Knowledge Management’s Strategy Taxonomy

Knowledge Management’s Strategy Taxonomy
Meir Russ

Department of Business Administration
University of Wisconsin-Green Bay
[email protected]
920-465-2757
Fax 920-465-2660
Jeannette K. Jones

American Intercontinental University – Online Campus
5550 Prairie Stone Parkway

Hoffman Estates, Illinois 60192
[email protected]

Based on the C3EEP framework we propose a taxonomy of Knowledge Management
(KM) strategies companies can use. The article will present the current stage of the
taxonomy. We currently have six frameworks of two*by*two KM strategies. Based on
our early studies, a framework for KM strategy will also be proposed. In addition, we will
present early findings connecting the taxonomies and the framework to outcomes. Future
research opportunities will be identified.
Key words: Taxonomy, KM strategy framework, Knowledge-Based Strategy, KM Levers
Category: Organizational aspects of KM

Paper submitted to Encyclopedia of Knowledge Management, 2nd Edition, David
Schwartz, editor. Comments are welcomed. You can circulate this article. You can cite or
refer to this article.

1

Introduction

The New-Knowledge based global economy reveals distinctive challenges to companies,
regions, national governments (e.g., Teece, 2000b, Statistics Canada, 2005), and
international organizations (e.g., Roelandt & den Hertog, 1999). Also, the emergence of
global networks and communications and the Internet presents strategic opportunities and
threats both to entrepreneurs and to companies (e.g., Tapscott and Williams, 2006).

Recently, an immense interest proliferation has been seen in the topics of knowledge and
knowledge management (KM) in the academic literature (e.g., Kluge et al., 2001,
Ruggles, 1998). Knowledge in the new economy is seen as the most important asset (e.g.,
Lytras et al. 2008). Notwithstanding this “hype,” the need for a better understanding of
managing knowledge and knowledge management as a strategic elements is more acute
than ever (e.g. Davenport and Grover, 2001; Gilmour, 2003, Soo et al. 2002).

The research prism presented here is similar to Bierly and Chakrabarti’s (1996) (which is
a rare example of an experiential study of KM strategies) and Pitt and Clarke’s (1999)
methodologies, which suggests that knowledge strategies will be an imperative area of
strategic choices that companies will have to make in order to succeed. The taxonomy
proposed below is based on the C3EEP typology described in earlier research. The
findings of our earlier research (Russ et al. 2005, 2006a, 2006b, 2008) indicate that four
of the six dimensions might be of most importance and will be used for the taxonomies
developed below.

Background

Numerous empirically based (descriptive) and theoretically based (prescriptive)
taxonomies of business and/or generic strategies were proposed by academics (see
examples of reviews at White, 1986; Parnell, 1997, Raisch, 2004). For example, Porter
(1985) used two dimensions of the competitive advantage (price and value) and the scope
of the market (whole versus niche), to define three prescriptive (generic) business
strategies: cost leadership, differentiation, and focus (niche), that was later extended (e.g.,
Wright, 1987). Another example was used in describing international business strategies,
while using the price sensitivity and customer responsiveness dimensions (Bartlett and
Goshall, 1989) to define four prescriptive strategies: international, global, multi-
domestic, and transnational, that were later validated (e.g., Leong and Tan, 1993) and
improved (e.g., Harzing, 2000). One of the most frequently used descriptive business
strategies was developed by Miles and Snow (1978) that identified four business
strategies: defenders, prospectors, analyzers, and reactors, that were also later validated
(e.g., Parnell and Wright, 1993) and extended (e.g., Wright et al., 1990).

A few typologies and/or taxonomies of KM strategies were also studied recently by
academics.

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Bierly and Chakrabarti (1996) identified four basic strategic dilemmas that companies
have regarding their knowledge base. The four dilemmas in their typology are: external
versus internal learning; radical versus incremental learning; the speed of learning and the
breath of their knowledge base. Bierly and Chakrabarti (1996) operationalized this
typology within the pharmaceutical industry by using five dimensional spaces as
measured by: R&D intensity, science linkage, knowledge dispersion, technology cycle
time and learning radicalness. Their descriptive taxonomy was comprised of four generic
KM strategies: the explorers, exploiters, loners, and innovators.

