1. Knowledge 2011
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LONDON SCHOOL OF BUSINESS
& FINANCE
Knowledge Management Systems
Student Name: Madhumalesh Prakash
Student ID: A4036664
Submission Date: 4th November, 2011
Intake: MBA Batch 8A
Module Name: Managing Information
Module Code: MI
Assignment Title: Managing Information- Critical Evaluation of Relevant
Issues
Word Count: 4529
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Table of Contents
1. Executive Summary ......................................................................................................................... 3
2. Introduction: Information Systems ................................................................................................. 3
3. Environmental and Industry analysis .............................................................................................. 4
3.1. PESTLE analysis........................................................................................................................ 4
3.2. Porters five force..................................................................................................................... 5
4. Knowledge management system .................................................................................................... 6
4.1. Enterprise-wide knowledge management systems ................................................................ 7
5. Implementation of KMS ................................................................................................................ 10
5.1. Tools and Techniques............................................................................................................ 10
5.2. Building Information system ................................................................................................. 11
6. Security threats: ............................................................................................................................ 14
7. Ethical issues ................................................................................................................................. 15
8. Conclusion ..................................................................................................................................... 16
9. References .................................................................................................................................... 17
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1. Executive Summary
This report delineates the types of Information system, mainly Knowledge
Management Systems (KMS). It also defines tools or technologies used by KMS
and methods of building an Information system, in reference to a newly
established medium sized accountancy and management consultancy. The size
of the report is not intended to go into a great amount of detail on all aspects,
but provides overview on all the topics related to knowledge management and
Information system in general.
Accountancy and management consultancies provide advices for the
organisations to improve the performance through the analysis of existing
organisational situation and develop new plans for the improvement. They also
provide professional advices on accounting and taxation policies.
2. Introduction: Information Systems
The growth of the internet, globalisation and the rise of information economies
has raised the importance of information technologies in the organisation and
management. Information technology (IT) refers to all the computer based
information systems used by the organisations and their underlying
technologies. Sometimes, Information technology is confused with Information
systems. An information system(IS) can be defined as, “ a set of interrelated
components that collect, process, store and distribute information to support
decision making and control in an organisation” (Laudon and Laudon 2006). It‟s
clear from the definitions that Information system contains information about
the organisation or the environment surrounding the organisation and IT is a
fundamental component of any modern IS.
There are four major types of Information systems that correspond to each
organisational level:
 Executive support systems (ESS) are the systems which helps senior
managers to make decisions in strategic level.
 Management information system (MIS) serves the management level
with weekly, monthly and yearly results.
 Decision support systems (DSS), also serves management level.
 Transaction processing system (TPS) is the basic business systems that
serve the operational level of the organisation.
Information systems can also be classified from the functional perspective such
as: Sales and marketing systems, Manufacturing and production systems,
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Finance and accounting systems and Human resource systems. These serve at
all organisational levels as well.
In the present environment organisations becomes more flexible and productive
by co-ordinating their business processes more closely or by integrating these
processes to focus on efficient resource and customer service management. To
support this enterprise applications are designed, which consists of enterprise
systems, supply chain management systems, customer relation management
systems and knowledge management systems. In this report let us discuss
about the knowledge systems in detail. Before going to the Information system
to implement let us conduct an environmental and industry analysis in which the
firm is going to operate.
3. Environmental and Industry analysis
Before designing any information system, we need to carry out analysis on the
environment where the firm is going to operate. In a wider sense, system
environment is all elements outside the system. The factors affecting the
environment consist of some general social factors and specific social factors.
Many frameworks are used to do environment and industry analysis. In this
section we will use PESTLE analysis for environmental analysis and Porter‟s five
forces for industry analysis.
3.1. PESTLE analysis
Pestle analysis looks at political, economic, social, technology, legal and
environmental factors which affect the organisation (Dransfield 2001).
 Political: Political factors include Government stability, taxation policy,
foreign trade regulation and social welfare policies. The UK is one of the
most prosperous and influential nations in the world and has a very major
role to play on the international stage.
