INVESTMENTS IN WORKFORCE KNOWLEDGE

and TECHNOLOGICAL CAPABILITIES

Cheryl Gaimon, Karen Napoleon, Gulru Ozkan

POMS Conference, May 2007

CONTEXT OF RESEARCH

Resource-Based View of the FirmWenerfelt (1984) Strategic Mgt. Jl.Barney (1991) Jl. of Mgt.Teece (1997) Strategic Mgt. Jl.

Knowledge Based View of Resources

Workforce Knowledge Technological capabilityLeonard Barton (1992) Strategic Mgt. Jl.Conner Prahalad (1996) Organization Sci.

1

Motivation of the MODEL

Knowledge Based Resources Profit

Drivers of Change:Reduce costs (time, accuracy)Increase product-mix capability

Enhance product featuresChanges in demand

Technological opportunities

2

Changing Technological Capability

Benefits sought elusive... costs and time exceed expectations

AMT (50-75% failure Majchrzak)CAD ( time 30%, quality 18% Joglekar & Whitney)

CRM (55% below expectations Rigby et al.)

Implementation failureAMT (Tyre, Hayes Clark, Chew et al...)

IT (Brynjolfsson, Dong & Zhu, ...)

3

Our ModelHolistic view of knowledge management

Technological Capabilitydepreciation, upgrade (decision).

Workforce Knowledgelearning-by-doing vs. depreciation,

general training (decision).Obsolescence,

learning-before-doing (decision).

Strategies prior, during, following upgrade4

Insights Sought

When to pursue learning-before-doing vs. general training? (substitute, complement)

When does technology upgrade substitute for worker knowledge?

How does workforce learning... impact upgrade decision?

How does technological advancement impact decisions? (vendor)

What drives manager’s implementation strategy? 5

LITERATURE: Learning

Killingsworth (1982) Rev. Econ. Studieslearning-by-doing and training output

Bailey (1989) Mgt. Sci.- as time betw. learning & use forgetting .

Argote et al. (1990) Mgt. Sci.knowledge depreciation

Adler & Clark (1991) Mgt. Sci.preparatory training disruption

Pisano (1996) Research Policylearning-before-doing disruption & benefits.

6

LITERATURE: Implementation

Hayes & Clark (1985)disruption costs often outweigh purchase costs

Brynjolfsson (1993) Commun. of ACMimplementation major cost of IT investment

Chand et al. (1996) Opns. Res.Gaimon (1997) Mgt. Sci.Carrillo & Gaimon (2000) Mgt. Sci.

intro. link worker knowl. & proc. changeCarrillo & Gaimon (2004) Sloan Mgt. Rev.

outcome uncertainty and role of knowl.

7

V(t) level technological capability time t

technology depreciation (μV(t))_____ a(ti) = 1 upgrade decision

-------- a(ti) = 0 no upgrade8

V(t)

V(0)

V(ti+)

V(ti)

ti time(t)

K(t) level workforce knowledge time t

general training (g(t), decision)learning-by-doing vs. knowledge depreciation (K(t))

knowledge obsolescence BUT learning-before-doing (P(t))

9

ti

time(t)

K(t)

0

K(ti)

K(ti+)

10

P(t) Learning-Before-Doing

preparatory training (p(t), decision) forgetting (P(t))

time(t)P(ti

+)

P(ti)

P(t)

0

Obj. Max Net Revenue - Costs

Revenuedriven by K & V.

Cost of General Trainingincludes tuition, disruption costs to sustain output during training (e.g., overtime)...

Cost of Preparatory Training...

11

Cost Purchase & Implement ith Technology Upgrade

Fixed and variable costsPurchase cost can or over time.

Implementation cost as lead-time.

Also, variable cost as extent of upgrade . disruption costs, compatibility...

12

Optimal Rate of General Training

13

time (t) T

Case(1)

Case(2)

Case(3)

Optimal Rate of Preparatory Training

14

t i t i+1 t i+2 Ttime (t)

Analytic Results

If high workforce knowledge depreciation preparatory training and delayed; general training over planning horizon;

however, upgrade less likely.

15

Analytic Results

If high rate forgetting: preparatory training & delayed; general training

substitute general for preparatory training

however, an upgrade less likely.

16

Analytic Results

If learning-before-doing highly effective... preparatory training and earlier; general training over planning horizon;

substitute preparatory for general training

and an upgrade more likely.

17

Analytic Results

If technological depreciation smallupgrade more likely

general trainingbut preparatory training.

18

ContributionsHolistic model of knowledge management before, during, following techn. upgrade

Workforce:learning-by-doing obsolescenceknowledge depreciation learning-before-doinggeneral training preparatory training

forgetting

Technology:technology depreciation technology upgrade

19

Contributions

Insights on drivers of solutions wherepreparatory & general training complements - substitutestechn. capability substitutes for workforce knowledge

Effect on knowledge management due to:rate of technological advancement dynamic cost of technologyrate that knowledge or technology depreciation occurs

Drivers of rapid or slow implementation strategy20