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Requirement
In this part of the assessment you have to write a 3000 word long report investigating BHP Billiton Ltd. With regards to your chosen case organization, please explain and discuss the following:
The purpose of innovation from a knowledge management perspective can be divided into knowledge exploitation and knowledge exploration. Using the lecture and seminar material of this module, in relation to the statement above and based on your own research, explain how innovation can be managed in supply chain contexts. Use practical examples from the world of business to underpin your arguments.
Please follow below instructions
Apply Maximize knowledge exploration and exploitation throughout the whole assignment on IT Innovation.
1) Abstract (300 words)
- A summary of whole assignment
2) Introduction of the company (100 words)
3) Explain Cognitive Hierachy (300 words)
a) To explain the classical Greek Period (as attached)
i. Ackoff’s Apex
4) Apply into BHP Supply Chain Process using Rothwell 5 models of Innovation (as attached)
a) Is BHP Innovative / not Innovative (750 words)
5) Framework (700 words)
- Using Nonaka Framework 1994 (as attached)
6) Using 4 & 5 to link a business relationship which will be more to highlighting practical examples of the company. (750 words)
7) Conclusion (150 words)
- Give your own opinion (a comparison)
8) Referencing at least 20 sources of journal articles
Solution
ABSTRACT
This assignment illustrates the paradigms of innovation from a knowledge management perspective. Knowledge exploitation and exploration are the two pillars of knowledge management which has been addressed in detail in this work. BHP Billiton has been chosen as the organization where the relevant effects of innovation in terms of knowledge management have been analysed. Knowledge management and innovation have been discussed in the lights of various frameworks like Cognitive Hierarchy, Rothwell’s 5 generations of innovation model, Nonaka framework, etc. in this assignment to have a better acumen about innovative processes undertaken in the supply chain of BHP Billiton. Cognitive hierarchy have been elaborated as per the DIKW pyramid which talks about the various levels of cognizance namely, data, information, knowledge and wisdom. Again this theory has been elaborated in Ackoff’s Apex which further dissects the wisdom section of Cognitive Hierarchy Pyramid into various levels of cognizance like understanding, knowledge, etc. Rothwell’s 5 generations of innovation model brings in a different perspective for innovation where it is explained that innovation is driven by the various trends prevalent in the market for a particular generation. Nonaka framework deals with 4 distinct knowledge conversion process which is termed as SECI model. As per this framework knowledge creation is the direct effect of individual and socialization process. All these frameworks and models have been critically analysed and applied in a knowledge management perspective with reference to BHP Billiton as the chosen organization. Lastly this work ends with a critical evaluation and opinion of the writer on all these theories and their application by BHP Billiton. This work covers all the relevant frameworks to understand and examine the knowledge management process for innovation with special reference to knowledge exploitation and knowledge exploration.
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INTRODUCTION
21st Century has been the age of information, which has driven growth for businesses all over the world. So developing effective information management techniques has been of utmost importance for organizations to create innovation and remain relevant in the market. Information leads to knowledge exploitation and exploration which is essential for growth. This work has chosen BHP Billiton as the organization to analyse the various theories and frameworks related to knowledge management and innovation. This work will progressively delve deeper into all the aspects of knowledge management.
BHP BILLITION Ltd.
BHP Billiton is an Anglo-Australian multinational company working in the mining, metal and petroleum sectors. The headquarter of the company is in Melbourne, Australia and is the world’s largest mining company by revenues. This company was formed by the merger of Australian Broken Hill Proprietary Company (BHP) and the Dutch company Billiton. BHP Billiton is a dual-listed entity in both Australian stock market as well as London Stock exchange. Both the companies have a rich history in terms of operations in the mining industry. Billiton had started its operations way back in 1860 at Netherlands whereas Broken Hill Proprietary Company had started in 1885 in western New South Wales, Australia (Bukowitz & Williams, 2001).