 Economic: This contains factors like Inflation, unemployment, interest
rates and money supply. UK had a high growth rate of 2.8% in 2007, but
economic deceleration started in 2008. In 2009, the economy contracted
by 4.9% as external demand remained weak because of global economy.
The economy recovered in 2010 at a very slothful rate of 1.6% (UK
country profile 2011). Recently experts have warned that the economy is
stagnating and in “grave danger” of a second recession (London evening
standard 2011).
 Socio cultural: Factors like population demographics, income distribution,
lifestyle, consumerism and social mobility comes under Socio-cultural
factors.
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 Technological: This includes factors like new discoveries/developments,
speed of technology transfer and rates of obsolescence. UK is one of the
few globally competitive manufacturing sectors, supporting more than
276,000 jobs. According to Science and Innovation framework, the
knowledge intensity was 1.9% and will be increased to 2.5% by 2014(UK
country profile 2011).
 Legal: Legal laws like competition law, employment law, computer misuse
act, defamation act and copyright and rights in database regulations act
needs to be considered. Wall Street Journal‟s Index of Economic Freedom
2011 ranked UK as the 16th freest economy worldwide and UK was ranked
fifth in the Doing Business indicators of the World Bank for 2010.
 Environmental: Any organisation should consider these factors like
environmental protection laws, waste disposal and energy consumption.
3.2. Porters five force
Industry analysis can be done by the Porter‟s five force framework for better
understanding of which information system to develop (Johnson et al 2006).
 The threat of substitutes
There are lot of consultancies which have established their names in the
UK industry.
 The threat of new entrants
New opportunities are emerging for medium-size firms that deliver
customer satisfaction, good value, and flexible service.
 The power of suppliers
Need to have good relation with suppliers of software and hardware. Also,
need to have many suppliers. Relying on one supplier may be a risk if
supplier fails to deliver at time.
 The power of buyers
The inflation or economic downturn affects the buying power of the
customers. More customers are likely to become price sensitive.
 Competitive rivalry
There is danger of intense competition from the rivalries. So, to be
competitive we need to improve our knowledge and information
resources.
Hence, to improve the knowledge resources of our organisation I recommend
adopting a Knowledge Management System (KMS). In the next part of the report
we will understand about knowledge, different types and processes of KMS, and
impact of it on the organisations.
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4. Knowledge management system
Thomas Watson, the CEO of IBM, stated,” All the values of this company is in its
people. If you burned down all our plants, and we just kept our people and our
information files, we should soon be as strong as ever”. And according to
Nonaka, “In an economy where the only certainty is uncertainty, the one sure
source of lasting competitive advantage is knowledge”. These quote clearly
implicates that knowledge is a very important asset for IBM and other
organisations.
Coming to the definition of knowledge, it can be seen as a blend of actionable
information built over time based on accumulated experiences. Knowledge can
be categorised with respect to its object as:
 Knowing what- is based on the ability to collect, categorize and absorb
information.
 Knowing how- is predicted on the ability to create an order of steps
needed to complete the task or an activity.
 Knowing why- is based on the understanding of cause and the laws that
govern the phenomenon.
Knowledge can also be categorised with respect to its type as:
 Explicit knowledge: This type of knowledge can be articulated, codified
and transferred easily. An example is providing training for the use of
software like SAGE in accounting. This can be by a manual or any of the
associates.
 Implicit knowledge: is the type of knowledge which individuals posses but
find it difficult to articulate, codify and transfer. For a clear and basic
example, a cricketer asked about a difficult shot he played, he often refers
to instinct developed by his experience.
The term „Knowledge management‟ refers to the set of activities and processes
used to create, codify, gather and disseminate the knowledge in the
organisation. Number of technologies is used to enable the various aspect of the
knowledge management in an organisation: Creating, Capturing, Storing and
Disseminating (Picollli 2008). Laudon and Lauodon (2006) have stated the
organisational processes in other words as acquiring, storing, distributing and
applying knowledge which means the same as described by Picolli. Also,
Knowledge management can be viewed as three levels of techniques,
technologies and systems that promote the collection, organisation, access,
sharing and the use of workplace and enterprise knowledge (O‟Brien 2004). Let
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us discuss the processes involved in managing knowledge and types of
Knowledge management system as described by Laudon and Laudon (2006).