Pitt and Clarke (1999) proposed six dilemmas regarding companies’ knowledge base
when facing decisions regarding their innovation strategies. They proposed the following
typology: exploitation of their current product markets and technology base versus
exploration of new innovation domain; incremental innovation versus discontinuity; tight
control of the process versus flexibility; internal development of the innovation versus
acquisition from external sources; individual autonomy versus collective responsibility;
and creativity in the process versus procedural and formalized disciplined process.

Earl (2001) identified a descriptive KM strategy taxonomy comprised of seven, what he
called, schools: three technocratic schools of: systems, cartographic, and engineering; one
economic school: commercial and three behavioral schools: organizational, spatial and
strategic. For his taxonomy he used the following attributes: focus, aim, unit, critical
success factors, principal IT contribution, and philosophy.

KM Strategy taxonomies

Based on our previous research, we identified six taxonomies, each based on two
strategic dilemmas.

Codification-Tacitness and Exploration-Exploitation Strategies

Our earliest research (Russ et al. 2005) suggested that Codification-Tacitness and
Exploration-Exploitation strategic dilemmas might be of the most importance. Four
alternative strategies that companies can use when managing their KM assets (see Figure
1 below) were proposed within Taxonomy A. As part of this and later research (Russ et
al. 2006a and 2006b) we were also able to relate outcome effectiveness to the strategies
identified. Only in the case of this taxonomy, do we have definite conclusions.

3

Figure 1

Taxonomy A

Codification Tacitness .

Exploitation | Structured Utilization Intuitive Utilization

|I II

|

Exploration | Structured Innovation Intuitive Innovation

| III IV

|

Source: Russ et al. 2005

Type I companies employ the Structured Utilization strategy. Those companies
concentrate on exploiting their currently existing knowledge while also codifying that
knowledge. “Structured Utilizers” use codification and exploitation strategies
concentrating on codification of knowledge when sustaining their new product
development efforts to improve their existing products, and servicing their existing
clients to achieve higher process effectiveness. Such a strategy choice results in lower
(within Taxonomy A) product effectiveness than the exploration alternative (Type III has
a higher product effectiveness than type I ) and in higher process effectiveness than the
tacitness alternative (Type I has a higher process effectiveness than type II), based on our
research results.

Type II companies employ the Intuitive Utilization strategy. Intuitive Utilization
companies concentrate on exploiting their currently existing knowledge while
maintaining this knowledge as tacit. The “Intuitive Utilizers” use tacitness and
exploitation strategies focused on keeping the knowledge tacit, concentrating on
sustaining their new product development to improve their present products, and
servicing their existing markets. Such a strategy choice results in lower (within
Taxonomy A) product effectiveness than the exploration alternative (Type IV has a
higher product effectiveness than type II) and in lower (within Taxonomy A) process
effectiveness than the codification alternative (Type I has a higher process effectiveness
than type II). This seems to be the least effective strategy (out of the four mentioned here)
based on our research results.

4

Type III companies employ the Structured Innovation strategy. Structured Innovation
companies concentrate on exploring new knowledge to the extent that it is feasible while
codifying this knowledge. The “Structured Innovators” use codification and exploration
strategies that concentrate on codification of new knowledge as sustaining new
innovative product development and/or servicing new markets to attain higher process
and product effectiveness. Such a strategy choice results in higher (within Taxonomy A)
product effectiveness than the exploitation alternative (Type III has a higher product
effectiveness than type I) and higher (within Taxonomy A) process effectiveness than the
tacitness alternative (Type III has a higher process effectiveness than type IV). Out of the
four mentioned here this seems to be the most effective strategy, based on our research
results.