COGNITIVE HIERARCHY:
Cognitive Hierarchy or the DIKW Pyramid is a model or framework to establish the structural or functional relationship between data, information, knowledge and wisdom. Data can be thought of symbols or signs which are unorganized and have no meaning if looked at in isolation. This data when interpreted properly will give rise to information and if assimilated in our learnings then gives rise to knowledge. Knowledge can be referred as belief structuring and internalization of all the information gathered from the surroundings and then processing them. Wisdom has been interpreted in different terms by many scholars, one such interpretation was given by Ackoff (Chang Lee, Lee, & Kang, 2005). Ackoff defined wisdom as an escalation of the understanding which is an appreciation of why from any gathered data. Wisdom has been dissected into three layer of knowledge, understanding and wisdom in Ackoff’s Apex model. Understanding has been presented as an intermediate layer between knowledge and wisdom in the Apex model. Wisdom can be interpreted as the ability to increase the effectiveness of interpretation. Wisdom adds value to the knowledge which we often term as mental judgement. The values that are created through wisdom are unique and particular to the person who is in action. Wisdom can also be seen as an integrated knowledge form which is useful to the highest level if applied properly. It gives human beings the ability to judge and take decisions between right and wrong, good or bad. This also introduces the question of subjectivity since it is unique for every human being. When a person acquires wisdom it means he has made full use of the structural and functional integration between data, information and knowledge to incorporate into the decisions taken by him (b, 1994).
BHP SUPPLY CHAIN PROCESS:
BHP Billiton is a multinational organization with operations in multiple countries and varied sectors. So it becomes very complex to integrate such operations on a single unified platform. A brief look into the business operations of BHP Billiton will give a clear picture of its supply chain requirements. The discrete parts of the organization are dissected and managed in different organizational units all over the world so that they are able to impart high quality and expert service to its partners and customers. Geographical diversification of BHP Billiton is explained as follows (Carlucci, Marr, & Schiuma, 2004):
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Copper refineries is located in Santiago given that the major copper assets of BHP Billiton is situated in Chile;
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Iron Ore processing plants have been set up near Perth as it is closely situated to the iron ore assets in Pilbara;
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Coal handling plants are located in Brisbane provided the close proximity of the coal mines near New South Wales and Queensland’s Bowen Basin;
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Petroleum establishments have been erected near Houston as they are in the vicinity of onshore as well as offshore assets located in US.
BHP Billiton has a philosophy of establishing their major operations unit close to the material assets. Consistent with this policy it has set up its marketing office in Singapore although marketing activities have also been taken up in Houston. This helps in achieving several targets which are listed below (Chang & Chang, 2004):
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It helps in providing an informed, data driven, analytically sound acumen in terms of long-run supply/demand and pricing of their commodities.
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Gives an exposure to clients about their commodities through marketing activities.
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Helps in superior supply chain management of the products from assets to markets.
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Data driven approach helps in having an in-depth understanding of the usage of their products and how the customer needs are changing over time.
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Charge superior price for their products (Allameh, Zare, & Davoodi, 2011).
Long back in 2003 BHP Billiton had established mySAP for the superior management of it supply chain procedure. It enabled BHP Billiton in superior control over the supply chain processes from mines to stockpiles to the end customers (Chirumalla, 2013). The capabilities of mySAP bolstered the supply chain mechanism of the diversified resources company to have increased visibility into its operations, flexible decision making and integrated planning approach which go a long way in reducing inventories, transportation costs and other allied costs. In the first phase of the implementation mySAP was implemented only in the manganese business while it was scheduled to be expanded in other businesses as per the success it achieved. It realised different capabilities namely, demand planning, supply network planning and global stock to order systems. In the second phase it was extended to transportation planning and execution. BHP Billiton invested in several of the SAP modules like Scheduler’s Workbench, SAP Trader’s. These are all industry specific solution packages developed by SAP. It was executed to have more control and reduce the costs in bulk transportation management.This supply chain innovation solutions were slowly rolled out to iron ore as well as coal business (Chong & Choi, 2005).