The activities involved in knowledge management systems are:
 Knowledge acquisition: Organisations acquire knowledge in many ways
depending on the type of knowledge. Knowledge management system try
to build library of documents, cases and presentation based upon the
previous experience. In some cases organisation acquire knowledge by
setting up online expert networks through which employees find the
expert in the company.
 Knowledge storage: Once the knowledge is acquired it needs to be stored
so that it can be retrieved and used anytime by the employees.
Management must encourage employees to update and store the
documents properly by rewarding them.
 Knowledge dissemination: technologies like portals, e-mail, instant
messaging and search engine technology have resulted in knowledge
dissemination. These technologies have added to an existing array of
groupware technologies where (chapter 8) employees can share
documents, data, presentation and graphics.
 Knowledge application: knowledge that is acquired and disseminated, if
not applied in the practical problems facing the organisations does not add
business value. Organisational knowledge must become a part of decision
making, i.e. decisions and processes in an organisation should be based in
informed knowledge, not on guesswork.
There are generally three types of knowledge management systems: enterprise-
wide knowledge system, knowledge work system and intelligent techniques. In
this report we are designing information system for a medium sized consultancy
firm, so let us use enterprise-wide knowledge systems as it is designed for
general purposes. The other two types are for specialised workstations and for
scientists, engineers and knowledge workers which includes CAD, 3D
visualisation and virtual reality.
4.1. Enterprise-wide knowledge management systems
The figure shown in the next page provides an overview of technologies and
capabilities found in enterprise wide knowledge management systems.
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Fig 1. Enterprise-wide Knowledge management system
The enterprise-wide knowledge management system can be further sub divided
into three systems (Laudon and Laudon 2006):
 Structured knowledge systems: This system consists of documents,
reports or presentations, which already exists in the firm. Structured
knowledge is explicit knowledge that exists in the form of formal
documents. We need to develop this system in our consultancy in order to
store structured documents and engagement-based repositories of reports
from consultants who are working with particular clients. The reports may
include detailed description of consulting objective and practices used to
achieve client‟s objective. These reports can be stored in databases which
can be used later for training of new consultants. For instance, in KPMG,
an international tax and accounting firm with 95,000 professionals serving
the clients through 1,100 offices in 150 countries have developed Web-
based knowledge environment KWeb which contained databases
organised around internal and external knowledge domains of interest to
its consultants and partners.
 Semi-structured knowledge systems: This type of knowledge is the digital
information which is not available as a formal document or a report
written by a designated author. This type of knowledge are in folders,
messages, memos, proposals, emails or presentations or even in videos
which are created in different formats and stored in many locations. This
may be not legal under the influence of laws such as Sarbanes-Oxley Act
of 2002, which requires financial services to hold records of all corporate
documents, including e-mails and presentations. In our consultancy to
track, store and organise documents like client details and emails, and
presentations we need to develop a database and technical infrastructure
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that can collect such semi structured documents and organise them in a
logical fashion. For example, Hennigan Bennet and Dorman LLP, was
overflowed with backup tapes of hundreds of thousands of e-mail
messages. They adopted Hummingbird‟s integrated knowledge system
which automated the capture, manipulation, and distribution of document
based knowledge embedded in e-mail. This made the attorneys easier to
access through electronic searches.
 Knowledge network systems: This system address the problem that
arises when the appropriate knowledge is not in the form of
documentation but instead resides in the head of the experts in the
organisation. Knowledge acquired from this system can be referred to
tacit knowledge. This system also looks at turning tacit knowledge into
explicit knowledge, i.e. solutions that are developed by experts are
documented in the database. For instance, in TCS consultants access to
nearly 40 years of experience and best practices, arranged by
engagement, technology in use and customer requirements. Also they
used Just Ask system, where employees could blog or post questions that
other employee or experts could answer.
Many companies are building knowledge management systems (KMS) to manage
organisational learning and business know-how. Information systems create
value for the firm in organisational, management and technological aspects.
