Knowledge Risks in Organizational Networks – Journal of Strategic Information Systems

Peter Trkman (Faculty of Economics, University of Ljubljana) and I have a paper accepted for publication in the Journal of Strategic Information Systems. The paper titled “Knowledge Risks in Organizational Networks: An Exploratory Framework”  uses a combination of knowledge-based and transaction cost theories to show how the dimension and type of knowledge risk differently impact the knowledge transfer, the whole network, and the risk mitigation options.

In a networked environment, it is essential for organizations to share knowledge among themselves if they want to achieve global objectives such as collaborative innovation and increased effectiveness and efficiency of operations. However, sharing knowledge is not risk-free. An organization might lose its competitive edge if it shares too much or certain key knowledge. In addition, an organization might suffer if its intellectual property is improperly handled by its business partners. While the literature has touted the value of knowledge sharing within networks, there is a conspicuous absence of studies examining the risks of sharing knowledge. To address this gap, we develop an exploratory framework that categorizes knowledge-sharing risks across multiple dimensions. Such a framework is a structured alternative to practice-based approach to knowledge risk management. It enables a prior identification of various kinds of knowledge risks that organizations are facing.

The use of such framework is not without its limitations. Thus, a complementary paper will be published in the same issue by Marco Marabelli and Sue Newell that presents an alternative approach to knowledge risk management based on a practice perspective of knowledge.

Just a couple of footnotes

 

11 replies
  1. Karen Wood
    Karen Wood says:

    While working for a healthcare association in 2009 I had the opportunity to support the integration of Virginia’s Federally Qualified Health Centers (FQHCs) into the state’s emergency preparedness and response initiatives. This effort primarily focused on the entry of FQHCs into two state administered networks led by the Department of Health. The knowledge management risk framework presented in Trkman and Desouza (2012) is interesting and relevant to the evolution of that relationship not necessarily for insight on the impacts to knowledge sharing or risk mitigation solutions, but how the dimension/type of one area affected the dimension/type in another area.
    For the Healthcare and Public Health (HPH) sector disaster response at a basic level and as generally contemplated, entails an unmanageable surge in patients or cases placing enormous demands on the system for public health and medical services. Many of the scenarios discussed for disaster response and recovery suggest that individual agencies/facilities will be overwhelmed by demand, leaving them short-staffed, without adequate space, with depleted inventories, and, for the private sector in particular, uncertainty as to whether they will be able to recoup their costs. As such various networks have emerged to coordinate and support planning efforts which share characteristics of each of the four types of networks discussed in the framework. The primary motivation for joining each of these networks is to improve the ability of the organization and/or sector’s ability to respond to increased demand for services (agile network) by coordinating efforts, distributing grant funds, and sharing resources (risk-hedging network), and identifying and resolving problems during front-end scenario planning (innovative network). In addition, these networks are further subdivided regionally and maintain multi-agency coordination and communication capabilities, thus increasing cost efficiencies (functional network) for members. While the theory behind creating these networks is to provide the time and space for symmetric collaboration, Virginia’s FQHCs were not necessarily openly embraced in these efforts which suggest a perceived asymmetry among those involved. The FQHCs were hesitant to devote resources to engaging the network because other members, and the lead in particular, did not see much value in FQHCs for response and recovery; The potential roles of FQHCs was not written into state plans nor was any grant funding distributed to these entities. Furthermore, subsequent discussions concerning the potential roles of FQHCs did little to change the government- and hospital-centric approach to HPH planning, another indicator of an asymmetric relationship. Had these perceptions of asymmetry not been the case, these networks may have learned that FQHCs as a state and national network, and resource, could be a significant response resource*.
    Ultimately, the nature of collaboration in this case was a barrier to effective knowledge sharing and undermined the primary motivation for creating those networks (ie: improving the ability of an organization in responding rapidly to increased and perhaps unmanageable demands for services).
    *See: Wood, Karen. (2009). Community Health Centers: The Untapped Resource for Public Health and Medical Preparedness. HSAJ. 5(1).

