Managing the balance between technological knowledge and


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Managing the balance between
technological knowledge and
customer knowledge

Shari S. C. Shang

Department of Management Information Systems,

National Chengchi University
, Taiwan



Department of Management Information Systems,

National Chengchi University
, Taiwan



The main purp
ose of this study is to develop

a mechanism between
customer knowledge and technological knowledge.


Both structured questionnaires and interview were


The added value of this paper is to link a firm's knowledge
between customer knowledge and technological knowledge, and explore a solution to
maintain the co
nflict between customer knowledge and technological knowledge

in a


Technological knowledge, Customer knowledge, knowledge management,

management mechanism

Chapter 1


Customer knowledge refers to the understanding o
f customers, their needs, wants.
It is essential to business running if a business is to align its processes, products and
services to build sustained customer relationships. Sharing the customer knowledge as
one type of knowledge sharing can help firms to

identify customers' present and latent
needs. Many companies have accumulated knowledge of their customers, but
frequently having it in a fragmented form and is difficult to share.

Technological knowledge, on the other hand, can be developed from complete

ignorance of customer knowledge, as organization members experiment, encounter
errors, draw inferences, and learn from customers. When technological knowledge is
incomplete, there will be costs for learning with unknown returns. However,
knowledge sharing

focuses on sharing of organizational knowledge (e.g. market
intelligence, technology knowledge) with insiders/outsiders to improve firm's
comprehensive capability. If a firm possesses truly unique knowledge of its customers,
then a competitor must develop

either another form of knowledge (such as technology
knowledge) or another type of asset (perhaps a one
kind manufacturing process)
that will enable it to achieve the same marketing outcomes.

Organizations tent to combine customer knowledge and tech
nological knowledge
for strategic purposes. For example, CRM is a technology
enabled business strategy
whereby companies leverage increased customer knowledge and advanced
technologies to build profitable relationships, based on optimizing value delivered
and realized from their customers. There is need for managing the balance between
these two types of different knowledge.

The aim of this study is to understand clearly the technological and customer
knowledge and build insights of managing the balance

between these two types of
knowledge for business advantages.

Chapter 2

Literature review

2.1 customer knowledge

Customer knowledge is knowledge about customers, which includes knowledge
about potential customers, customer segments and individual custo
mers, and
knowledge possessed by customers. There are two different types of customer
knowledge (Matthew K.O. Lee,
Christy M.K.

Choon Ling Sia 2006):

Knowledge about customers (e.g. demographics, preferences, lifestyles and, etc.); and

Knowledge resided
in customers (e.g. experience and insights about the products or

Customer knowledge is created and shared through a process of discussion with
questions and answers between customers (Matthew K.O. Lee, Christy M.K. Cheung,
Kai H. Lim, Choon Ling

Sia 2006). However, without the participation of customers,
the firm could not acquire customer data and customer information.

Customer knowledge enhances learning about customer needs and, as mentioned
in the organizational learning literature, generates

a behavioral consequence (Fiol and
Lyles 1985). It is important to understand the process of customer knowledge so that
the firm could enhance awareness of customer needs, is likely to ensure that the
making process is faster. Customer knowledge
process refers to the activities
within an organization focused on the generation, analysis, and dissemination of
related information for the purpose of strategy development and
implementation (Satish Jayachandran, Kelly Hewett and Peter Kaufman 2
004). In
addition, customer knowledge process will improve a firm's ability to identify
customer needs and allows a firm to be ahead of the curve in predicting and shaping
responses to emerging customer needs. Namely, good customer knowledge process
will e
nable it to identify customer needs earlier compared with its competitors and
thus allow for faster customer responses.

2.1.1 Benefit and difficulty

Effective management of customer knowledge can significantly enhance a
company's competitive advantage by
providing the company with better
and timely
design of new produc
ts and services, with early warning and competitive intelligence,
with customer commitment and loyalty, and with the synergy of collaboration
(Koenig and Srikantaiah, 2000). In addition, Bult
er (2000) has asserted that
capitalizing on the information of customer's needs can improve customer satisfaction
and increase the frequency and intensity of buying behavior with the vendor
concerned, resulting in a high switching cost for its customers.

owever, there are some difficult about customer knowledge like leveraging
customer knowledge (profiling and personalization) and linking customer knowledge
with successful service innovation. For example, difficulties often arise with
encouraging consumers

to add new categories, and to up
date their profiles. In
addition, for effective operation, active customer feedback on the relevance and
usefulness of marketing communications are necessary. The latter is the difficulty of
evaluating value from the custo
mer's perspective, a critical need exists for firms to
obtain and possess knowledge about what activities create customer value for
individual customers.

