Knowledge and Process Management Volume Number pp 3–16 (2001) & Case Study Knowledge Management in Small Firms John Sparrow* Knowledge Management Centre, University of Central England, UK This paper discusses features of small firms that combine to constitute a different milieu for knowledge management It reports upon work conducted with many small firms and presents a model of considerations and phases in knowledge management projects in small-firm settings Copyright # 2001 John Wiley & Sons, Ltd INTRODUCTION Knowledge management There can be little doubt that effective leverage of knowledge will be the key to business success in the future Particular economic concepts have been argued to have become increasingly central to business and national competitiveness These include the economics of knowledge (Machlup, 1984), core capability (Prahalad and Hamel, 1990), co-production of value (Wikstrom and Normann, 1994) and adaptability/innovation (Bolwijn and Kumpe, 1990) In addition, there is an increasing contribution of digital technologies to decision making in terms of their knowledge-processing characteristics and support for collaborative effort through enhanced communication (Hougaard and Duus, 1999) The ability for sets of individuals/ businesses to continuously manage their adaptation in order to co-produce, on the basis of their respective strengths in knowledge terms (increasingly independently of geographical/temporal constraints), represents a fundamental challenge to conventional business, management and economic practices Managing the value that can be derived from knowledge is a challenge for all businesses, large and small Understanding of the organizational theory and practice considerations of knowledge management has largely been derived, however, from large company developments It seems clear *Correspondence to: John Sparrow, Knowledge Management Centre, University of Central England, Perry Barr, Birmingham B42 2SU, UK E-mail: john.sparrow@uce.ac.uk Copyright # 2001 John Wiley & Sons, Ltd that small and medium-sized businesses will need to address their knowledge management practices, but that, like so many aspects of business and management, the issues that small and mediumsized businesses will face will not be simply a scaled-down replica of large-company experiences Knowledge Management Centre research programme The Knowledge Management Centre has been established as a regional partnership between a university, and local city council, and business support agencies in the West Midlands of the United Kingdom to identify and address the business support needs for small and mediumsized enterprises (SMEs) in developing their knowledge management (KM) practices This paper draws upon a programme of indepth qualitative research to explore knowledge practices, KM development and business support needs of SMEs The research process has entailed survey, passive observation, action research and process consultation phases/stances Nearly one hundred businesses have been involved In-depth study has taken place in a small number of businesses for periods of between twelve and eighteen months In the course of the work, a number of insights into key issues in knowledge management in SMEs have been derived from case studies of the ‘unaided’ learning and KM practices of SMEs, case studies of gaining ‘entry’ into SMEs for knowledge projects, surveys of attitudes to KM in SMEs, and in-depth facilitation of knowledge management in several SMEs Whilst a number of reports have been produced by members of the CASE STUDY team upon particular facets of knowledge management (e.g Martin, presentation to the Staff Seminar Institute for Manufacturing, University of Cambridge, 1999; Shelton, 2000; Sparrow et al., 1998; Sparrow, 1999; 2000; Zetie, 1998), the overall thrust of the findings (and their shaping influence on the ‘model’ of SME KM development that has evolved to date) has not been articulated This paper represents an initial attempt to ‘map’ this territory and present the ‘rationale’ behind the approach towards supporting KM development in SMEs that has evolved to date KNOWLEDGE MANAGEMENT-RELATED FEATURES OF SMALL FIRMS Drivers, evolutionary paths and business priorities Drivers As has been the case with earlier generations of ICT innovations (e.g Hepworth and Ducatel, 1992), the adoption of knowledge technology in small businesses seems to be led by clients, especially large customers and suppliers The automotive best-practice forum held by Arthur Andersen in January 1999 (Livernois and Miller, 1999) identified a number of knowledge gaps emerging as suppliers’ responsibilities increase In our work, cases have been identified where significant restructuring of the activities of major customers have had implications for the skills/ capability of SMEs At the personal level, there is broad evidence that small business owners/managers may need to have reached a point of genuine ‘fear’ of a prospective difficulty before they act (e.g Berry and Perren, 1998; Sparrow and Goodman, 2000) Engaging small businesses in a reflective process that signals a compelling need appears to have value These drivers are in contrast to the technological push considerations that can be a primary driver in larger firms Evolutionary paths While methods in small businesses might appear ‘informal’, they have often been found to support quite sophisticated decision-making (e.g Lightfoot and Kitchen, presentation to the Small Business and Enterprise Development Conference, Leeds, 1996) and large business (more formal) practices should not be ‘imposed’ (e.g North et al., presentation to the 18th ISBA National Small Firms and Policy Conference, University of Paisley, 1995) There is evidence from studies of management information, control and decision making in Knowledge and Process Management small firms that shows the ‘development of information and control systems to have a processual and apparently adventitious nature [where] the chains of causality are quite complex’ (e.g Berry and Perren, 1998: 904) Berry and Perren (1998) cite by way of example, the importance of the ‘process’ that lay behind a case study business’s ‘extension’ of an accounts package to a broader information system The work of the KMC team to date indicates that any need for technical enhancement of a knowledge management ‘system’ is more likely to ‘resonate’ in a small business that has already sensed the value of information management Appreciation of the strategic importance of ‘core capability’ may come more easily to an SME that has seen one aspect of the relationship between business strategy and human resources through involvement in the Investors in People programme The importance of systematic analyses of business processes and linkages to key knowledge may be understood more readily by an SME that has engaged in a ‘quality’ (e.g ISO 9000, Business Excellence model) improvement initiative Current business priorities With the resource constraints of SMEs in mind, Sparrow (1999) suggested that a specific pressing business situation might constitute the most appropriate opportunity for a small business to initiate a knowledge project Braganza et al (1999) suggested that it might be useful for businesses to classify and manage