 Organisation: As we saw Information system has become an integral part
of an organisation and in companies like accounting and management
solution, there would be no business without Information systems. KMS
helps knowledge workers to create, organise and make available
important business knowledge, wherever and whenever it‟s needed in an
organisation. For example, Tata Consulting services (TCS) created Process
Asset Libraries which contained information related to technology,
processes and case studies which were made available to all centres
through intranet (Sethi and Sethi). They also can improve business
performance by providing feedbacks to knowledge workers and encourage
behaviour changes by employees (O‟Brien 2004).
 Management: As we saw before management‟s role is to make decisions
in some uncertain and critical situations. But also managers must also do
more than what already exists like creating new products and services.
This is a creative work driven by knowledge and information.
 Technology: As we saw in introduction, Information technology is a major
tool used by the managers to cope with change. This dimension of
information system can be seen in two aspects for KMS.
i. Storage technology: Includes both physical media for storing data
such as discs and the software governing the organisation of the
data on this physical media. For example, AT&T Lab maintains a
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26-TB data warehouse which holds 2 years of detailed records
telephone calls on AT&T network. This system runs on 10000
servers with 2,670 discs for storage (Mc Gee 2004).
ii. Communication technology: consists of both physical device and
software, which transfers data between two or more components in
different locations. A network links two or more computers to share
data or resources. Internet is the world‟s largest and most widely
used network and is of special interest to organisations and
managers. For example, In Siemens, colleagues in the Netherlands
provided technical data through „ShareNET‟ (a website containing
chat rooms, search engine and database) to help the sales rep
prove that Siemens‟ system would be substantially more reliable
(Ewing 2001).
5. Implementation of KMS
In this section let us discuss briefly about few tools or techniques required for
implementing the knowledge management system proposed in the previous
section and about how to build an information systems.
5.1. Tools and Techniques
Technologies like Internet and Intranet websites, groupware or teamware, data
mining, data warehouse, knowledge bases and online discussion groups can be
used in KMS.
 Intranet- This is a powerful tool that, when used correctly, can enhance
communication and collaboration, streamline procedures, and provide
just-in-time information to a globally dispersed workforce (Barnes 2002).
This tool can be used to implement the knowledge network systems as
discussed in previous section. And also can be used in structured
knowledge management system to share documents reports among the
employees within the organisation. For instance, London School of
Business uses LMS (Learning management systems) to update all its
students with course materials and announcements.
 Groupware or teamware- This tool provides capabilities for supporting
enterprise-wide communications and collaborative work. Individual, teams
and workgroups at different locations in an organisation can use this tool
for writing and commenting or projects, sharing documents, or for
conducting electronic meetings.
 Data warehouse- is a data repository that collects and consolidates data
from multiple source systems; it may be either internal or external, with
the purpose of enabling analysis (Piccoli 2008). This can be used in
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structured and semi-structured knowledge systems to store documents
and reports. For example, Trimac, a bulk hauling and trucking firm based
in Calgary, Alberta, Canada had developed data warehouse and uses it
with Business intelligence tools for multidimensional analysis of data such
as account information, products, customers and scheduling (Rosencrance
2001).
 Data mining- is the process of automatically discovering relationships in
larger databases. In data mining, data in data warehouses are used to
reveal hidden patterns and trends from historical business activity
(O‟Brien 2004). For example, Bank of America uses data warehouse and
data mining to develop accuracy in marketing and pricing financial
products. Data mining discovered that a certain set of customers were 15
times more likely to purchase a high lending product which helped the
bank to create a final list of quality prospects for solicitation (Nance
2001).
 Knowledge base- The knowledge base contains facts about a specific
subject area and heuristics that express the reasoning procedures of an
expert. The knowledge in the knowledge base is represented in form of
cases, that is, example of past performances and experiences or it
includes methods of processes from experts (O‟Brien 2004). These tools
are also used in structured knowledge management systems where you
can access case studies of previous experiences. For example, TCS started
documenting the problems and solutions they faced, and documented
around 1500 cases studies which were made available to the employees
through intranet (Sethi and Sethi).