2.1.2 Example

Muji makes extensive use of customer knowledge to create high impact
experiences. Centr
alized store operation, employee training, and focus on conceptual
design guidelines distinguish Muji from other Japanese companies.

Eleven uses several contexts for knowledge sharing. For example,
customer knowledge is captured throughout the 8,000
stores of Seven
Eleven. At the
stores, dialog with customers helps to capture emerging needs. Local employees'
knowledge and insight in such needs is shared with other employees and with field
counselors and owner consultants, who visit stores frequently t
o consult. The market
knowledge and insights are also shared in the weekly face
face meetings, in which
all managers get together and share their views and feelings. As a result, all decisions
are based on sharing knowledge of customers and on a continu
ous flow of feedback
from the shop floor.

2.2 technological knowledge

Technological knowledge is knowledge about firm’s experience with product and
process technology. In fact, organizational learning might be said to occur as an
organization and its memb
ers build a knowledge base of action
outcome relationships
relevant to its tasks and technologies (Argote, 1999; Bohn, 1994; Dun
can and Weiss,
; Yelle, 1979). These knowledge bases have been called technological knowledge
(Bohn, 1994). Utterback (1994)

further suggests that technological knowledge exists
at two levels, operating knowledge, held by the operating employees, and structuring
knowledge, held by managerial employees. Structuring knowledge is knowledge of
how to structure operations, as oppose
d to operating knowledge, which is knowledge
of what to do within a structure. In the early stages, operating knowledge develops
rapidly, as products and processes are advanced by skilled operating personnel
working in an unstructured environment. As techn
ological knowledge matures,
managerial structuring knowledge often translates operating practice into structure,
standard operating procedure and enabling technology.

The value of the technological knowledge is influenced by the demand, rather
than by the
sheer costs of the single research program that is at the origin of the rare
success. The application of the notion of essential facility and mandated
interconnection to the governance of technological knowledge can be implemented by
the adoption of the li
ability rule and the parallel reduction in the exclusivity of patents.
Because knowledge is at the same time an output and an input in the production of
new knowledge, exclusivity, traditionally associated to patents, is the cause of actual
knowledge ratio
ning with major drawbacks in terms of both static and dynamic
efficiency. technological knowledge is very much the result of the valorization of
up processes built upon learning processes and accumulated competence: it is
difficult if not impossible

to disentangle the specific cost items that can be charged:
major issue of indivisibility applies
It can develop from complete ignorance to
mature knowledge (Bohn, 1994), as organization members experiment, encounter
errors, draw inferences, and learn.

2.2.1 Benefit and difficulty

Technological knowledge helps not only in accelerating the development of new
products deliberately planned for, but also in the development of various other new
products that may not have been planned by the firm initially. Te
knowledge is an important one as it can help a firm not only attain, but also sustain its
competitive advantage.

Knowledge transfer requiring co
operation between many diverse groups,
including for example, R&D, manufacturing, marketing, procur
ement, contracts,
spare parts and services. However, the problem can be particularly acute where
technology is concerned, both because the technology itself can be difficult to transfer
and because of the difference in culture between, say, those working i
n an R&D
environment and those working in a manufacturing or marketing environment

2.2.2 example

Firm performance is affected by breadth of technological knowledge. Three
factors necessitate breadth of technological knowledge. First, ability to integrate

wide range of technical disciplines has been shown to be important in pharmaceutical
firms that have successful R&D programs (Bierly and Chakrabarti, 1996; Henderson
and Cockburn, 1994; Pisano, 1994). Second, as Teece (1987) argues that successful
ct development requires both core and complementary technologies. Third,
specific portions of a firm's current expertise can be rendered obsolete by
revolutionary technological change (Dosi, 1984; Tushman and Anderson, 1986). In
such a situation firms with

a broader technological knowledge base are in a better
position to recover and maintain their competitive advantage.