their knowledge projects on the basis of their contribution to innovation They distinguish between knowledge projects that expedite efficiency benefits to the firm, enhance the relative performance of the business in its sector, exploit a new opportunity for a firm to gain advantage in its industry, or explore possible innovations SMEs appear to be most attracted to the first two forms of knowledge project In the Knowledge Management Centre’s case study SMEs, process innovations, joint ventures, ownership succession, and restructuring have each provided an opportunity for the ‘lens’ of knowledge management to be brought to bear Components of knowledge management initiatives in SMEs Four components of knowledge management in small firms have been found to figure strongly in small firm knowledge projects These are depicted in Figure J Sparrow Knowledge and Process Management Figure Four components of knowledge management in SMEs Appreciation of personal and shared understanding While it is clear that information and communication technologies can enhance a business’s knowledge system, it is important to recognise the nature of knowledge-creation utilization and transfer, and the need to augment technological initiatives to secure competitive advantage An ‘overwhelming emphasis on IT and major gaps in the treatment of people’ (Swan et al., 1999, p 264) in knowledge management theorising and practice, has been noted This ‘technological’ imperative is captured in statements such as Cole-Gomolski’s (1997) assertion that ‘the idea behind KM is to stockpile knowledge and make it accessible to others via a searchable application’ The KMC studies of knowledge processes in SMEs have confirmed that knowledge transfer is not a case of linear information transfer but a process of ‘sense-making’ (Weick, 1990) with extensive effort being needed to develop a ‘common stock of knowledge’ (Kogut and Zander, 1992: 389) and ‘system of meaning’ (Trompenaars, 1995) Knowledge management implies an emphasis in management upon ‘management by perception’ (Sparrow, 1998: 12), i.e ongoing recognition of the meaning and interpretation of events by others There is a wealth of evidence that shows that people use their mental models of situations to guide their decisions and actions (Sparrow, 1998; Eden and Spender, 1998) At the strategic level, Daniels et al (1994) demonstrated how organizations in general are ‘run’ in terms of managers’ models of the organization and its competition, rather than any ‘objective’ notion of the location of the business in its environment In the small firm, the contribution of owner/manager cognition towards business practices is even more significant Sparrow and Bentley (2000), for example, identified the impact of owner–manager personal decision style (belief in control etc.) upon the risk management practices adopted in their small firms Sparrow and Goodman (2000) have shown Knowledge Management in Small Firms CASE STUDY how the innovation process within networks of small firms may be affected by the models that owner–managers manifest in terms of trust, support for innovation, task orientation and vision (i.e perceptions of team climate; Anderson and West, 1994) Individuals’ models of their own knowledge and the potential contribution of other knowledge have also been studied in SMEs (Lightfoot, 1996) The study highlighted the importance of recognising the ways in which owners/managers ‘accomplish’ (Munro, 1996) their resistance/rejection of outside knowledge The case study work on knowledge management in SMEs has highlighted the fundamental need to recognise the mental models that participants have, and the need to work towards means of eliciting and sharing personal understanding in the identification and development of process and knowledge system developments A revised knowledge system in a small firm cannot be a complete replacement of the models that participants have of issues and situations A system that informs a business about strategic options to collaborate (on the basis of a competitive intelligence system) needs to provide information in the terms of the ‘model’ of the industry and competition that an owner and managers have, rather than constitute some attempt to present its own conception of the issues Knowledge systems in small firms need to amplify human potential (Chattell, 1998) It is also important to maintain the ‘fit’ of any knowledge system with the models of individuals in a second manner The release of the potential of new developments can only be secured if the potential is appreciated and is realizable by those involved Putting the notion of knowledge at the centre of a person’s thinking entails more than exposing them to a revised knowledge system It is also far more than attempting to address loose notions such as the ‘cultural mismatch’ of a technology (e.g Allen, 1977) It involves ongoing assessment of the understanding of individuals and support for development of that understanding The fit of a knowledge philosophy and knowledge practices within an individual’s practice is critical The degree to which a collective mind (Weick and Roberts, 1993) operates within a ‘community of practice’ (Hendry et al., 1995) will determine overall effectiveness Knowledge management requires an appreciation of individual and collective understanding Knowledge bases and knowledge systems Developments in KM in smaller businesses have to stem more from a fundamental conceptual grasp CASE STUDY Knowledge and Process Management of the role of knowledge in business and the basic principles of a knowledge system This is in contrast to initiatives in larger firms which may be part of a tradition to make substantial investments in information technology on the basis of the influence of internal technical specialists (to some extent on the basis of their own ‘sectional’ interests; Eason, 1988: 204) In larger organizations, the contribution of the latest ‘generation’ of software/hardware is interpreted in terms of specific contrasts with the current information management system The particular ‘technical’ advances are seen in terms of the enhancements they provide to the current technology Knowledge management in smaller firms has to be seen first as a (significant) concept with implications for the current business systems (both human and computer-based) The added value of an investment in computerization has to be demonstrated above and beyond other (cheaper and more grounded) changes to business practices Many of the features of knowledge systems in larger firms can only be achieved through use of and information and communication technology approach This is often because the bureaucratic features of larger firms (fractionation of work, complexity, anonymity etc.) require a technology for their mitigation The broad principles with which a knowledge system can be considered can provide a useful tool for enhancing organizational systems and practices in small firms A consideration of the strengths and limitations of the current ‘system’ means that the particular contribution that ICT can make is appreciated (and considered from a business benefits perspective) This is in contrast to developments premised on a general technological belief Figure details the principles