5.2. Building Information system
Several methods exist to build information systems. The primary difference
between these methods lies in who writes the code. The four basic methods are:
(1) program the entire application from scratch, (2) pay an outside company to
develop the application, (3) assemble an application by customizing various
purchased components, (4) purchasing the entire application from another
company (Anderson 2003). As we are designing a KMS for a medium sized firm,
second and third option will be expensive and unnecessary.
Anderson (2003) has developed many approaches for the building of information
system in his textbook. The different approaches are: Systems Development Life
cycle (SDLC), Prototyping, Extreme Programming, JAD and RAD, and End-User
development. In the following section let us discuss about SDLC and Prototyping
which is used majorly.
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 System Development Life cycle
This approach is a comprehensive method and encompasses five basic
stages:
i. Feasibility and planning: This step comprises of a quick
examination of the problems, goals, and expected costs of the
system. After the feasibility is determined, a plan and schedule id
created.
ii. System analysis: First step in this is to determine how the system
works and locate problems. Technique is to break the system into
pieces as smaller systems are easier to analyse. At the end of this
analysis, problems and needs are documented with text, data flow
diagrams and other figures.
iii. Systems design: This is a major step of SDLC design for the new
system is done on paper. The objective of this step is to describe
the new system as a collection of modules and subsystems.
iv. System implementation: This involves installation of the designed
system and changeover the previous system. We have to be
extremely careful in implementing new systems as the users will be
new to the systems and nervous and if something goes wrong they
may never trust the system.
v. Maintenance and Review: Once the system is installed, the
computer systems need to be upgraded in a regular basis. And, it is
also important to assess the effectiveness of the particular
development process.
This approach had advantages like control on the systems, detailed steps,
well defined user input and monitor large projects. It also disadvantages
like increases development costs and time, rigidity, and hard to estimate
the costs. This drawback of SDLC makes the managers of medium firms
think about an alternative approach.
 Prototyping
Prototyping is a method for systems that are not complex and do not
involve too many users or analysts. Early versions of the systems are built
in the first position and these systems are then continually modified until
the user is satisfied.
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Fig 2. Prototyping model
Any system development methodology uses the five steps discussed
above. Prototyping also involves these steps but they differ in how much
time spent in each section and degree of formality involved. The first step
in the designing in prototyping is to talk to the user and then related tools
are used to create approximately what the user wants. This step generally
requires only a couple of weeks. Then the user works with the prototype
for certain time and suggests some changes. The analyst makes the
changes and hands it back to the user and this cycle repeats until the user
is satisfied or decides that the system is of no use. To obtain advantage
from this approach, we need to emphasize on getting a working version of
the system to the user as fast as possible. Once the working model is
approved by the user, next step is to maintain and evaluate the system.
Advantages of this system are that users receive a working system much
sooner than they would in SDLC approach and users have more input so
they are more likely to get what they want. Systems designed in this
approach are much easier to change because it was designed to be
modified from the start. Only disadvantage of this approach in a medium
firm is large portion of time will be spent making changes.
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6. Security threats:
Information systems discussed above concentrate data in computer files that can
potentially be accessed by large number of people both inside and outside the
organisation. When data are stored in electronic form they are more vulnerable
to many more kinds of threats than when they exist in manual form. Some
major threats for the information in KMS are (Anderson 2003):
 Disasters: like fires, floods hurricanes and other physical disaster do not
happen often. But, when a disaster hit a company‟s data centre then
company will be destroyed. This threat can be overcome by using “hot
site” or “cold site”, which mainly aims in backing up of the company‟s
data. For example: It would have taken years for the people and
companies to recover from the September 11 attack on World Trade
Centre in New York. But, within minutes after the attack, businesses
activated backup plans and rushed to SunGrad backup data centres in
Philadelphia. Because of all these backup plans. It was possible to reopen
stock markets on September 17 (Iwata and Swartz 2001).
 Employees and Consultants: Employees are the heart of a company.
Companies function and succeed trusting their employees; however there
may be chance that one employee will use the company‟s knowledge and
experience to misappropriate resources. For example: Though its
fictitious, in the movie Die Hard-4 movie, the villain of the story hacks all
the traffic control systems and mainframe systems of America to steal
whole of the financial assets from his computer. He was a formal
intelligence officer in FBI who was abused and suspended for some
reason. General ways of controlling this is by constant monitoring, hiring
workers carefully, treat employees fairly and have separation of jobs.
 Outsiders: There is some threats from the outsiders who might dial up
your computer and guess a password. Laudon and Laudon (2006) refer
them to hackers who tend to gain unauthorized access to a computer
system. This threat can be tackled by using appropriate firewalls and
intrusion detection systems. Firewall is placed between the firm‟s private
network and public network to protect against unauthorized traffic. For
example, Citizens bank in North Carolina, adopted „Entercept‟- intrusion
detection and prevention software which decides whether to permit a
system request into a server from an external network source based on
the signature of the request or behaviour rules (Alexander and Hamblen
2002).
 Viruses: These are form of software programmes which brings threat to
the operating system of the system. These programmes can be hidden
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inside a document, sideshow, database or an e-mail. This threat is
controlled by installing anti-virus software like Norton which is designed to
check computer systems for these software programmes and eliminate it
from the affected area. One of the famous virus infections attacked IBM‟s
mainframe-based network during Christmas in 1987, when the network
was brought to standstill for the loading of chain-letter Christmas card
(Robson 1997).
7. Ethical issues
Information systems, with their penchant for enabling new ways of doing
business, constantly introduce potential for ethical dilemmas (Piccoli 2008). In
general the ethical dilemma faced by IS are argued by Mason‟s acronym PAPA
(Robson 1997). They are:
 Privacy: IS may pose questions regarding disclosures about a person and
his interactions. The common good may encourage using IS capabilities to
uncover socially damaging situation. For example, patterns in data stores
that indicate criminal activities.
 Accuracy: Is may pose questions with respect to achieve informational
accuracy and redress from inaccuracy. The error created, represents a
potential for individual wrong or social damage. For example, 21 patients
died in November 2000 because of the radiation poisoning in National
cancer Institute of Panama. This was mainly because of misuse of a
software system by a physicist (Gage and McCormick 2004).
 Property: IS may pose questions regarding the ownership of information
and its transfer channels. In general, we can give an example of
overstocking of common grazing land, where unregulated individual
responses destroyed the asset for all
 Access: Is may pose questions with respect to access in information and
technological logical capability.
As the introduction of Information system in our firm, encourages the employees
to use internet services more for connection and collaboration, risks may arise of
non-work related activities in workplace like pornography. For example, in a
cases study Mark Vernon (2002) has mentioned 72% of UK companies have
faced this problem. This can be controlled by monitoring how and when internet
is used by the employees. By doing this company may breach the law if
individual privacy. This can be tackled by including a clause in the contract while
employing and get consent of the employees to monitor them.
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8. Conclusion
Information system is an indispensable management tool which helps the
organisation to attain competitive advantage. IS when coupled with
complementary changes in organisation and management, it provides foundation
for new services and ways of conducting business.
As we discussed knowledge management is a set of processes to create, store,
transfer and apply knowledge in the organisation. IT promotes learning by
increasing the ability of the organisation to learn from its environment.
Knowledge management systems can provide considerable value if they are well
designed and enable employee to locate, share and use knowledge more
efficiently. Finally, you being a information manager should consider the growing
security threats and some ethical dilemmas before planning any Information
system.
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9. References
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Dransfield, R. (2001). Scanning the environment: Corporate strategy.
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Ewing, J. (2001). “Sharing the Wealth”, Businees Week e-biz, March 19, 2001.
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Robson, W. (1997). “Responsible IS management”, Strategic Management &
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Figure 1. Enterprise-wide Knowledge Management system, [online]. Available at
http://1.bp.blogspot.com/_vWVcWvZyXVE/SxNLukdhMrI/AAAAAAAAABE/utflXzv
qdyI/s1600/6.jpg (Acceessed on 3/11/2011)
Figure 2. Prototyping model, [online]. Available at
http://rajeevprabhakaran.files.wordpress.com/2008/11/prototype.jpg (Accessed
on 3/11/3011)
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