  2. Chris
    Chris says:

    Finding the critical balancing point between sharing “too much” or “not enough” information in your own network or organization is a complicated and arduous task. Information overload, clogging the channels, and data distraction can be the consequences of sharing excessive information, or by sharing it in a hyper-expedited manner that prevents proper absorption and incorporation of that knowledge. On the other hand, inadequate information (or information passed in a slow and lethargic manner) can starve an organization or network of the data it needs to successfully operate. Again, striking the proper balance entails understanding both of the organizations in which the exchange is to be taken place, understanding the implications and second and third order effects of the information shared, and distributing that information through the right channels and at the proper pace. In the public sector, the more proximate organizations are, the more rapidly they should be able to absorb and assess shared information. However, that is not always the case.
    In the public sector, proximity is a central point of friction between various levels, branches, and bureaus of the government. The various subsets of proximity play into the knowledge-sharing and risk equation: cognitive; organizational; social; institutional, and geographical. When boiled down, the government represents organizations that are vastly and fundamentally different from one another, with competing interests and frequently fluctuating alliances. Alliances morph, develop, wither, then die, and then new ones are formed. Even within the same political parties one can readily find ample examples of infighting and inefficiencies, which can be traced back to the relative vicinity of objectives, structure, and location. There are multiple examples of small towns (and their supporting networks/organizations) that have managed crisis well. A prime example of how the community of Allentown, PA rallied after multiple disasters. http://communityresiliencenetworks.wordpress.com/ The proximity of many organizations (geographically, socially, structurally, and ideologically) contributed to the resilient response.

    On the other hand, the town of Sanford, Florida, in light of the recent events surrounding the Trayvon Martin shooting, has completely mismanaged the crisis it has on its hands. http://www.miamiherald.com/2012/03/31/v-fullstory/2724962/how-a-small-town-mismanaged-a.html
    Part of the article points out the fact that the police and local government were unprepared for this situation: “In a fast moving media environment you must have effective crisis management that maintains trust with your audiences…” said Daniel Diermeier, a professor and analyst at Northwestern University. Instead of effective information sharing between the police, the local government, and the public- a wildfire of speculation ensued as the need for information failed to be quenched. Instead of smothering the rising tensions, news media outlets fanned the fire by choosing sides and asserting speculations in this apparent information vacuum. This was an example of how the lack of proximity (the only alignment in Sanford organizations was geographic) led to an intensification of a crisis which could have, and should have been diffused.

  3. jeffkaz
    jeffkaz says:

    I find the network concepts interesting as the governance becomes a collaborative endeavor vice a hierarchy. The ownership becomes shared and the intent is to focus the organizations within the network toward the accomplishment of network-level goals.
    Within the government, members from different departments or agencies regularly come together to solve different issues within the government. The nature of the network depends on the issue to be solved. Of course the type of network is probably not as important as the issue to be solved. Some public organizations may not cease to exist if they do not become or remain members of a network but they may become irrelevant to the network.
    When you bring together members from the State Department, Defense Department or the Commerce Department, for example, you will inevitably have asymmetric knowledge. One organization may have information others may need to complete the picture. Even within departments or agencies, you will have asymmetric knowledge. The reason we work together is to leverage knowledge of others.
    As we attempted to solve the issue of data sharing not only among the government users of space situation awareness data but among the commercial and international satellite owner-operators, we brought together a network of public officials from within the Defense, State, Commerce, and Homeland Security Departments along with the Intelligence Community to address another issue of data sharing. Certain meetings included international and commercial partners to get their input on the issues.
    Discussions revolved around how much and what information to share with our international and commercial partners. Within these conversations, members of the government network had information which could not be shared with the rest of the network as we tried to resolve our issues. Unfortunately, some data could not be shared to present a complete picture or provide “enough” information to others.
    Members of the Defense Department understood the knowledge we had and what could not be shared with Commerce or State officials. Commerce and State officials brought information to the table to enable better decisions at Defense. Sometimes the network will always be asymmetric.
    Developing networks presents interesting issues with regard to knowledge and information sharing – especially when classified information is involved. In some instances, the knowledge will be asymmetric regardless of the nature of the network.