Type IV companies employ the Intuitive Innovation strategy. Those companies
concentrate on exploring new knowledge as much as they can while maintaining this
knowledge tacit. The “Intuitive Innovators” use tacitness and exploration strategies that
concentrate on developing new innovative products and/or servicing new markets while
keeping their knowledge tacit. Such a strategy choice results in higher (within Taxonomy
A) product effectiveness than the exploitation alternative (Type IV has a higher product
effectiveness than type II) and in lower (within Taxonomy A) process effectiveness than
the codification alternative (Type III has a higher process effectiveness than type IV),
based on our research results.
.
Exploration-Exploitation and External Acquisition-Internal Development Strategies

Our research findings (Russ et al. 2006a and 2006b) suggest that the combination of the

Exploration-Exploitation and that of the External Acquisition-Internal Development

dimensions is also significant, (see Taxonomy B in Figure 2 below). Figure 2

Taxonomy B

External Internal
Acquisition Development

Exploitation | External Utilization Internal Utilization

|A B

Exploration | External Innovation Internal Innovation

| C D

Source: Russ et al. 2006a

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Type A companies employ the External Utilization strategy. External Utilization
companies concentrate on exploiting their currently existing knowledge while focusing
on their core activities and using knowledge and capabilities from the outside to the
extent that it is feasible for everything else. The “External Utilizers” employ external
acquisition and exploitation strategies concentrating on their core capabilities to enhance
their existing products and servicing their existing markets while concentrating on
developing close relationships with external constituencies. This seems to be the least
effective, in terms of product effectiveness, strategy (out of the four mentioned here-
Taxonomy B), based on our research results. This might suggest that outsourcing
strategies might not be the most effective strategy when “product based outcomes” are
the focus of the strategy. However, this may not prevent this strategy from being the
most appropriate with regard to process efficiencies.

Type B companies employ the Internal Utilization strategy. Internal Utilization
companies concentrate on exploiting their currently existing knowledge while focusing
on developing most of the knowledge they need internally. The “Internal Utilizers”
employ internal development and exploitation strategies concentrating on developing
internally the knowledge they need to improve their existing products and servicing
existing markets while concentrating on developing close relationships within the
company.

Type C companies employ the External Innovation strategy. External Innovation
companies concentrate on exploring new knowledge focusing on their core activities
while acquiring the rest of the knowledge from external sources. The “External
Innovators” employ external acquisition and exploration strategies that concentrate on
supporting new innovative product development and/or servicing new markets while
centering their attention on developing close relationships with external constituencies.

Type D companies employ the Internal Innovation strategy. Internal Innovation
companies concentrate on exploring new knowledge to the extent that it is feasible while
developing most of the knowledge they need internally. The “Internal Innovators”
employ internal development and exploration strategies that concentrate on internally
embracing the new knowledge needed to support new innovative product development
and/or servicing new markets to achieve higher product effectiveness. This seems to be
the most effective strategy (out of the four mentioned here-Taxonomy B), based on our
research results.

Codification-Tacitness and External Acquisition-Internal Development Strategies

The outcomes results based on our earlier research (Russ et al. 2006a, and 2006b) also
suggest that the combination of the Codification-Tacitness and that of External
Acquisition-Internal Development dimensions might be of importance (see Taxonomy C
in Figure 3 below).

6

Figure 3

Taxonomy C

Codification | External Internal
Acquisition Development

External Codification Internal Codification

|1 2

|

Tacitness | External Tacitness Internal Tacitness

|3 4

Source: Russ et al. 2006a

Type (1) companies employ the External Codification strategy. External Codification
companies concentrate on codifying their core activities and using knowledge and
capabilities from the outside to the extent that it is feasible for everything else. The
“External Codifiers” employ external acquisition and codification strategies
concentrating on their core capabilities to improve their products and servicing their
markets.

Type (2) companies employ the Internal Codification strategy. Internal Codification
companies concentrate on codifying most of their knowledge as much as possible while
developing most of the knowledge they need internally. The “Internal Codifiers” employ
internal development and codification strategies that concentrate on internally embracing
the new knowledge needed to support new product development and/or servicing their
markets to achieve higher product effectiveness. This seems to be the most effective
strategy (out of the four mentioned here-Taxonomy C), based on our research results.

