C. and Laudon J.P. (2006). Management Information Systems: Managing the digital firm, 9th edition. Pearson Education: New Jersey. McGee, M.K. (2004). Bigger and Better, Information week, March 22, 2004. Murphy, J. and Pryan, J. (2011). Economy in grave danger despite rise in output, London Evening Standard, p 1. November 1, 2011. Nance, B. (2001). Managing Tons of Data, Computerowlrd, April 23, 2001. Nonaka, I. (1991). The Knowledge Creating Company, Harvard Business Review, November- December 1991. OBrien, J.A. (2004). Management Information Systems: Managing Information Technology in the Business Enterprise, 6th edition. McGraw Hill: New York. Piccoli, G. (2008). Information system for managers. John Wiley & Sons: United States of America.

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Robson, W. (1997). Responsible IS management, Strategic Management & Information Systems, 2nd edition. Prentice hall: Great Britain. Rosencrance, L. (2001). Data Warehouse Gives Trimac Data for the Long Haul, Computerworld, July 30, 2001. Sethi, N. and Sethi, V. Knowledge Management and Collaboration at Tata Consulting-Case study, Nanyang Technological University. UK country profile (2011). The UK: In depth PESTLE insights. (Cover story), p181. Vernon, M. (2002). legal and ethical issues, Financial time,2 October, 2002. Figure 1. Enterprise-wide Knowledge Management system, [online]. Available at http://1.bp.blogspot.com/_vWVcWvZyXVE/SxNLukdhMrI/AAAAAAAAABE/utflXzv qdyI/s1600/6.jpg (Acceessed on 3/11/2011) Figure 2. Prototyping model, [online]. Available at http://rajeevprabhakaran.files.wordpress.com/2008/11/prototype.jpg (Accessed on 3/11/3011)

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