  4. bohica
    bohica says:

    There are transaction costs associated with acquiring and managing knowledge, and if the knowledge is acquired through a network there are additional costs of creating and maintaining that network. There is also a cost associated with managing the risk of knowledge being transferred out of that network. The article proposes five different “dimensions” for classifying the risk of losing knowledge from a network. This framework of the five dimensions has, as noted by the authors, not been empirically validated yet.

    The classified networks that the government uses are, by definition, in the public sector, although shielded from the public writ large. Taking the intel community network as an example, let’s examine the nature of the collaboration and the nature of the network. Collaboration assumes that those involved are working towards a similar goal, for instance, stopping a terrorist attack against the United States. While everyone can agree on this goal, there are knowledge asymmetries because some network members hold information that they are not willing to share with others. This situation unfortunately occurs frequently, despite the fact that the Director of National Intelligence was specifically set up to prevent lack of information sharing. Without going into specific details, CIA has information that DIA does not, DIA has information that it will not share with CIA, and both organizations have information that they will not share with DNI entities. Thus the transaction costs of equal sharing have been deemed unacceptable, because of the belief that knowledge is power.

    Moving on to the nature of the network, the intel community would like to delude itself into thinking that its networks are innovative, and they may have been when first established, and on occasions when improvements are made. But because of the extreme need for security, sometimes improvements take longer than in the industrial sector. Intel community networks also strive to be agile, to respond to changing policymaker needs. But, the need to keep and hoard knowledge, as mentioned in the article, means that less information is shared. It took many years for the intel community to have an instant messaging system that worked on the classified network, and when that system was put into place there was a huge list of rules set up to prevent certain specific types of knowledge from being shared. It also took a huge amount of time for the intel community to be able to access the Internet on work computers because special firewalls and other security needed to be in place. Most citizens would be aghast at the fact that information from the Internet was NOT available at intel community workers’ desks until the mid-1990s. Thus, the nature of the network in the intel community was the opposite of agile, because of concerns about losing sensitive information out of the controlled network. While those concerns are certainly valid, they can be, and were, an impediment to sharing what needed to be shared.

  5. Jamie Finch
    Jamie Finch says:

    Statement on framework of Knowledge Risks
    Jamie Finch 4.25.12
    For this review from a public sector perspective, I take into consideration two concepts that are mentioned in the paper. The first concept is proximity. When taking this in consideration – and that most of federal agencies are located in Washington, DC and they are, after all, the government. One would be under the misconception that all government agencies should very easily share knowledge with each other. Like most people, I was shocked after 9/11 that the FBI and CIA did not talk. Because of their location and the nature of the two organizations, it seems that they would share information. But information (knowledge) in Washington is power. Digging further into their histories, we see that they originated in very different times with very different missions (though, again, to the outside public there doesn’t seem to be that big a difference).
    I believe that one would actually see more proximity between the NTSB and the FAA. However, it must be pointed out that these two organizations come to aviation from very different approaches. FAA is to regulate and promote aviation. NTSB, on the other hand, has a sole mission of investigating aviation accidents. However, this accident investigation is a common bond between the two organizations that brings them closer in proximity. They both obviously want to find the cause(s) of an accident.
    There is some risk in this in that is on the human/individual level, which ties nicely into the second concept that I discuss here – the type of action. As I mentioned earlier, both NTSB and FAA are wanting to find the reasons for an accident. NTSB has much technical expertise on staff, however, not to the same extent as FAA’s talent bench. They must share information/knowledge to be able to accomplish their mutual goal. However, keep in mind FAA’s primary mission is to regulate, promote and keep “the planes flying”. This causes some conflict in mission goals between the two organizations and must be treated very carefully. Because of the proximity and the type of action that these two organizations are involved in surrounding an aviation accident investigation, obvious close relationships develop over the years. Here we have the risk of having deliberate and non-deliberate actions by individuals that could create a potential “leak” problem. From a deliberate standpoint, it could be done by a disgruntled employee in either organization or it could be the “slip of the tongue” or an unintentional email between colleagues in the FAA and NTSB with either information within its body OR attached in document form. Either way, the risks are there but must be endured for both organizations to accomplish their goals.

