03 April 2006

Consider the above “Strategic Capability” diagram (L. Baird and J. Henderson, The Knowledge Engine, Berrett-Koehler Publishers, 2001, first edition page 14).

Business Intelligence (BI) needs to provide the right Knowledge to drive the strategy and use the strategy to direct Knowledge Management (KM) initiatives: The Focus stage above.
The BI Reflect stage must rely heavily on Knowledge generated at the operational level (this same Knowledge is considered as “only” Information at the Strategic Level). Reflecting is about aggregating and simplifying this “operational Knowledge”, making sense of it strategically to produce “strategic Knowledge”.

“Making sense of Information” means here to be able to use it in various pre-defined contexts and run simulations. These simulations are to assist the strategic decision-makers in assessing which strategies have the most suitable potential-to-risk ratio.

How should the operational Knowledge be structured to enable these strategic simulations?

I have been recently introduced by Dennis Sherwood (author of “Seeing the Forest for the Trees – A Manager’s Guide to Systems Thinking”, Nicholas Brealy Publishing, 2002) to Systems Thinking in the organizational context. I strongly recommend Dennis’ book but in a few words, “the essence Systems Thinking is that the complexity of the real world can best be tamed by seeing things in the round, as a whole. […] Taking a broad view, however, is not at the expense of missing the detail […]. Nor is it a question of broad brush versus detail; rather, it is one of taking a broad view in the context of the right detail, of truly […] seeing the forest for the trees.”

The idea here is then to illustrate operational Knowledge in a systemic form (a causal loop more precisely) where all stakeholders are linked up through a network of inputs and outputs. These ins and outs are to represent the influences these stakeholders have on each other. Influences are either positive or negative (never neutral).

These systems include levers and outcomes. The levers are the variables for defining an initial context for the simulation. The outcomes give the results of the simulation.

Various off-the-shelves software will enable you to relatively easily design such an organizational system. However, the complexity isn’t with the technical design but rather with defining the relationships between stakeholders, or in other words, with having a clear understanding of how the organization operates.

Building effective organizational systems must therefore involve experienced individuals from different key functional areas in the organization. No single individual can have the required knowledge to do this alone.

Peter-Anthony Glick