Rothwell’s 5 generations of innovation model – Rothwell had identified that innovation is driven by different macro as well as micro factors prevailing in the market in a particular generation. Some of the factors include economic growth, industrial expansion, intense competition, inflation, stagflation, economic recovery, etc. As generations evolve a
Company should also reinvigorate itself to remain relevant in the market as per this theory. The 5 tenets of this theory are as follows:
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Technology Push – During 1950 to 1960 there was tremendous industrial expansion which led to a demand for extensive R&D and technological impetus. This can also be mapped into BHP Billiton’s growth. They had increased focus on innovative scientific breakthroughs to attain economies of scale during this period. There was lot of investment in mechanizing the extraction process of minerals (Claver?Cortés, Zaragoza?Sáez, & Pertusa?Ortega, 2007).
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Market Pull – This then transpired into capturing market shares in the 1960s and 1970s. There was an increased demand for customized solutions for every products and processes. Billiton had also taken part into market researches to understand the market sentiment and create value in terms of smooth supply chain (Akhavan, Jafari, & Fathian, 2005).
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Coupling of R&D and marketing – After that there was the decade of consolidation driven by inflation and economic stagnation. Elaborate spending on marketing or R&D was brought at a halt and focus was increased in developing product portfolios. By that time Billiton had settled its supple chain process and standardized approach was adopted in supply chain management for cost effectiveness (Chua & Lam, 2005).
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Integrated Business Processes – When the world economy emerged from recession, the crucial theme for a successful business was establishing an integrated approach to doing business. Billiton also established strong linkages between supplier and customers to develop a total concept in supply chain.
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System Integration & Networking – After 1990’s there started an intense struggle over resource allocation. Businesses started investing in enterprise resource planning and information system management. At this time BHP Billiton focused on information and communication technologies. It incorporated the SAP software packages as discussed above to smoothen the supply chain process and achieve cost effectiveness (Hakim & Hassan, 2011).
NONAKA FRAMEWORK:
Ikujiro Nonaka has done a notable work in the field of knowledgeman agent where he integrated the concepts of tacit knowledge and explicit knowledge. It is seen that western organizations focus more on the explicit knowledge which has found place in most of the western journals and articles regrading knowledge management. Nonaka then came out with the SECI model which became a stepping stone on the knowledge creation and conversion theories. It proposed that knowledge types can be combined and converted by four ways in an organization which are as follows:
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Socialization (Tacit to Tacit/originating ‘ba’): This dimension illustrates the effect of social interactions which is done face-to-face though personal experiences e.g. meetings, seminars or brainstorming sessions can create the eco-system for this kind of knowledge sharing. As tacit knowledge attainment is difficult to perceive it is often or not that tacit knowledge is time and space related which is acquired only through shared experience and spending time together or living in the same ecosystem. Perfect example of tacit knowledge would be the learning obtained by an intern through hands-on experience rather than the knowledge acquired by reading a book or manual. It is obtained through on-the-job training and by putting knowledge into practice (Iverson & Mcphee, 2002).
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Externalization (Tacit to explicit/interacting ‘ba’): It happens when tacit knowledge is expressed blatantly and simply in the form of channel of communication. The tacit knowledge gets embedded in the mode of communication like images, concepts, and written documents, etc. When tacit knowledge is explicitly stated then it percolates in the mind of the audience, thus it can be shared by anyone from then on and becomes the bedrock for knowledge creation and knowledge conversion (Mas-Machuca & Martínez Costa, 2012).
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Combination (Explicit to explicit/ Cyber ‘ba’): Explicit to explicit knowledge is created by integrating already available explicit knowledge for example building a prototype of a known concept. The innovative use of communication technology and information systems may bring about this kind of knowledge conversion. Today’s data driven world can be a perfect example of a combination type of knowledge creation or conversion. The data collection for combination process is done from outside the organization and then it is integrated with the information already available in the organization to process it and come out with a knowledge conversion. The new knowledge acquired and established is then diffused among the members of the organization (Monteiro, 2016).
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Explicit to Tacit (Internalization/exercising ‘ba’): Explicit knowledge conversion is achieved by doing things by own hands. A very good example would be MBA graduates who have the explicit knowledge by reading various reading books and course outlines. But they can convert this explicit knowledge into tacit knowledge by having a hands on experience on the subject matter which they have learnt in college (Frost, 2004). Explicit knowledge becomes part of a person and thus becomes an asset to the organization. Internalization is also about continuous self-evaluation by the individual and reflecting about his knowledge and learnings so that he can evolve as a better human being. It helps the person to connect the dots and recognize patterns thereby judging on the basis of good or bad, right or wrong. This adds value to the organization as it develops decision making capabilities for the business.