  6. Andina Nagler
    Andina Nagler says:

    During my professional career I have seen many networks in action and this article helped me understand better certain aspects of the networks and their ability to either hinder or encourage knowledge sharing. As a contractor for the Department of Homeland Security, we had to get together in small networks all the time to collaborate in submitting proposals as a team. The reason companies got together was because they possessed asymmetric information and would benefit from the collaboration. Prior to any collaboration, many Non-Disclosure and Confidentiality Agreement were put in place by all parties to protect each organization’s knowledge. Also, due to the geographical and organizational proximity of the companies, most employees upon entering these companies were made to sign Non-compete Agreements to mitigate the risk of companies “stealing” their human capital and the knowledge these employees might possess. The high transaction costs connected with the aforementioned relationship was mitigated through the development of trust among certain partners. After multiple collaborations, the knowledge sharing occurred naturally due to the trust established and not because of the many agreements in place.
    I also want to touch upon the professional experience I have had with organizations that are geographically non-proximate but organizationally proximate. From 2009 – 2011, Virginia Tech was trying to establish a Counter-Smuggling Network in the Black Sea Region. What we found was that official organizations were not as warm and fuzzy about the idea. Because we were dealing with law enforcement organizations, I personally contributed this hesitation and reluctance to participate to the law enforcement culture of “whoever has the knowledge and information makes the arrests and thus gets the glory”. Law enforcement organizations and officers know full well that if they share the knowledge, they potentially risk the credit and the promotions that would have been forthcoming had they not shared the information. However – we did create an informal network that was built on the existing personal trust of individual law enforcement agents from different countries. Through the use of technology to alleviate the geographic distance, various agents started collaborating informally on different cases they were working on. The agents organized informally because they were all motivated by the common goal they shared – reduce crime in the region. Even though these agents were coming from different countries, backgrounds, and cultures, this didn’t hinder their willingness and desire to collaborate and exchange knowledge. The risk her was mitigated through the existence and further development of trust in the network.

  7. Nathan Pawlicki
    Nathan Pawlicki says:

    Knowledge is Power

    Sharing knowledge can be seen as a tool, or at least a bargaining chip, to achieve certain ends. As it pointed out at the beginning of the article, the use of knowledge sharing networks can create dependencies and may require trade-offs. Knowledge sharing often has a price. For example, to access this very article requires that one either enter into an agreement to pay for its presumed knowledge, or that you be part of an institution that has already entered into that agreement.

    Once certain knowledge is shared, effective control over it may be lost as it travels through a variety of formal and informal networks that the originator may not even be aware of. Without knowing what networks exist or may exist and how their knowledge will be used, the originator may find it very difficult to trust another institution as they may not know how it, or its members would react to the knowledge. Because the originator cannot know the motivations and reactions of those who encounter the shared knowledge, trust can become diffused and contingent.
    While a network of institutions may generally agree upon a common goal, even one person who differs in opinion and objective may be enough to harm collaboration. As we have seen in cases of massive breaches of knowledge through intentional or even unintentional leaks or security incidents can erode trust and limit what is shared in an attempt to mitigate the effects of potential breaches. As more information systems are threatened, the problem of controlling information/knowledge is compounded by the weakest link in a given network, and that vulnerability may only be discovered after the fact.

    Given these difficulties, applying a risk management framework makes sense, and as the comment by “jeffkaz” points out, this has been an on-going issue with Federal Government classified knowledge-sharing through entities such as the Intelligence Community and the Department of Defense. Balancing a “need to know” is one of the fundamental challenges of our national security classification system, especially given that there are institutional incentives to holding on to knowledge and an uncertainty of how others may use that knowledge and how it might benefit or hurt the originator, perhaps many years later in unanticipated ways.

    Side-Note:
    The conclusion mentions, “As we have hinted above, an examination of how appropriate knowledge risk management strategies and approaches change over time would be beneficial. Specifically, following the concepts of single- and double-loop learning, the main question is whether firms “merely” learn to execute the process of knowledge risk management better or whether they are also able to improve the process as such.”

    How does this concluding proposal to use of “single- and double-loop learning” compare with the recent skepticism of “organizational learning” concepts discussed in class?