of knowledge systems that can be used to guide the evaluation of current knowledge systems and practices in SMEs It has been noted how many of the features of knowledge management software developments in larger businesses may be a reflection of features of large firms per se, rather than generic knowledge management requirements The technological emphasis in large firm and SME knowledge systems differs In the main, large firm KM products place their primary emphasis upon the means to get information to users (as opposed to the contribution of the utilization of information) The emphasis on these two considerations is different in SMEs The work of the KMC team has revealed the value of supporting SME owners, managers and employees to view their business in knowledge terms It is the facilitation of this conceptual process that has proved to be the most central feature of the KM approach that the team has evolved The emphasis on the development of knowledge as a lens (as opposed to a knowledge management system) together with the emphasis upon knowledge system principles (as opposed to ICT knowledge system elements) represents a fundamental difference between knowledge projects in large and small firms The integrated and contextualized action needed for knowledge projects in SMEs Effective enhancement of knowledge management capabilities in a small firm has to recognize a number of key features of small firms Scarbrough (1996) identified a potential tension within larger organizations between the human resource function and IT function in designing and executing a knowledge project in businesses The properties of knowledge systems can reflect the Figure Principles of knowledge system that can be explored with SMEs J Sparrow Knowledge and Process Management relative influence of particular ‘sectional’ interests The important role that participants play in dealing with the unanticipated (emergent) features of a knowledge project have also been reported (Orlikowski, 1996) There is a general recognition of a need for greater involvement of top management in knowledge projects (Kennedy, 2000) The shaping role of functional ‘expert’ change agents is, however, less apparent in SMEs The centrality of a managing director and managers in SME knowledge projects is most evident The role of top management in SME knowledge projects may account for the higher emphasis upon strategic impact both in the initial consideration of a KM initiative and in the response to emergent features of a knowledge project The ‘articulation of the knowledge base’ (Chattell, 1998: 150) through the development of a formal organization system for knowledge identification, definition and evaluation, as an approach to knowledge management, it rooted in the philosophy of predictability, measurement and control An alternative philosophy might place less emphasis on the decontextualization of knowledge through its description and measurement, and more upon chaos theory (Stacey, 1992) notions of a self-correcting, flexible and dynamic knowledge process through which the business secures its adaptivity There is evidence to suggest that this is a characteristic of management approaches in small firms The instability of the business in the light of the volatility of its business environment may place a premium upon adaptivity rather than predictability and more rigid configuration (Smallbone et al., 1992) The overwhelming majority of the reported implementations in knowledge management in larger firms concern operational developments Strategic implications of knowledge/capability have been considered less in empirical terms and more as economic and management debates Two aspects of strategic implications for knowledge projects that have been highlighted are strategic vulnerability (e.g Hall and Andriani, 1999) and strategic capability (e.g Bowander and Miyake, 1999) A method to identify and evaluate a firm’s capabilities for competitive advantage has also been presented (Birchall and Tovstiga, 1999) More recently, the theoretical dangers of a ‘blinkered’ knowledge management system have been highlighted (e.g Malhotra, 2000) and the need for maintaining an uncertainty capability in business seems clear In other contexts, it has been shown that entrepreneurs’ mental models of their businesses integrate strategic and operational considerations and consider the retention of ‘man- Knowledge Management in Small Firms CASE STUDY oeuvrability’ (Sparrow and Bentley, 2000) The need for recognition of and education for uncertainty has been highlighted in earlier work by a member of the KMC team (Boyd and Wild, 1993; Boyd and Robson, 1996) Recognition of uncertainty and the value of an adaptive capability appear to be best secured through a group process that explores the value of diversity and creative abrasion in group decision making Knowledge projects that adopt a grounded process consultation approach by their very nature enable groups to consider their own practices and identify positive features Means by which a team can avoid the ‘blinkered’ perceptions that a rigid knowledge system might invoke, include comprehensive and effective learning processes The role of people external to a business in enhancing a small business’s learning have been considered by a member of the KMC team previously (Harding, presentation to the 19th ISBA National Small Firms Research and Policy Conference, Birmingham, 1996) and form part of his ongoing research Overall, work within case study SMEs on knowledge management has shown how knowledge projects are formulated and implemented within an integrated framework that manages the impact of knowledge projects in operational, strategic and uncertainty management terms Figure summarizes these levels of impact It has been noted how knowledge projects in small firms may be provoked by pressure from external influences It has also been noted how the vulnerability of SMEs may provoke them to ensure that their ability to adapt is retained The definition of roles in relation to external ‘co-producers’ in SME is more negotiable than the offerings of larger businesses In considering knowledge projects, large businesses place the primary emphasis upon their internal knowledge flows Significantly lower consideration is given to the negotiation of external boundaries (and core capability) In comparison, SMEs place relatively lower emphasis upon the internal aspects of knowledge and greater emphasis upon external aspects KM projects have differed in the ‘level of knowledge analysis’ (Braganza et al., 1999) that they have adopted Projects can focus on the Figure The three levels of impact of knowledge projects in SMEs CASE STUDY individual (Fahey and Prusak, 1998), group or team (Leonard and Sensiper, 1998; Huber, 1999), business process (Braganza et al., 1999), organization function (Davenport and Klahr, 1998), organization (Teece, 1998; Bowander and Miyake, 1999; Tidd and Taurins, 1999), joint venture and other inter-organizational collaboration (Fairhead, 1998; Rura-Polley and Clegg, 1999) network (Marceau, 1999), industry/cluster (Leonard-Barton, 1995; Mitra, 1999; Park and Kim, 1999) or nation (Porter, 1998) level There seems to be an increased emphasis upon individual considerations, significantly