The following is table between
technological knowledge

(see table 1)

customer knowledge

technological knowledge


uestions and answers between

liability rule and the parallel reduction in the
exclusivity of patents


encouraging consumers to add new
categories, and to up
date their profiles

knowledge transfer requiring co
between many divers
e groups


generation, analysis, and

organization members experiment, encounter
errors, draw inferences, and learn


enhance a company's competitive

timely design of new
products and services

accelerating the devel
opment of new products
deliberately planned for

development of
various other new products that may not have
been planned by the firm initially


knowledge about customers

knowledge resided in customers

operating knowledge





pharmaceutical firms


2.3 knowledge management mechanism

Knowledge management is vital to a company's success in this era. Not only has
the topic of know
ledge management attracted much research attention lately, but the
ent of customer knowledge and t
hnological knowledge are also becoming
increasingly important.

Newman defined knowledge management as the collection of processes that
govern the cre
ation, dissemination, and utilization of knowledge. The theory of
knowledge creation distinguishes between tacit and explicit knowledge. Tacit
knowledge is difficult to articulate and encode, and consequently difficult to transfer.
On the other hand, expli
cit knowledge can be communicated or transmitted in formal
language. Along the line of tacit and explicit knowledge classification, knowledge
management is believed to be "a systemic and organizationally specified process for
acquiring, organizing, and com
municating both tacit and explicit knowledge" so that
work can be made more effective and productive.

In Holm's view, knowledge management is getting the right information to the
right people at the right time, and helping people create knowledge, and shar
e and act
upon information in ways that will measurably improve the performance of the
organization and its partners. To achieve this, we need a systematic approach


to identify and capture information and knowledge about a company's

products, services, markets, customers, and competitors, and to share them
for the greater goal of organizati
onal well being and performance


2.3.1 Customer
knowledge management mechanism

stomer knowledge management help gather knowledge from the customer and
help identify knowledge that the customer needs and that should be collected by the
firm. Because an interaction is a two way process, knowledge is gathered by both
parties. The custom
er gathers knowledge that helps him make a purchase decision at
the same time the firm collects knowledge that in the aggregate can be referred back
to the customer or used for product development.

The model that we propose
illustrates a three
step process

that will gather knowledge during personal interaction
with customers

(see table 3)

M Garcia
Murillo, H Annabi
, 2002)


When the customer and salesperson come together, they both bring their knowledge
and experiences to the interaction. In this fac
face encounter the customer seeks to
satisfy a need. The need can be for a product or service. On some occasions the
customer knows well what he intends to buy but in other circumstances, the customer
may not be oriented and hopes to find information
at the store.


While the customer displays what he/she knows and his/her preferences, the
salesperson begins to create a mental map of user needs. Based on customer needs,
the salesperson will begin to identify the pieces of knowledge that can help
consumer in his/her particular situation. To help a customer make a decision, the
salesperson sorts

relevant to that particular individual regarding product
characteristics, functional attributes, information about common problems, substitute

products, maintenance
nformation, quality records, competitive products, and options.
The knowledge identified by the salesperson should be articulated and presented to
the customer not

as pressure for a sale but as a genuine effort to assist

the decision
making process. The customer in turn feels more comfortable making a
decision that satisfies his/her needs and returns to the store to satisfy future needs.


At this point of the interaction, the customer has obtained general informa
tion about
the products and services. Similarly the salesperson has an idea of customer

and needs. Because complete understanding might not have been achieved
initially and because preferences change over the course of the interaction, this thir
step in the process involves reaching an understanding of the needs and perspectives
of both parties. It is important for the salesperson to have a clear idea of customer
needs after exchange of knowledge has taken place and for the customer to realize t
type of information that he requires to make a decision.

Table 3

2.3.2 Technological
knowledge management mechanism

The vital impact of organizational knowledge on performance is now widely
nized, but the study of how to manage such knowledge is still in its infancy. A
framework for measuring and understanding one particular type of knowledge

technological knowledge, that is, knowledge about how to produce goods and services

is presented.

The framework can be used to more precisely map, evaluate, and
compare levels of knowledge. The level of knowledge that a process has reached
determines how a process should be controlled, whether and how it can be automated,
the key tasks of the workforc
e, and other major aspects of management. Better
knowledge of key variables leads to better performance without incremental physical
investment (Bohn, Roger E., 1994)

In contrast to most approaches for measuring knowledge, the nature of the
knowledge chan
ges qualitatively with each stage in this framework. The process of
learning from one stage to the next also changes. Eac
h stage is described as follow

(Bohn, Roger E., 1994)

Table 4


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