    -Nathan

  8. Chris E.
    Chris E. says:

    Knowledge is power, which can be good or bad in terms of risk. This article could definitely be used to supplement discussions involving response and recovery efforts as they pertain to public safety networks operating under mutual aid agreements. Some organizations are now operating in a network-centric fashion having flatter hierarchies, decentralized decision-making, self-managing teams, shared vision/culture/values, permeable internal and external boundaries, and utilizing information technology/computer-mediated communication as its backbone (Daft & Lewin, 1993). This communication technology greatly expands knowledge sharing.
    The realm of law enforcement plays a huge role in response and recovery and like other organizations, has tremendous risk in knowledge sharing. The article talks about someone jumping ship and taking knowledge from one company to a competitor. This can be similar to the rare occasion that a peace officer goes rogue and crosses the blue line into becoming a criminal – bringing with them the knowledge they gained from service.
    The risk of sharing knowledge has well been known in the intelligence and law enforcement community especially when you are referring to “intelligence” or investigation information. These communities understand the risk; however, they go the extreme in safeguarding the information which severely hinders collaboration among different agencies which can and has lead to the failure to prevent major incidents. On the other hand, sensitive information, tactics or vulnerabilities could be exposed.
    Leadership seems to be a key element in safeguarding knowledge. Developing employees to understand the elements and risks around knowledge sharing and creating rules and motivation in support of desirable knowledge sharing seems to be a key step in minimizing risk. Also creating an environment to maintain high morale and keep employees around prevents the change of staff revolving door. Additionally, having good leadership creates the type of organizations that will recruit lateral employees who will also bring in knowledge.
    Too much perceived risk hinders innovative thinking. Like in many organizations, it is a “rat race” to climb the corporate ladder. When employees have good ideas, they are scared to share/explore them with others for fear that their idea will be “stolen”.
    Reducing transaction costs reminds me of the concept in http://www.challenge.gov where anyone can be a potential “solver” of government challenges.
    Lastly, knowledge can be bought…. Or is that a separate topic altogether..?

  9. Alexis Barrios
    Alexis Barrios says:

    In their paper Knowledge risks in organizational networks: An exploratory framework, Trkman and Desouza cite the challenge of cultivating trust as a prerequisite for knowledge transfer between two or more partners in a network, “If the benefits of sharing [knowledge] are not clear, or if the exchange appears to be one-sided, the sharing is not likely to occur” (p 11). This can be seen in the difficulties that U.S. coalition forces have had in their attempts to build a viable security apparatus manned by Iraqi soldiers for the maintenance of their own security. In this example, one of the prerequisites of knowledge transfer in a network has led to unexpected years of occupation and costs for the U.S. The article purports that one of the prerequisites for a transfer of knowledge in a work is trust between the two parties and its evolution over time. In Iraq, U.S. coalition forces had to cultivate trust with the Iraq army slowly and carefully to reduce perceived risks and lower transactional costs. The U.S. had to carefully share intelligence with their indigenous partners because this information could be used to alert a target in advance. Additionally, perhaps information that is shared too freely, such as the time and location of a raid, could be used to stage an ambush on coalition forces, thus inflicting casualties and further cost damages on them. Think, also, about the monopoly that coalition forces have in terms of intelligence capabilities to target and eliminate security threats. Coalition forces might be unwilling to leave behind a powerful intelligence apparatus under the direction of indigenous leaders who can be sectarian in perspective, and able to employ these powers to further either their communities or their hold on power. Mistrust only serves to mitigate a weak and fractured state, rather than one that is viable and able to stand on its own, thus subjecting the supporting nation to extended financial and human costs, and the supported nation to a future of instability and risk to coalition nations. Both the U.S. and Iraq forces were working towards the common goal of a self-sufficient Iraq army; however, building trust between these historical adversaries took time. Perceived reputation, mutual distrust, and considerable antagonism between the networks meant collaboration and knowledge sharing would indeed need a longer duration of interaction to reduce risks, build trust, and share knowledge that benefits the whole network.