more emphasis upon one-to-one business collaboration, network and industry/cluster considerations in SME knowledge projects, and the boundaries between many of these different levels of knowledge analysis need to be more fluid in SME knowledge projects Bureaucratic forms of organization seek to fractionate and proceduralize working practices It is not surprising therefore that knowledge projects in larger firms have tended to emphasize the conscious technical (semantic) knowledge associated with good practice in the execution of particular procedures Even within large-company contexts, knowledge system developers have found that the information of the form that constitutes ‘manuals’ is not sufficient to secure effective ‘transfer’ of knowledge between users The strict ‘logic’ and ‘theory’ of how to carry out tasks may not be the most appropriate thing to transfer Experience is often retained in human memory as ‘episodes’ (i.e specific case-based information) Knowledge systems in large firms sometimes seek therefore to capture and convey ‘lessons learned’ from case experience The ‘technologies’ that support the transfer of knowledge have addressed users’ knowledge of where expertise resides (i.e who knows what) together with means to access ‘document-’ and ‘experience-’ based accounts There has also been recognition that subconscious knowledge (in the form of skills and tacit feel) figures in human performance but this has been dealt with in the belief that ‘providing access to people with tacit knowledge is more efficient than trying to capture and codify that knowledge’ (Davenport and Prusak, 1998: 72) Systems that enhance meta-knowledge (i.e a team’s knowledge of who knows what) have been substituted for systems that support the access and transfer of less conscious knowledge The work of the KMC team has established the fundamental role that subconscious (skill and tacit feel) and even unconscious (e.g personality, decision style etc.) facets of knowledge play in SME decisions and action Knowledge transfer is Knowledge and Process Management not dealt with adequately by hoping that expertise will transfer because participants are in close and frequent proximity A central theme in the KMC team’s work has been the appreciation of the need to facilitate the elicitation and sharing of less immediately conscious information within a workgroup or business if more effective knowledge systems are to be developed in SMEs In addition to distinguishing between levels of consciousness of different facets of knowledge, Sparrow (1998) has drawn a distinction between thinking processes that emphasize reasoning, creativity and mood There is evidence to suggest that ‘bureaucratic’ organization constructs ‘local discourse’ (Antaki, 1994) that seeks to limit decisions and action to more ‘rational’ territory (Albrow, 1997) The contribution of affect and imagination in small group settings is, however, well established The potential distortion of organizational practices that an attempt to bring about an ‘unbalanced’ and ‘disproportionate’ increase upon ‘rationality’ could bring in a small firm setting needs to be recognized (e.g Berry and Perren, 1998) Important interrelationships between motivation (empowerment), creativity and knowledge capture have been highlighted by Paper and Johnson (1997) within project teams in large organizations SMEs may be benefiting from an appropriate combination of these factors Efforts that ‘destabilize’ this may be dysfunctional Couger (1996) has suggested that work environments structured to relatively larger degrees around information systems may impede creativity In a similar way, energy and enthusiasm (and other affects) that can accompany spontaneous informal human collaboration may be sacrificed in a quest to emphasize ‘measured’ and ‘systematic’ analyses (Sparrow, in press) The approach adopted by the KMC team seeks to ensure that the potential ‘climate’ of knowledge utilization (in creativity and affect terms) that an SME team develop is considered in their design of a revised knowledge system A feature of decision making that has been found repeatedly in studies of small firms’ practices is holism Management in a small firm involves recognition of the ongoing dynamics of ‘all the resources of the business towards the aim of satisfying customer needs’ (Burns, 1989: 36) Knowledge projects in larger firms have ‘segmented’ knowledge in ways that may not be appropriate in small firm settings Matusik and Hill (1998), for example, distinguished between ‘component’ knowledge and ‘architectural’ knowledge The latter relates to organization-wide routines for coordinating the components of the organization J Sparrow Knowledge and Process Management Smart et al (1999) considered the knowledge associated with four ‘process levels’ and where it might be ‘located’ within an organization It has been suggested that knowledge projects need to define the critical knowledge at a particular ‘information leverage point’ (Applehans et al., 1999) quite narrowly In the less fractionated environment of an SME, knowledge of both kinds (and all levels) may figure in decisions and actions Knowledge projects are more likely to be of limited value therefore, in an SME setting, if they are defined too tightly The cost of a comprehensive bespoke ICT-based knowledge management system may not be justified by an SME in added value terms There are a number of options available for SMEs ‘Modular’ approaches that are scalable and that can be used to address particular facets of knowledge utilization may be more appropriate In particular, systems that enhance business processes (workflow etc.) can be a useful avenue The knowledge capability of standard server software is evolving very rapidly (e.g Windows 2000) The options within such software may remove many of the cost and learning curve barriers to ITC adoption in SMEs It is not cost and learning alone, however, that limit the contribution of ICT to knowledge utilization in SMEs As noted throughout this paper, the nature of knowledge processes in small firms is not supported well by current and prospective ICT developments An area of knowledge management that has received attention in large company contexts is management of the intellectual property rights portfolio (e.g Cook, 1995) The issue has also been examined in SME settings (Kuratko and Hodgetts, 1988; Kitching, 1998) KMC work within SMEs has identified that it is the issues that surround the capture and utilization of specific intellectual property rights rather than portfolio management that create the greatest difficulty The movements within intellectual capital (e.g human, structural etc.) within SMEs reflect different ‘investment’ decisions Some of these movements may be planned whilst others may be provoked by significant changes (e.g ownership succession) KMC research has identified a valuable role for an intellectual capital valuation lens upon managing the (re)embedding of capability in an SME in the light of owner succession (Martin, presentation to the Staff Seminar Institute for Manufacturing, University of Cambridge, 1999) Overall, it seems clear that the small firm knowledge setting is different from that within larger firms Knowledge Management in Small Firms CASE