Why Strategy Needs Knowledge Management

Why Strategy Needs Knowledge Management

Strategy requires knowledge. Too often, strategy begins with a foray into an environmental scan—a knowledge project initiated to develop the context for the strategic dialog. Research projects at the start of a strategic planning process should put a red flag, as they suggest that the organization regularly operates without understanding its context.

Maintaining strategic context should be considered the primary role of knowledge management at the executive level. While capturing, disseminating, and curating critical operation knowledge fuels continuity, at the executive level information about customer, competition, and context prevail as a means of facilitating common constructs, visions, and decision-making.

Leaders may not think it fair to judge their connectedness to the business simply because they kick-off a research project to kick off a strategic planning cycle. Many would insist that the senior leadership team knows what they need to know by heart—or in their bones—that they live in the environment day in and day out. They know the business. 

That they know may be true, but the lack of consistent, evidence-based support for positions means that the leadership team has no way to determine how well aligned they may be on critical assumptions about the business. From a knowledge management standpoint, this implicit knowledge, the knowledge not captured in an external form, results in communications inefficiencies as executives talk to compare positions, and serious misunderstandings if they choose not to calibrate before decision making. Undocumented, uncollected and unshared knowledge also means that those with operational responsibilities don’t likely have all the information they need for making well-informed decisions. Leadership should not assume that people understand the organization’s context. They should invest in knowledge management of strategic context to ensure that they do.

Effective organizations disconnect the cycle of strategic decision making from the process of maintaining a well-documented context for the business.

Effective organizations disconnect the cycle of strategic decision making from the process of maintaining a well-documented context for the business. Maintaining an organizational context should be an ongoing investment that provides background to all decision-making activities.

Strategy requires several knowledge components, which are outlined in Table 1. Organizations that want to make their strategic planning more impactful should gather this knowledge in one place and make it easily accessible. They also need a process commitment to update this knowledge continuously, including keeping older versions of some of it for historical context and perspective. In some cases, knowledge such as a Strengths-Weaknesses-Opportunities-Threats (SWOT) analysis may exist at different levels and for different purposes. All versions of SWOT analysis should be available, each referencing its own context.

Why Strategy Needs Knowledge Management

Table 1. Knowledge Components to Support Strategy

Knowledge Component	Description	Notes
Mission	The organization’s mission.	Why do you exist?
Values or principles	The guiding principles that describe how the organization behaves in its market, with its customers and with its employees and partners.
Strengths-Weaknesses-Opportunities-Threats (SWOT)	A matrix that captures the strengths, weaknesses, opportunities and threats of the organization.	For strategic planning purposes, this should be conducted at the enterprise level, be it the all-up organization, or a division. Lower level SWOT analysis should be captured and maintained to create richer context.
Vision	The vision for where the organization sees itself. Timeframe should be 5-10 years.	Rather than a simple statement, Serious Insights recommends vision components that build a map of the strategic capabilities necessary to achieve the vision.
Customers	A detailed understanding of who the most valuable customers are and should be.	Forward looking analysis that describes the future state of customers is also valuable.
Competitors	A list of competitors, rank by various factors, including engagement, displacement risk and stability.
Industry Analysis/Map	Characteristics of the industry, including size, history, transformation, etc.
Competitive Advantage	The core competitive advantage of the organization.
Current strategic plan	A copy of the document of record when it comes to strategic planning.
Key Obstacles	A list and description of the key strategic obstacles the organization must overcome to achieve its vision.
STEEP Uncertainties and driving forces.	What are the social, technological, economic, environmental and political uncertainties that the organization will face over the next decade.	Even for organizations not conducting scenario planning to complement their strategic planning process, understanding the uncertainties and driving forces for the industry is an important element of context.
Previous year goals achieved	What did you do last year and how well did you do it against goals and the industry.
Talent analysis	What knowledge differentiates the organization and how is that knowledge retained—through talent or through knowledge management and automation.	An analysis of the effectiveness of knowledge application, along with risks from departure or obsolescence is also good to include.
Projects/status	What are the major projects or initiatives within the organization and how is each one contributing.
Voice of the Customer	A thorough analysis of what the customer thinks of products, services and processes.
Product/Service analysis	Profit/Loss Statement by product or service.	This helps get to the discussion of what businesses the organization should consider abandoning, as well as what knowledge they may be spending money maintaining with little or no return.
Regulatory environment	How regulated is the industry? All regulatory issues should be spelled out and their implications identified.
Industry stage	An assessment of industry maturity.
Risk assessment/revenue volatility	A list of risks, including revenue volatility, that the organization faces.
Emergent Technologies	Which technologies are likely to threaten or enhance your market position?	May be captured in the SWOT analysis but monitoring technology related to your products or services at a deeper level can provide a better perspective on threats and opportunities.
Capital/Labor mix	What is the mix between capital investment (technology, equipment, facilities, etc.) and labor costs.
Barriers to entry	What are the barriers to entry for new competitors? The barriers to entry for exiting organizations in new markets.

Some organizations see initiating contextual research as a way to engage stakeholders during the strategic planning cycle. Serious Insights believes organizations should plan at the speed of change, not around arbitrary expiration dates. That means the context becomes the trigger. When something changes, the organization as a whole should sense that change and be prepared to engage in strategic dialog about its implications, and whatever action may be required to keep the organization in a strong competitive position. So rather than the planning process triggering the research, in our approach, the on-going engagement with the research triggers periodic strategic reviews that either reinforce current positions or suggest the need for modifications.