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Place Your OrderBUSINESS RELATIONS OF KNOWLEDGE MANAGEMENT:
Supply chain relationships – All companies all over the world have relationships with its customers and suppliers. It helps in defining the objectives and goals of a business where these relationships can act as an asset or burden depending on their application. These all depends on how well they are managed by the companies’ managers (Siqueira, Priem, & Parente, 2015).
In relationships companies are allowed to access resources of partners which can be anything ranging from human capital to knowledge or experience, etc. There can be an effective exchange of resources in case there is a good relationship establishment initiative(“A study of knowledge management process practices in very small software companies,” 2011).
Relationships always need to be a two way communicationsthere need to be contribution from both the parties. This is a useful way of risk management as they are then equipped to deal with uncertainties. It also depends on the companies’ needs and motivation to learn.
Facets of relationship - Knowledge Management and innovation can be used to achieve efficiency. They can be applied for rationalization of supply chain process of a global powerhouse like BHP Billiton. As Billiton is combination of two companies, there can be efficient structure establishment between the two companies which form part of a larger activity structure. This helps in efficient use of resources among the two organizations and they are free to develop complimentary resources which they can share or exchange as per requirement. These activity links in supply chain helps to reduce cost through economies of scale (Storey & Kahn, 2010).
Relationships can be used as a source for innovation as all the companies are dependent on other entities for resources or technical know-how. Production, services or logistics all are intertwined with relationships with counterpart companies. Relationships play a vital role in the following issue:
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Customizing & adapting offerings
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Development of brands
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Creation of an identity for the business
A business can use relationship to its advantage by acquiring the power of influencing others. It gives them grater bargaining power with their suppliers or customers. A typical example would be the supplier relationship and network management done by Toyota with its suppliers. This can also be seen in thelight of Porter’s Five Forces model where bargaining power with customers or suppliers establishes a company in strong footing.
Substance of relationship – These deals about the various processes that should be employed for a successful relationship development. At first the parties need to understand each other fully before proceeding with collaboration strategy. The needs and expectations of each other has to be understood, there might be distance between the two organizations in terms of social distance, cultural distance, time distance or technological distance. These differences between the two concerned parties can be reduced through effective collaboration and dialogue.
Activity links between the companies needs to be established to effectively leverage the relationshipbetween the two entities. In order to develop, both have to make certain investments with respect to time and finance to tie-up resources with each other. This leads to commitment from both the parties and future possibility of growth. Adaptations as per the needs of the counterparty can lead to competencies developing outside the comfort zone of the organization (Tan, 2011).
Customer Relationships – Some customers go for a long term commitment whereas others are short term customers. Both of them are equally important for the business of an organization. Short term small customers should not be exploited and impetus should be given in building relationships with them. This will serve in developing a sustainable business for the future profitability of the company.
Challenges in relationship – Some of the challenges in relationship include that only a small portion of the customer’s account for most of the sales which can be followed from the 80/20 rule. Suppliers are small and critical to the business which gives them greater bargaining power in terms of supply chain operations. There will be a lot of insignificant supplier but when they are brought under one platform they can significantly contribute for the development of an effective supply chain (Yew Wong, 2005).
CONCLUSION:
This work dealt in great detail about the various aspects of knowledge management with special reference to knowledge exploration and exploitation. The various frameworks and theories discussed in this work are highly relevant for a multinational organization like BHP Billiton. In my opinion over the years BHP Billiton has focused on innovation and technology to achieve economies of scale and establish a sustainable business. Comparing the various frameworks and models it is justified to say that Billiton is one of the most innovative companies in terms of supply chain and very few competitors have been successful in replicating its success in the supply chain management. This work lists in detail the various elements of supply chain innovation and how they have been applied by BHP Billiton in their operations process.
References
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