STUDY Knowledge and organizational learning processes in SMEs Swan et al (1999) argued that there is a need to harness ‘the intellectual and social capital of individuals in order to improve organizational learning capabilities’ (p.264) Nonaka and Takeuchi (1995) highlighted the role of learning in knowledge creation Boisot (1995) considered the relationship between the technological strategies of firms and learning He showed how an emphasis upon the ‘social learning cycle’ (p.257) in the strategies of firms could enhance competitiveness in an alternative way to knowledge protection In working with SMEs the difficulties that they face in these regards have become apparent Attempts to ‘protect’ their knowledge through patents are problematic because of the demands of securing and policing patents Owner–managers attempt other means to limit the diffusion of their expertise They may deliberately avoid training and development opportunities for others with regard to certain aspects of their own personal expertise SMEs find difficulty in elaborating upon their contribution to make it less codifiable, particularly where the processes they operate are quite simple and proceduralized The issues surrounding growth of markets and commensurate management of growth of the firm in order to secure the economies of scale that can preserve a competitive position have been acknowledged for many years (e.g Barber et al., 1989) The alternative approach towards maintaining competitiveness that Boisot (1995) identified is based upon the learning capability of a firm If it can absorb and scan diffused knowledge and codified knowledge and translate it into a specific capability of its own, then protection and elaboration become less relevant The key issues are problem solving, diffusion, absorption and scanning For an SME to manage its knowledge assets in this way requires it to have an effective organizational ‘learning’ capability The significance of organizational learning for competitive advantage was highlighted by Moingeon and Edmondson (1996) It is clear that the knowledge (and potential advantage) that a small firm may have can only be sustained if it is supported by effective organizational learning processes Unless there is a constant renewal of knowledge, then any advantage will be transitory The linkages between individual action and beliefs, and organizational action (and perceived impact) were considered initially by March and Olsen (1975) They identified four possible breaks (disconnects) in these learning loops The potential for learning is impeded in a situation of roleconstrained learning because the action of an CASE STUDY Knowledge and Process Management individual to act in a way consistent with their knowledge is restricted The potential for learning under a situation of audience learning is limited by virtue of the ‘misreading’ of others’ actions (and learning by others ‘observing’ (but not fully sharing the interpretation of) an experience) Superstitious learning occurs when an organization takes action on the basis of ‘faith’ and does not subject actions to a monitoring of impact upon its environment Finally, learning under ambiguity occurs where the impact of changes upon an organization’s environment cannot readily be attributed to specific actions Kim (1993) drew attention to a further set of three loops (and disconnects) in the organizational learning process Situated learning occurs when an individual’s actions are not reflected upon (and the potential for learning beyond the specific situation is lost) Fragmented learning occurs when the understanding that an individual derives from experience is not shared within the organization Opportunistic learning is held to occur when an organization takes action that is known not to fit with the shared understanding in the organization In reconceptualizing the learning disconnects occurring at the action, experience and reflection phases of a learning cycle, and extending the notion of organizational learning loops to a business’s position within its business environment, Sparrow et al (1998) highlighted a further set of three loops Actions by ‘sections’ of an organization that are ‘inconsistent’ with the action of other sections can result in ‘uncoordinated action’ An organization’s inability to manoeuvre (act) in its industry/ network/cluster (i.e ‘organization positionconstrained learning’) can restrict its learning opportunities The opportunities for a business to reflect upon the experiences of others in its industry/network/cluster can be affected by ‘isolation-constrained learning’ The study also confirmed the centrality of all the forms of learning loops in the maintenance and development of capability in small firms Figure highlights the learning loop ‘disconnects’ that have been identified and explored with SMEs The model involves all four of the components of knowledge management that have been detailed above (Figure 1) The model also recognizes the operational, strategic and uncertainty management considerations of knowledge in SMEs (Figure 3) The model has as its most central tenet, the assertion that knowledge management development in SMEs needs to be supported through a process that recognizes and incorporates the current thinking and priorities in the knowledge project It seems inappropriate to ‘hijack’ the agendas and momentum in a business and attempt to ‘railroad in’ a knowledge system (in particular, a ‘standard’ complete ICT-based system) The experiences with SMEs suggest that the focus for initial incremental developments can emerge from exploratory work with MDs and (senior) managers as they are supported to consider their business practices through a knowledge lens The role of a facilitator seems central to the process The importance of ownership and the ultimate objective for an SME team to develop its own capability to sense needs for development appear to be secured well through a process consultation approach (Schein, 1999; Shelton, 2000) SME knowledge projects can take many months Contact with the ‘appropriate’ individuals and groups at particular phases of the developments needs to be maintained Contact in the order of one half-day every week to ten days over a period of to 12 months appears to be the average level of support required The model of SME knowledge management development also recognizes that knowledge projects in SMEs ‘track’ through three sets of procedures These are technological/systems development procedures, business development procedures and organizational development procedures These sets of procedures are summarized in Figure Knowledge projects may place different emphases upon these three sets of procedures but successful projects will address all three sets of procedures to some extent The overall model that can be used to guide knowledge projects in SMEs is therefore a combination of Figures 1, and It is presented as Figure A MODEL FOR THE DEVELOPMENT OF KNOWLEDGE MANAGEMENT PRACTICES IN SMES Phases in knowledge projects in small firms A model of considerations An emergent model of approaches towards developing knowledge management practices in SMEs is being derived from the experiences of SMEs 10 The model of considerations captures the range of considerations that may need to be addressed in knowledge projects in small firms The emphasis placed upon any particular cell within the model will vary with the particular knowledge project It will also vary with the phase or stage of the knowledge project Knowledge projects within J Sparrow Knowledge and Process Management CASE STUDY Figure Learning loops and potential ‘disconnects’ SMEs progress through several phases The facilitator may find that the participants wish to place more (or less) emphasis upon a particular set of procedures at a particular juncture, but may attempt to assist the group to consider the parallel issues (associated with the alternative sets of procedures) at that time The considerations and phases indicated in Figure represent the initial attempt to discern some pattern in the ‘tracks’ that SME knowledge projects take It should be recognized, however, that specific case study businesses have on occasion not addressed a specific aspect/ procedure at the ‘time’ indicated in the figure In such instances there has tended to be a feeling by the facilitator that a particular feature of the KM development process is ‘missing’ An examination of Figure reveals that there are elements of structured measurement and assessment together with inductive (qualitative) elements The experiences with SMEs would suggest that a ‘battery’ of formal measurement and assessment techniques for each procedural aspect would not be an appropriate approach On the contrary, experience would suggest that participants may wish to share in more ‘natural’ (though informed) qualitative analyses and interpretations of their practices and processes and work their way towards complementary systematic techniques Conversely, decisions to engage in more formal assessments quite early in the development process may result in participants wishing to ‘flesh out’ the interpretation with ‘specific’ and ‘actual’ examples and considerations Phase can accommodate structured and qualitative elements It has been noted how structured consideration of strategic options can be useful An alternative qualitative approach that entailed a ‘reading’ of the current business plan for ‘knowledge’ considerations has also proved useful Choice of an initial aspect of business process for knowledge development can be made on the basis of systematic and comprehensive analysis of pressing business conditions and centrality of a business process Alternatively, the choice of project can be the product of a discussion among MDs and managers Similarly, analysis of individual perceptions and team process characteristics can be derived from close interpretation of tran- Figure The three sets of procedures in knowledge projects in SMEs Knowledge Management in Small Firms 11 CASE STUDY Knowledge and Process Management Figure A model to guide knowledge projects in small firms scripts of interviews and group meetings or from more structured approaches including repertory grid procedure, psychometric testing (e.g MBTI) and questionnaire assessment (e.g Team Climate Inventory) Phase can involve formal structured analysis through attempts to value facets of intellectual capital It can also benefit from a less quantitative ‘visualization’ of the business in intellectual capital terms as a rhetorical device The KMC team is exploring the role of an ‘audit’ of knowledge management practices The tool that has been developed to date fits quite neatly into the toolkit that UK business advisers have of health-checks, benchmarking tools and audits Initial experience with the approach would also suggest that it can serve as a basic ‘orienting’ agenda for an introductory awareness-raising discussion The KMC team have extensive experience of both ‘live’ facilitation of reflection on group process in addition to asynchronous computer supported qualitative data analysis of verbal and written materials Both of these sets of skills appear to be 12 of value in the support process This may raise training and development issues for more extensive (national) support of SMEs using this model Phase 3’s inclusion of business process analysis can again be operationalized in tight ‘systems’ terms or less ‘rigorously’ The visual depiction of processes (using tools such as maps, flow diagrams etc.) appears to be valuable The sharing of perceptions has been found to work well when supported by ‘models’ of the ‘causal maps’ that different individuals appear to have The consideration of learning processes can benefit from the systematic exploration of the extent to which different learning ‘sources’ (e.g customers, best practice networks, suppliers, Internet, universities etc as detailed in the knowledge management audit tool) are utilized, together with reflection upon any ‘disconnects’ in any of the learning loops (as detailed in Figure 4) The more precise linking of knowledge (and supporting structure, systems, culture, incentives and broad uncertainty capability) to business J Sparrow Knowledge and Process Management Figure CASE STUDY Phases in the knowledge management development process in SMEs processes (in Phase 4) can be accomplished through a knowledge map of the kind detailed by Applehans et al (1999) Complementarily, a group model-building session (of the kind developed by Colin Eden and colleagues, e.g Eden and Ackermann, 1998) or a more formal system dynamics model (e.g Vennix, 1996) can be valuable The more participative approaches have the advantage of providing an opportunity for the exploration of diversity and uncertainty capability The KMC audit tool can provide a framework to consider the ‘parallel’ or ‘reinforcing’ elements of a knowledge management system (e.g culture and reward systems) These issues are more appropriately considered in the ‘scoping’ and ‘designing’ of an enhancement to current systems and practices, rather than as afterthoughts in the implementation of a ‘new’ system The development of knowledge bases and knowledge systems (in Phase 5) is largely a technical process The latest generation of knowledge management software ‘modules’ can enable the least technical of managers to develop a functioning system, but a small investment in IT consulting support can be valuable at this stage The KMC team is reviewing the experiences of SMEs with the alternative platforms (e.g Notes, Microsoft servers etc.), and bespoke versus mod- Knowledge Management in Small Firms ular system developments Insufficient cases have been undertaken to draw firm conclusions on this aspect at this stage Reference to a number of cases here, however, will highlight some of the issues that have been evidenced The first issue concerns the maintenance or change in hardware platform In one SME the intention to build more capability through the development of a marketing information system was taken as the opportunity to change the platform used in the business to one based on Windows NT The core databases in the businesses had been built in a ‘bespoke’ system The MD (who was a bit of a computer hobbyist) had developed a whole raft of additional features, but was finally of the view that the system needed to be re-implemented on Windows NT There were real concerns about the ‘porting’ of data etc into the new system (particularly because the vendor of the original