    Another concept that applies to response and recovery networks is that of knowledge sharing taking place “as part of a dyadic relationship or in a whole network…[where] risk can arise either due to a lack of knowledge and/or response to available information.” Here we can point to the involvement in Iraq of the private contracting firm Blackwater, USA (now Academi) and the huge amount of responsibility that they were given in stabilization efforts. By operating, in essence, as a part of the overall war effort, the actions of Blackwater can be said to fall under the banner the overall coalition’s efforts. As a military entity operating somewhat independent of state control, Blackwater allegedly violated international laws by smuggling weapons into Iraq, and also by allegedly distributing them to a terrorist organization – the PKK. The U.S. did not have appropriate oversight of Blackwater because they are a private contractor operating outside of government oversight. This lack of oversight provided insufficient knowledge of their activities; however, the U.S. government was still held responsible since Blackwater was an instrument of our statecraft.

  10. Seref
    Seref says:

    All the assumptions and expressions about unwillingness of organization to share knowledge due to fear of losing control and the predominance of the risk over the benefits of knowledge sharing have left meaningful sense to me in the article. As it is mentioned “Organizations need to protect and monitor flows of their valuable knowledge assets throughout the network if they hope to maintain, and advance, their long-term competitive positions”.
    When I think about the practice of counter-terrorism and information sharing activity the discussion comes to the earth and get a realistic platform. Information sharing is the most important part of the terrorism prevention. As the terrorism is one of the most important problems in the world, many people expect from the government to solve this “wicked” problem as effective as possible. In the examination of 9/11 terrorist attack, the Commission has reach the comment that attacks would have been prevented. The reasons behind failure were assigned that the enemy were underestimated, intelligence and information did not shared properly, agencies could not managed well, and several attacks (before 9/11) had not been analyzed well which could help to prevent from being happen 9/11.
    For me the nature of collaboration is the source of risk for the information sharing process. Having information is not that easy and cheap. Intelligence agencies are spending significant amount of money and giving too much time and effort, and also getting some risks so that they can receive that information. Sharing this valuable information would not be easy, if they do not receive similar assets from other participants. Reciprocity is matter in such a trade. Otherwise unwillingness can be the case among participants which kills the coordination efforts. With the Perrow’s interpretation coordination or collaboration can be understood as the “giving up the authority” to the others. It can be said that no agency would leave its authority for the sake of coordination.
    One example can be found from Turkey in the HSBC Bank bombing terrorist attack in 2003. According to Tatil, the passive competition among intelligence agencies provided a space to the terrorist to carry out their attack. The roots of the competition and conflict can come from the previous relations, or emerge present time problems or potential (future) tensions among participants. Goal conflict, mission conflict, unclear roles, lack of resources, or limited budgets can lead to competition among agencies. Briefly, he examines and finds the intelligence agencies competition and its negative effects on Istanbul terrorist attacks in 2004.
    Tatil, S. (2006). A comparative analysis of intelligence family response to terrorist attacks. Central Missouri State University.

