Strategy as Practice and Leadership

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The necessity to measure the cost and value of knowledge is at high importance, nevertheless, they remain unable to measure which is considered a grave impediment, per Simon 1999.

The main question is understanding how the company creates value using a knowledge base view (KBV) with the intention to advance the development of the KBV strategic theory.

The cost of inputs and the value of outputs could be accurately measured, whilst the cost and value of knowledge still can not be measured, nevertheless, it must be measured, estimated explicitly so that the efficiency and profitability could be determined.

The problem at the company is that the Division of Knowledge matter has not been distinguished as of yet.

Transference of knowledge in the company is quite a challenge, especially in the finance part. To ensure the transferability of the specialised organisational knowledge has been decided finally to be assembled on the Enterprise Resources Planning (ERP) which is currently a main objective for the firm to be activated on the new projects.

Tacit knowledge including skills, know-how, and contextual data is at high cost and transferrable but slow, the situation is that due to the high speed of turnovers, this type of knowledge must be explored and reinvented, considering the necessity of direct communication, intimacy and durability in order to transfer the knowledge between individuals. The recommendation is to overcome the loss of the tacit knowledge value is to firstly work on better retention plans of the employees, secondly to overlap the positions in the hiring programme to ensure the full transference. To enhance the codified knowledge, instead of working on separate excel spreadsheets, work collaboratively on a networked reporting model to be designed by consensus. In case of technical programmes, instead of working on separate external references Autocad files but work on a Building Information Model (BIM), which basically coordinates all disciplines together as if the buildings and master plans are executed on the real ground, in addition to calculation of quantities, cashflows, and costs in a timely manner. Reducing complexity also is a major objective to ensure maintaining the codified knowledge itself and its value.

What is considered as encapsulated knowledge is thought, reflection and experience embodied in an item or device or product. Encapsulation of knowledge is much needed in the company as it creates value without providing substantive knowledge. A mix of all three knowledge factors is necessary to engage in production.

A strong focus on the role of knowledge as a factor of production is necessary, per Grant 2002, p.133 suggestion.

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Intellectual capital and Social capital

Intellectual capital (IC) is currently categorized into three which are consecutively, the human capital, the structural capital and the relational capital in general, i.a. per Sveiby 1997. Another strategy of categorization by Gu and Lev 2001, is as follows:

- Research and Development;

- Advertising;

- Capital Expenditures;

- Information Systems;

- Technology Acquisition;

In light of the two stipulated categorization methods by Sveiby and another by Gu and Lev, and throughout the analysis procedure of the company’s knowledge management, few concerns arose. The first is that both methods are valid but more importantly insufficient. The fact that the company is currently embracing and most probably influenced by GU and Lev 2001 and their categorization method, the alternative ideal action in this case is to merge the two stipulated methods, which are complementary, for a more coherent and inclusive IC report model.

IC in a learning organization is knowledge which is considered a competitive advantage to the company.

Findings have proven that the competitive advantage associates a strong effect on the relationship of Intellectual Capital and financial performance. Therefore, for this assessment to be legitimate, the company must redefine the competitive advantage notion. As per Porter 1985, “competitive advantage is the ability to earn return on investment consistently above the average for the industry”. From the same perspective, value-creating strategy instills competitive advantage in the firm, per Barney 1991.

This paper criticizes the company which wrongly assuming that competitive advantage depends on technology, big scale of economy, and natural resources. This misconception requires an immediate redress and to remobilize the valuable capabilities, rare resources, non-substitutable individuals and hard to imitate resources, per Barney 1991, which are considered invisible intellectual assets. This act shall ensure a maximum performance and durability.

The current wide expansibility trait of the company by launching several mega projects consecutively every six months and with no assurance of the strategic intangible assets whether durable. The company’s economy growth in this case might be at risk. To ensure success of the on-going economical growth, the company must bolster the competitive advantage which mediates the IC and the financial performance.

For better financial reporting, other advanced views such as FASB NN 2001, categorizing in IC in much clearer breakdown as follows: technology, customer, market, workforce, contract, organization, statutory-based assets. The most recommended view this paper recommends is per German Schmalenbach Working Group 2002, which grouped the intangible assets into seven ideal capitals consecutively, innovation capital, human capital, customer capital, supplier capital, investor capital, process capital, and location capital.

For better measurement, normalization or standardization shall occur in a clear and well distinguished itemized financial reporting model. All reporting models shall be designed in the most accurate and measurable pattern and aligned with the technologies used or potentially to be used in the future. All standardized items must be speaking the same language, otherwise a tremendous amount of rework and interpretation between individuals and outputs shall occur while accompanied with enormous time consuming.

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Balanced Scorecard

See Appendix No. 2

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