system was no longer in business) In contrast, a current case study business has developed a number of tools based upon Lotus Notes They want any additional knowledge features of their systems to be implemented in Notes The second issue concerns the development of bespoke versus ‘off-the-shelf’ components In some case study businesses the level of internal ability in ICT terms is high Such businesses often wish to implement a bespoke system In another instance 13 CASE STUDY however, development options for a portal system are being explored that can be built rapidly with an off-the-shelf product (e.g SearchPad) The third issue concerns the specific contribution being sought in an ICT-based knowledge system component Developments that are seeking to redefine integration (including discussion) with the customer may want to develop some ‘intelligence’ into their web pages through standard products such as Microsoft FrontPage They may wish to build in discussion facilities with WebBoard As noted above, however, a portal facility may benefit from adoption of off-the-shelf products such as SearchPad, InfoMatrix or Agent Server Document management systems can be implemented with basic web-design software, but the control (and hence reliability and maintenance problems) of such systems may create difficulties longer term It is in the area of knowledge features within process software that raises the major data-handling and systems-integration issues The fourth issue concerns the use of standard off-the-shelf products as rapid development tools for the scoping and framing of a knowledge (e.g intranet) project with possible hand-over to other systems for implementation One of the partner bodies in the KMC has found, for example, that the non-technical intuitive nature of a product such as MindManager allows an intranet’s requisite features to be brainstormed, analysed and mapped In addition to the technical development issues, the tactical management of the movement towards a revised system (in the broadest sense of the term) appears to be an important consideration The adoption of a process consultation and action learning approach means that the developments have been made by a particular ‘community of practice’ In the course of the development they are progressively empowered to have considered their own ongoing development (including learning and uncertainty capabilities) Action plans for the next ‘part’ of the business or ‘process’ that will be addressed in knowledge terms can be drawn up The opportunities to benefit from the experience of the team(s) and knowledge projects that have been undertaken to date appear to suggest that the ‘speed’ of the next cycle of phases may be somewhat faster Overall, the knowledge management work with small firms that has been conducted by the Knowledge Management Centre suggests that the understanding of the theory and practice of knowledge management can be enriched considerably by detailed consideration of the primary considerations in a small-firm context 14 Knowledge and Process Management REFERENCES Albrow M 1997 Do Organizations Have Feelings? Routledge: London Allen TJ 1977 Managing the Flow of Technology MIT Press: Cambridge, MA Anderson NR, West MA 1994 The Team Climate Inventory: Manual and User’s Guide ASE Press: Windsor Antaki C 1994 Explaining and Arguing: The Social Organization of Accounts Sage: London Applehans W, Globe A, Laugero G 1999 Managing Knowledge: A Practical Web-Based Approach AddisonWesley: Reading, MA Barber J, Metcalfe JS, Porteous M 1989 Barriers to Growth in Small Firms Routledge: London Berry AJ, Perren L 1998 Management information in small growth oriented service sector businesses: Lessons from success Proceedings of the 21st ISBA National Small Firms Conference Durham University Business School, 18–20 November, 894–911 Birchall DW, Tovstiga G 1999 The strategic potential of a firm’s knowledge portfolio Journal of General Management 25: 1, 1–16 Boisot M 1995 Is your firm a creative destroyer? Competitive learning and knowledge flows in the technological strategies of firms Research Policy 24: 489–506 Bolwijn PT, Kumpe T 1990 Manufacturing in the 1990s—productivity, flexibility and innovation Long Range Planning 23: 44–57 Bowander B, Miyake T 1999 Japanese LCD industry: Competing through knowledge management Creativity and Innovation Management 8: 2, 77–99 Boyd D, Robson A 1996 Enhancing learning in construction projects In The Organisation and Management of Construction: Shaping Theory and Practice, Langford D, Retik A (eds) E&N Spon: London; 293–302 Boyd D, Wild A 1993 Innovation and learning in construction project management Proceedings of 9th Annual Conference of Association of Researchers in Construction Management (ARCOM) Exeter College University of Oxford, 14–16 September Braganza A, Edwards C, Lambert R 1999 A taxonomy of knowledge projects to underpin organizational innovation and competitiveness Knowledge and Process Management 6: 2, 83–90 Burns P 1989 Strategies for success and routes to failure In Small Business and Entrepreneurship, Burns P, Dewhurst J (eds) Macmillan: Basingstoke; 32–67 Chattell A 1998 Creating Value in the Digital Era: Achieving Success through Insight, Imagination and Innovation Macmillan Business: Basingstoke Cole-Golomski B 1997 Users loath to share their knowhow Computerworld 31: 46, Cook T 1995 Measuring the benefits of patent protection Managing Intellectual Property 76: 39–44 Couger JD 1996 Measurement of the climate for creativity in IS organizations Creativity and Innovation Management 5: 4, 273–279 Daniels K, Johnson G, de Chernatory L 1994 Differences in managerial cognitions of competition British Journal of Management Special Issue 5: June, 21–29 Davenport TH, Klahr P 1998 Managing customer J Sparrow Knowledge and Process Management support knowledge California Management Review 40: 195–208 Davenport TH, Prusak L 1998 Working Knowledge: How Organizations Manage What They Know Harvard Business School Press: Boston, MA Eason K 1988 Information Technology and Organisational Change Taylor and Francis: London Eden C, Ackermann F 1998 Analysing and comparing idiographic causal maps In Managerial and Organizational Cognition: Theory, Methods and Research, Eden C, Spender J-C (eds) Sage: London; 192–209 Eden C, Spender J-C (eds) 1998 Managerial and Organizational Cognition: Theory, Methods and Research Sage: London Fahey L, Prusak L 1998 The eleven deadliest sins of knowledge management California Management Review 40: 265–275 Fairhead J 1998 Paradigm change and leveraged learning during the Rover–Honda collaboration Creativity and Innovation Management 7: 2, 93–106 Hall R, Andriani P 1999 Managing knowledge in an innovative environment In Liberating Knowledge, CBI/ IBM (eds) Caspian Publishing: London Hendry C, Arthur MB, Jones AM 1995 Strategy through People: Adaptation and learning in the small–medium enterprise Routledge: London Hepworth M, Ducatel K 1992 Transport in the Information Age: Wheels and Wires Bellhaven: London Hougaard S, Duus HJ 1999 Competing in the digital age Journal of General Management 24: 3, 1–10 Huber GP 1999 Facilitating project team learning and contributions to organizational knowledge Creativity and Innovation Management 8: 2, 70–76 Kennedy