  11. Benjamin Bergersen
    Benjamin Bergersen says:

    When I worked in at a public utility, a Local Exchange Carrier (LEC) (http://en.wikipedia.org/wiki/Local_exchange_carrier) in the telecommunications industry I noticed that the business was supported by partnerships and a network of businesses. The LEC focused on core capabilities as listed in the DeSouza article (Gupta et.al. 2009). For a LEC the core competencies are providing telephone services and Internet connectivity for the last mile to the public customer. The LEC would own the wiring and phone lines in a city, metropolitan area, suburb, our rural area. The basic business was get the home customer and business customer local telephone service, and a connection to the Internet via the telco’s main office. To entice the public utilities to invest in such extensive cabling, digging, and equipment, the local governments would only allow one base local exchange carrier.
    Even though there were over a million customers in a metro area, the LEC would not attempt to provide all support services with in house resources. Parts were actually bought from a business partner who was also a potential competitor. For example the LEC might buy their phone and network equipment through a large long distance company such as MCI, Sprint, or AT&T. There would be a benefit to doing this because the larger long distance company could provide better bulk ordering and supply chain logistics than the smaller telco could. If there was a storm other companies in the LEC’s network would provide surge level repair trucks. This allowed the local telco to maintain a small fleet of trucks for repair and installation services. If you needed to triple the truck capacity for just one week every four years it did not make sense to have the additional trucks sit idle in the maintenance parking lots most of the time. The cost to operate and maintain the trucks for 208 weeks (four years) would be much larger than the small benefit of having them in use for one week. Some billing was performed by a separate company. All of these companies had physical and virtual connections to the LEC to communicate and perform these ancillary functions.
    In times of disaster and recovery public utilities like the phone company, the LEC, greatly relies on its network. Remember the last big storm in the north east. You saw trucks with lift baskets locked boxes, and hazard cones parked all along the road side where there were downed telephone lines. These trucks would come from all over the nation via network communications for emergency disaster recovery. All the equipment damaged by the storm would need to be replaced through the network of the public utility.
    There are inherent risks with sharing knowledge with your business partners. Today they might be helping you. Tomorrow they make take the business intelligence that you shared on your supply chain and use it to compete with you. The business partner may even use the information to take you over. For example the LEC needed a big long distance carrier to provide long distance telephone services and to order equipment. Once the big telco learned all bout the customer base, equipment needs, and where the best areas of profitability are, they might come in and compete as a competitive local exchange carrier (CLEC). This could result in losing some or most of your customers. It would be based of loss of your proprietary business information that was the formula for providing good services, integrating suppliers, and increasing profit.
    The contractors that provide trucks could enter into a relationship with you that prevents others from entering into your supply chain. They could do this by setting up proprietary communications for dispatch, fleet management, and problem resolution. If they are using different radios to talk to your home office that is an additional barrier for entry. Once there are strong enough barriers to entry, your contract truckers could raise their prices to the LEC. The LEC is tied too tightly to them and it would be too painful to extricate themselves from the partnership. The LEC suffers and their profit is reduced as the maintenance and repair truck contractors increase their profit. If managers believe that their partners will not harm them then their perceived risk is lower. With lower perceived risk the governance and control mechanisms for knowledge sharing over the network is reduced (DeSouza refers to Langfield-Smith, 2008).
    DeSouza speaks about building costs and maintenance costs of the network. The initial building costs for a public utility network is substaintial. However once it is built, many of the communications are performed through automated ordering systems run on computers. The ongoing maintenance cash cost is low enough to keep it running. Information flows quite freely if there are not strong governance models. It could be viewed that the LEC did not have extensive risk management controls, and their business partners learned how they performed the work.
    Knowledge Risk Framework Applied
    Using the knowledge risk framework the LEC was functioning in an (1) asymmetrical manner with their long distance service supplier and parts supplier. The LEC would place orders for large numbers of long distance telephone services and large numbers of parts. These were regular and frequent. This information (a grouping of data sorted by automated means according to DeSouza’s definition) could easily be converted into knowledge. The knowledge provided business models for costs, gross income, customer base, and future trends. The LEC had a weak asymmetrical network relationship with a strong big telco. The big telco did not have to share very much information at all. Basically did they have the part in stock. The long distance services business information did not have to be shared down to the LEC to provide the LEC with services.
    (2) It was a functional relationship for equipment and reoccurring long distance services. The network members would squeeze additional profits out of the billing by taking knowledge of suppliers and how they operated. If you know how often and how much a public utility buys, then you can charge more when the utility is at an especially urgent point.
    (3) The relationship of the telcos is non-proximate. They are using secondary information and extrapolating on the internal operations of the other company. The LECs and big telcos did not need to recruit engineers away from each other. Although that may happen as in any industry.
    (4) The range of risk is “network”. That means that the risk is a member of the network may appropriate knowledge from another network member. Once the knowledge is extrapolated or taken the network entity may compete with the other entity within that network, or go create a new network. For example if the big telco got a lot of local informationand knowledge the big telco may chose to offer local services as a competitice local exchange carrier (CLEC). Or the big telco may try to enter into different relationships with different telcos and form a new network.
    The local telco was medium sized and it bought out other little LECs across the country. Then a big telco ended up acquiring the medium telco. In the end the LEC participated in a network and did not have protections from merger and acquisitions.

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *