Knowledge management is essential in the strategy formulation, as Nonaka (1991) highlights that it is considered as a strategic resource. He further adds that knowledge management is the actionable form of strategy and can be used effortlessly to manage everyday business. O’Dell (1996) did research on the knowledge management and considered it as a foundation of business strategy.
Therefore, he sums up that knowledge management provides know-how and know-why ideas, and initiates in the strategy formulation.
Knowledge management focuses on establishing knowledge management and knowledge creation strategies (Hansen, et al., 1999). One dimension of knowledge management is to create, store, share and use in the firms. The strategy as per this dimension is storing knowledge for further implementation, that can be done individually and, in a group, to fulfill the organizational mission under certain circumstances. Another dimension is to emphasize on knowledge sharing, that can happen via interpersonal interaction by social networking in between team (Lee & Kim, 2001). Moreover, creation of new knowledge is possible because of existing knowledge, and both implies together in the strategy formulation. However, it depends on tacit and explicit knowledge of corporate level, business unit level and individual level, and becomes the source of strategy, that comes from the knowledge grafting process (Huber, 1991).
16 This thesis is entirely based on sales prospective, and research concentration related with individual level. It is well known that firms should implement various strategies during the sales process, but sales strategies originate from sales knowledge (Reiter, et al., 2011). Similarly, other strategies interplay with sales strategies in order to complete the sales process. Therefore, this is probably why sales knowledge has important role to relate its responsibilities while formulating sales strategy (Terho, et al., 2015). Thus, an effective knowledge management strategy is necessary not only in sales process, but also important on strategic planning for the future (Hansen, et al., 1999).
Terho et. al (2015) pinpoint that strategy formulation happens in the corporate level as a vision & mission of the firms, subsequently, that becomes objectives, later it happens to be organizational strategy for long term. They further argue that sales strategy is the byproduct of organizational objectives, which works as a catalyst in the sales process. It is also considered as the long-term direction of sales process. Therefore, outcome lies in the experience of managers.
The determinants of sales strategies are the individual capabilities of managers.
It seems, they have minimal influence while having sales, in fact those knowledges and skills are mainstream factors. To accomplish the sales process, managers follow quite a few processes simultaneously. On the other hand, they build up some strong factors in order to accommodate over such determinants (Terho, et al., 2015).
Furthermore, organizational strategy should develop appropriate networks with customer relation departments, where product promotion strategies initiate to support sales and selling department on retaining prospective customer. In addition, the effective role of key account management also impacts on sales and selling. For instance, the coordination between senior managers with junior manager could influence on initiation of marketing and communication strategies.
17 In this thesis, Nonaka and Takeuchi (1995) SECI model is followed precisely to understand knowledge management. He refers that particularly tacit knowledge and explicit knowledge have huge impact on knowledge management. In addition to that same authors have proposed four ways of knowledge integration for knowledge creation. This model indicates that it identifies existing knowledge, shares what knowledge is required, develop new knowledge, maintains quality of the knowledge and dispose of the knowledge if no longer needed. In order to combine and convert the existing knowledge into new knowledge, they have created model as outlined below.
Figure 4: SECI model of knowledge creation
(adapted from Nonaka & Takeuchi 1995, pp 57,62,71)
18 The SECI model of Nonaka and Takeuchi (1996) present that socialization is the first step to begin conversion of tacit knowledge, refer the acquisition of tacit knowledges by the people who do not have it from the people who do. Ever since, knowledge is considered as the important resource in the firm, it has important role in any faculties. In response to the knowledge management, it should be true and applicable knowledge, otherwise tacit knowledge turns into information (Dayan, et al., 2017).
In response to socialization, Dayan, Heisig and Matos (2017) clarify that knowledge management and organizational strategy shares similar properties.
Same authors have specified that the relationship impacts not only on operation, but also on the creation of the organizational value. In addition to that Pawlowsky and Schmid (2012) conclude that knowledge management has a significant influence on the organizational performance, and same author consider that knowledge management method is still the most popular management tool for new knowledge creation.
Furthermore, Porter (1998) pinpoints that knowledge is essential for the firms sustainability, he considers human resources are the determinant factors for the knowledge management, when firms able to transform best tacit knowledge from the human capital into explicit knowledge, which then becomes part of the organization and remains as an organizational strategy. Even though, some of the knowledge comes into practice accidentally (Nonaka & Takeuchi, 1995), once people learn it, they can reflect on it and perhaps get success in creating new knowledge.
Externalization, the next step in the knowledge management process, Nonaka and Takeuchi (1995) refer that two different departments, or two or more groups from same business unit share their best-known ideas for assessing and understanding their best knowledge for the better result. The externalization allows the transformation of informal knowledge into formal knowledge, however
19 it needs a matching process of knowledge internalization (Kalpic & Bernus, 2006).
Holsapple and Joshi (2002) proposed that externalization gives managers a practical way to approach cross organizational knowledge, which is considered as a practical benefit of knowledge management. Walczak (2005) presents that an organization’s functional knowledge transforms successfully from upper level to lower level, which enables maximation of competitive advantage through knowledge sharing.
The next step in the SECI model is combination, Nonaka and Takeuchi (1995) highlight that this step is a process of systematizing concepts into a knowledge system, it happens when various explicit knowledge emerges and converts into new form of explicit knowledge. He sums up that combination of knowledge happens due to the various activities such as talking, listening, reading and writing, particularly between corporate level and business unit.
The final step is described as internalization, it is a process of symbolizing explicit knowledge into tacit knowledge. Nonaka and Takeuchi (1995) consider it as a traditional process of learning by doing. Individuals, team and all departments could implement their efforts respectively. Same authors have analyzed that individuals could also internalize their experience by documenting what they experienced, so that other people could experience the experience of others in order to build their notion. Whereas corporate level could also internalize their knowledge by disseminating their explicit knowledge towards business unit and to the individual level.
Due to the limitation of the thesis, the individual level is particularly concentrated in order to interpret the theories and literature. As per the SECI model of knowledge management, everyone in the firms are precisely important in the knowledge creation. In the sales prospective, all of the sales professionals get to fetch own experience and could be valuable in the sales process (Jobber &
Lancaster, 2015). While addressing knowledge management, most authors refer
20 that it is instrumental in strengthening organization’s competitive position (Becerra-Fernandez, et al., 2008) (Dayan, et al., 2017) (Easterby-Smith & Prieto, 2008). Therefore, knowledge management is relating to human capital (Dayan, et al., 2017), due to the skills and experiences, sales professionals should play an essential role in the formulation and implementation of strategy for the benefit of the organization (Madhavaram & McDonald, 2010) (Terho, et al., 2015).
Therefore, following section has defined to understand the knowledge management steps.
2.4.1 Knowledge Acquisition
Becerra-Fernandez et. al (2008) analyze that knowledge acquisition is the process of structuring the knowledge from one source to another, it completely depends on person how they relate their information each other. Some authors also referred that knowledge acquisition is also an individual acquisition, so that the use of knowledge depends on the person’s perception and their interpretation of certain events and actions.
In addition to that Grant (1996) proposes knowledge flows systematically in the organization from the individual level to the team, and team contributes to transfer their knowledge in the organizational level, such knowledge acquisition provides strategical value for further implementation. Thus, knowledge acquisition is also an individual acquisition, and impacts on individual’s knowledge and interpretations (Probst, et al., 1998, pp. 87-21). Therefore, it is a process of converting explicit knowledge into tacit knowledge in order to internalize salespeople’s knowledge into strategical form (Becerra-Fernandez, et al., 2008).
2.4.2 Knowledge Integration
Knowledge is the most strategical resources of the organization. The solid form of knowledge comes from various level. The process of combining specialized
21 knowledge happens individually or in a team at top management to floor management. The integrated knowledge from individual level forms new knowledge and firm establishes long term strategy (Becerra-Fernandez, et al., 2008).
Furthermore, the integration of knowledge increases strategical output, while knowledge plays a role of input. As a result, each individual shares their specialized knowledge and firm formulates dynamically competitive strategy via integration of the specialized knowledge (Zack, 1999). Therefore, in the formulation of new and appropriate strategy in the firm, knowledge integration works as the strategical integration. At last, Zack (1999) refers that knowledge integration means the combination of many forms of knowledge for success.
2.4.3 Synergistic Knowledge Growth
Becerra-Fernandez et al. (2008) say that the synergistic outcomes from the knowledge integration is greater than the individual sum of their separate effects.
Synergistic knowledge growth happens with the integration between two or more individual or organization. It supports on prospective making and prospective taking between individual, group and organization. As a result, the outcome from the collective knowledge is the synergistic, and greater than each individual’s knowledge.
In particular, the synergistic knowledge growth is applicable for combination of previous knowledge with the present knowledge, and development of new form of knowledge, which happens by the process of knowledge grafting process (Becerra-Fernandez, et al., 2008).
22