C 2000 Benchmarking your success In Managing Knowledge in the Digital Era, Nash T (ed.) Director Publications Ltd: London; Chapter 9, 60–65 Kim DH 1993 The link between individual and organizational learning Sloan Management Review Fall: 37–50 Kitching J 1998 Managing intellectual property in SMEs Proceeedings of the 21st ISBA National Small Firms Policy and Research Conference Durham University Business School, 18–20 November, 397–415 Kogut B, Zander U 1992 Knowledge of the firm, combinative capabilities and the replication of technology Organization Science 3: 3, 383–397 Kuratko DF, Hodgetts RM 1988 Understanding intellectual property protection for entrepreneurs In Entrepreneurship: Bridging the gaps between research and practice, Lasher H-J (ed.) Third annual conference, United States Association for Small Business and Entrepreneurship Leonard-Barton D 1995 Wellsprings of Knowledge: Building and sustaining the Source of Innovation Harvard Business School Press: Boston, MA Leonard D, Sensiper S 1998 The role of tacit knowledge in group innovation California Management Review 40: 112–132 Lightfoot G 1996 Management, knowledge and control in small firms: The problems with professional advice Proceedings of the 19th ISBA National Small Firms Policy and Research Conference, 20–22 November, 628–641 Livernois S, Miller RJ 1999 Arthur Andersen Best Practice Forum: Automotive Arthur Andersen: London Machlup F 1984 Knowledge: Its creation, distribution and economic significance Vols 1–3 Princeton University Press: Princeton, NJ Knowledge Management in Small Firms CASE STUDY Malhotra Y 2000 Knowledge management and new organization forms: a framework for business model innovation Information Resources Management Journal 13: 1, 5–14 Marceau J 1999 Networks of innovation, networks of production and networks of marketing Collaboration and competition in the biomedical and toolmaking industries in Australia Creativity and Innovation Management 8: 1, 20–27 March JG, Olson JP 1975 The uncertainty of the past: Organizational learning under ambiguity European Journal of Political Research 3: 147–171 Matusik S, Hill CWL 1998 The utilization of contingent work, knowledge creation and competitive advantage Academy of Management Review 23: 680–697 Mitra J 1999 Clusters and knowledge based economies Centre for Local Economic Strategies, Iss 18, December, Manchester Moingeon B, Edmondson A (eds) 1996 Organizational Learning and Competitive Advantage Sage: London Munro R 1996 Alignment and identity work: the study of accounts and accountability In Accountability: Power, Ethos and the Technologies of Managing, Munro R, Mouritsen J (eds) Thompson Business Press: London Nonaka I, Takeuchi H 1995 The Knowledge Creating Company Oxford University Press: Oxford Orlikowski WJ 1996 Evolving with notes: organizational change around groupware technology In Groupware and Teamwork, Ciborra C (ed.) Wiley: New York; Chapter 2, 23–59 Paper DJ, Johnson JJ 1997 A theoretical framework linking creativity, empowerment and organizational memory Creativity and Innovation Management 6: 1, 32–44 Park Y-T, Kim M-S 1999 A taxonomy of industries based on knowledge flow structure Technology Analysis and Strategic Management 11: 4, 541–550 Porter ME 1998 The Competitive Advantage of Nations Macmillan Business: Basingstoke Prahalad C, Hamel G 1990 The core competency of the corporation Harvard Business Review May–June Rura-Polley T, Clegg SR 1999 Managing collaborative quality: A challenging innovation Creativity and Innovation Management 8: 1, 37–47 Scarbrough H 1996 Information systems for knowledge management In The Management of Expertise, Scarbrough H (ed.) Macmillan Business: Basingstoke; Chapter 7, 177–189 Schein E 1999 Process Consultation Revisited AddisonWesley: Reading, MA Shelton R 2000 Helping an SME owner to share knowledge In HRD Research and Practice across Europe, Woodall J (ed.) Kingston Business School: Kingston upon Thames Smallbone D, North D, Leigh R 1992 Managing change for growth and survival: the study of mature manufacturing firms in London during the 1980s Working Paper No 3, Planning Research Centre, Middlesex Polytechnic Smart A, McCosh M, Barrar P, Lloyd AD 1999 The management of knowledge during design and implementation of process technologies Creativity and Innovation Management 8: 2, 100–111 Sparrow J 1998 Knowledge in Organizations: Access to thinking at work Sage: London Sparrow J 1999 Supporting SMEs in Knowledge 15 CASE STUDY Management Knowledge Management Centre: Birmingham Sparrow J 2000 Knowledge Management Challenges for the UK Business Support Infrastructure: Perceptions from within Knowledge Management Centre: Birmingham Sparrow J in press Recognising emotion in knowledge Journal of Managerial Psychology Sparrow J, Bentley P 2000 Decision tendencies of entrepreneurs and small business risk management practices Risk Management: An International Journal 2: 1, 17–26 Sparrow J, Goodman F 2000 Small business considerations in collaboration upon crime management Security Journal 13: 1, 21–31 Sparrow J, Zetie S, Bushell M 1998 Organisational learning in small firms: Implications for supporting knowledge management Proceedings of the 21st National Small Firms Policy and Research Conference Durham University Business School, 18–20 November Stacey R 1992 Managing Chaos Kogan Page: London Swan J, Newell S, Scarbrough H, Hislop D 1999 Knowledge management and innovation: networks and networking Journal of Knowledge Management 3: 4, 262–275 Teece DJ 1998 Research directions for knowledge 16 Knowledge and Process Management management California Management Review 40: 289–293 Tidd J, Taurins S 1999 Learn or leverage? Strategic diversification and organizational learning through corporate ventures Creativity and Innovation Management 8: 2, 122–129 Trompenaars F 1995 Riding the Waves of Culture: Understanding cultural diversity in business Nicholas Brealey: London Vennix JAM 1996 Group Model Building: Facilitating Team Learning Using System Dynamics Wiley: Chichester Weick KE 1990 Technology as equivoque: sensemaking in new technologies In Technology and Organisations, Goodman PS, Sproull LS, Associates (eds) JosseyBass: Oxford Weick KE, Roberts KH 1993 Collective mind in organization: heeding interrelating on flight decks Administrative Science Quarterly 38: 357–381 Wikstrom S, Normann R 1994 Knowledge and Value: A new perspective on corporate transformation Routledge: London Zetie S 1998 Knowledge Management Initiatives in Manufacturing SMEs A report to City of Birmingham Economic Development Department University of Central England Business School, Birmingham J Sparrow ... knowledge management to be brought to bear Components of knowledge management initiatives in SMEs Four components of knowledge management in small firms have been found to figure strongly in small firm knowledge. .. of knowledge in business and the basic principles of a knowledge system This is in contrast to initiatives in larger firms which may be part of a tradition to make substantial investments in information... Manufacturing, University of Cambridge, 1999) Overall, it seems clear that the small firm knowledge setting is different from that within larger firms Knowledge Management in Small Firms CASE STUDY Knowledge