Type (3) companies employ the External Tacitness strategy. External Tacitness
companies concentrate on maintaining their core capabilities knowledge tacit and using
knowledge and capabilities from the outside as much as possible for everything else. The
“External Intuitive” use external acquisition and tacitness strategies concentrating on
their core capabilities to improve their products and servicing their markets while
centering their attention on developing close relationships with external constituencies.
This seems to be the least effective strategy (out of the four mentioned here-Taxonomy
C), based on our research results.

7

Type (4) companies employ the Internal Tacitness strategy. Internal Tacitness companies
concentrate on maintaining their knowledge tacit as much as they can while developing
most of the knowledge they need internally. The “Internal Intuitive” use internal
development and tacitness strategies that focus on embracing internally the knowledge
needed to support new product development and/or servicing their markets while
focusing on developing close relationships within the company.

Our recent study (Russ et al. 2008) suggested that the Product-Process dilemma might
also be of significance. Below we describe the feasible taxonomies resulting from the
combination of this dilemma with the other three dilemmas used above.

Product-Process and External Acquisition-Internal Development Strategies

The next taxonomy describes a combination of the Product-Process and that of External
Acquisition-Internal Development dimensions (see Taxonomy D in Figure 4 below).

Figure 4

Taxonomy D

External Internal
Acquisition Development

Product | External Product Internal Product

| 

|

Process | External Process Internal Process

| 

Type () companies employ the External Product strategy. External Product companies
concentrate their core activities on developing and managing their product strategies
externally, and using all other needed knowledge and capabilities from the outside to the
extent that it is feasible for everything else. The “External Product” companies employ
external acquisition to improve and or develop their new products concentrating on their
core capabilities to service their markets while making sure that their reward system is
consistent and supporting such activities.

8

Type () companies employ the Internal Product strategy. Internal Product companies
concentrate on developing most of their product knowledge they need internally, while
using as little as possible of all other needed knowledge and capabilities from the outside
for everything else. The “Internal Product” companies concentrate their core capabilities
on internal development to improve and or develop their new products and use external
partners to develop and serve their markets, while making sure that their reward system is
consistent and supporting such activities.

Type () companies employ the External Process strategy. External Process companies
concentrate on maintaining their products and focusing their core capabilities knowledge
on process improvement by using knowledge and capabilities from the outside as much
as possible. The “External Process” companies use external acquisition and process
improvement strategies concentrating on their core capabilities to improve their processes
and servicing their markets while centering their attention on developing close
relationships with external constituencies and while making sure that their reward system
is consistent and supporting such activities.

Type () companies employ the Internal Process strategy. Internal Process companies
concentrate on improving the process knowledge they need internally, while using as
little as possible of all other needed knowledge and capabilities from the outside for
everything else. The “Internal Process” companies use internal development that focus
on embracing internally the knowledge needed to support new process development
and/or servicing their markets while focusing on developing close relationships within
the company, while making sure that their reward system is consistent and supporting
such activities.

Product-Process and Codification-Tacitness Strategies
The next taxonomy describes a combination of the Product-Process and that of
Codification-Tacitness dimensions (see Taxonomy E in Figure 5 below).

9

Figure 5 Tacitness
Taxonomy E
Codification Tacit Product

Product | Codified Product Tacit Process
|
|

Process | Codified Process
|

Type ( ) companies employ the Codified Product strategy. Codified Product companies
concentrate on codifying their knowledge of product development and management
focusing on their core capabilities to improve their products and servicing their markets.
Codified Product companies sustain their process development efforts to improve their
products and servicing of their clients to achieve higher product effectiveness by using
the most appropriate source of knowledge and using the appropriate IT systems to
support their core capabilities as needed.

Type ( ) companies employ the Tacit Product strategy. Tacit Product companies
concentrate on maintaining their knowledge of product development and management as
tacit, focusing on their core capabilities to improve their products, and servicing their
markets. Tacit Product companies sustain their process development efforts to improve
their products and the servicing of their clients to achieve higher process effectiveness by
using the most appropriate source of knowledge and using the appropriate IT systems to
support their core capabilities as needed.

Type ( ) companies employ the Codified Process strategy. Codified Process companies
concentrate on codifying most of their process knowledge as much as possible. The
Codified Process companies employ codification strategies that concentrate on internally
embracing the most appropriate source of knowledge and using the appropriate IT
systems to support their core capabilities that will result in higher process effectiveness.

Type ( ) companies employ the Tacit Process strategy. Tacit Process companies
concentrate on maintaining and developing their process knowledge tacit as much as they
can. The Tacit Process companies use tacitness strategies that focus on embracing
internally the knowledge and the use of the appropriate IT systems to support process
development and/or servicing their markets while focusing on developing close
relationships within the company.

10

Product-Process and Exploration-Exploitation Strategies
The next taxonomy describes a combination of the Product-Process and that of
Exploration -Exploitation dimensions (see Taxonomy F in Figure 6 below).

Figure 6
Taxonomy F

Exploitation Exploration

Product | Product Utilization Product Innovation

|

| Process Innovation
Process | Process Utilization

|

Type ( ) companies employ the Product Utilization strategy. Product Utilization
companies concentrate on exploiting their currently existing product knowledge while
servicing their existing and/or new markets. The Product Utilization companies employ
existing and/or new processes concentrating on their core capabilities to enhance their
product strategies and focusing on their core activities and using knowledge and
capabilities to the extent that it is feasible for everything else.

Type ( ) companies employ the Product Innovation strategy. Product Innovation
companies concentrate on exploring new knowledge focusing on new product
development activities while utilizing their existing knowledge for the non core activities.
The Product Innovation companies employ product and exploration strategies that
concentrate on supporting new innovative product development and/or servicing new
markets while centering their attention on delivering those products to their customers.

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Type ( ) companies employ the Process Utilization strategy. The Process Utilization
companies employ process and exploitation strategies concentrating on utilizing their
currently existing process knowledge while also focusing on improving their process
strategies and servicing existing markets.
Type ( ) companies employ the Process Innovation strategy. Process Innovation
companies concentrate on exploring new process knowledge to the extent that it is
feasible. The Process Innovation companies employ internal and/or external resources for
development of new processes to service their markets while improving on their process
strategies.
KM Strategy Framework
If the six C3EEP strategic dilemmas describe above are combined with the KM strategic
levers and outcomes measures as were identified in our earlier research (e.g., Russ et al.
2005, 2006a, 2006b), a possible framework for KM strategy emerges (see Table 1
below). The levers that were found to be of significance in regards to the strategic
dilemmas as well as the outcome indicators in our earlier research are marketed with an
“X” under each strategic dilemma.

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Table 1 – KM Strategy Framework

Codification versus Complementary versus Concealment versus External Acquisition Exploration versus Product/Service versus
versus Internal
Tacitness Destroying Transparency Development Exploitation Process

KM Levers/Outcomes

Product/Service Development- X XX
strategy X X

New Product developed in the last
two years-weight

Market-Scope X X

Customers X

Technology X X

Processes-Capabilities X

Employees utilization X X

Rewards XXX X

The role of IT X

Use of IT and Data X X X

Product Effectiveness XX

Process Effectiveness X

Source: Russ et al. 2006a

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Conclusions

This framework should provide KM practitioners, as well as academic researchers with
guidelines regarding where to focus their attention, and where to focus resource allocation when
considering alternative business and KM strategies (e.g., Pitt and Clarke, 1999).

For example, companies that utilize Codification strategy and are investing intensely in IS
technology are advised to verify/ensure that their reward systems and employee utilization
strategy (as well as culture) are aligned (e.g., Bartol and Srivastava, 2002; Cowan et al. 2000;
David et al. 1992). Companies are advised not to forget the need to balance this internal focus
with the need to develop appropriate new products as part of the appropriate Exploration strategy
(e.g., Baker and Sinkula, 1999; Connell et al. 2001; Miner et al. 2001; Shoham and Fiegenbaum,
1999).

Our research findings also suggest that the Codification strategy is more appropriate when the
company’s focus is on process effectiveness as a major outcome while the “Exploration-
Codification-Internal Development” strategy is more appropriate when the focus is on product
effectiveness as a major outcome. A plausible explanation for this might be that process
codification might make it easier to measure and manage when focusing on process effectiveness
as a critical success indicator (e.g., Davenport, 1993), while for success in New Product
Development, identifying new customers and exploring new needs is more pertinent (e.g., Smith
and Reinertsen, 1998).

Future trends

Our own research as well as others (e.g., Miller et al. 2007) would suggest that companies are
using a combination of the six taxonomies mentioned above, and that there are synergies
between some of them more than others. For example, the “Internal-Codifier-Innovator” (“2” *
“III” using our taxonomies notation) strategy (in our research, Russ et al., 2006a), seems to be
the most effective in terms of product and process effectiveness, on the other hand, the
“External-Intuitive-Utilizer” (“3” * “II” using our taxonomies notation) strategy seems to be the
least effective strategy. Or, as Miller et al. (2007) found within manufacturing firms that product
strategies and exploration strategy together with focus on radical innovation seem to work hand
in hand as well as process strategies and exploitation strategy with focus on incremental
innovation; which in our taxonomy translates into Product- Innovator- Destroyer and Process-
Utilizer-Complementer. Questions of interest can be raised here. Will some industries provide a
more fruitful environment for different combinations than others? If different sized companies,
will they have a tendency to use or avoid specific strategies and combinations of strategies?
Also, what different key success indicators aspired by the companies might be supported by
different combinations of strategies? For example, outcomes of profitability and earnings, might
show different results (e.g., Russ et al. 2005).

There are two additional dimensions of the C3EEP typology that were not used yet for KM
strategy taxonomies (Complementary-Destroying and Concealment-Transparent). We would
suspect, that these two dilemmas will become more and more important due to recent ICT trends

14

(e.g., Russ et al. 2008). The question raised here is, which of the nine plausible combinations that
the two dilemmas are adding in combination with the previously mentioned four are of more
importance (if there is any difference in importance)? We must also, keep in mind the relevancy
of industry and company size.

As mentioned in our earlier research, we would like to remind the reader, that there is a crucial
need to incorporate the aspects of organizational culture and the technology aspects of KBS in
each KM strategy discussion, which unfortunately is rarely done (see a rare recent example in Im
and Rai, 2008).

Key Terms

KM strategy prescriptive Taxonomy
The classification of the types of KM strategies in the context of business strategy at the
corporate, strategic business unit, functional and operational level of analysis, prescribed
by researchers based on theoretical studies resulting first in typology.

KM strategy descriptive Taxonomy
The classification of the types of KM strategies in the context of business strategy at the
corporate, strategic business unit, functional and operational level of analysis, described
by researchers, based on study findings and the typology interpreted by them.

Organizational KM strategy
The strategy (the mission, visions, goals and the game plans of achieving them) the
organization has in regards to its knowledge base and its ties to its capabilities,
competencies and business strategies resulting in value to its constituencies.

Organizational Knowledge-Base
Consists of knowledge embedded in systems, software resulting in structural knowledge
(capital), in processes, relations, etc., resulting in social knowledge (capital), in people as
tacit knowledge, resulting in human knowledge (capital), and in patents, brands, etc,
resulting in Intellectual property. This is the lowest layer of what the organization is (in a
knowledge based perspective) supporting capabilities, competencies, sustainable
competitive advantage resulting in value (e.g. profits, etc.).

KM strategy levers
Organizational, technological and human resources means and arrangements put in place
that will allow to improve the effectiveness of KM strategy and/or systems by
multiplying their effectiveness and also by proving a mechanism for adjustment when
and where needed.

Process effectiveness as an outcome
Setting up the right targets for how the organization creates and delivers its
product/service to its customers. Specifically, the indicators used were: increase in
productivity, work conditions improvements, and decrease of complaints by customers,
reduction of costs and ability to meet deadlines.

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Product effectiveness as an outcome
Setting up the right targets of what products/services the organization creates and delivers
to its customers. Specifically, the indicators used were: increase in number of customized
products/services, variety and number of new products/services offered.

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