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The importance of knowledge management

In today’s world of business competition, every organization is trying hard to find a way to be among the top and to have what so called a competitive advantage to survive in the industry. Various fields and disciplines have agreed in insisting that knowledge plays a key role in the definition, functioning and performance of firms (Anon, online). First and foremost, we must bear in mind that firms nowadays are no longer viewed as machines of transactional efficiency, bureaucratic order or labour exploitation but they are now seen as repositories of knowledge, creativity and innovation (Anon, online). Fransman (1994) has interpreted this critical change as a shift from firms conceived as pure ‘processors of information’ to firms conceived as ‘processors of knowledge’. Having seen the firm as ‘processors of information’ means that we believe that behaviour of the firm as a pure optimal reaction to market prices detected by the firm while having seen the firm in the view of ‘processors of knowledge’ means that we view the firm as a constitution in creating, developing and application of knowledge (Anon, online).

What is knowledge? John Locke (1689) defined knowledge as the perception of agreement or disagreement of two ideas. Based on this definition, Davenport and Prusak (1998) define knowledge as “a fluid mix of framed experience, contextual information, values and expert insight that provides a framework for evaluating and incorporating new experiences and information”. The first half of their definition provides ‘content’ of knowledge which includes number of things that we have within us, such as experiences, beliefs, values, how we feel, motivation and information (ibid.,1998). The second half of their definition “that provides a framework for evaluating and incorporating new experiences and information” defines the function and purposes of knowledge and how it relates back to Locke’s definition –we have within us a framework [one idea] that we use for evaluating new experiences [the second idea](ibid.,1998). What about knowledge management and knowledge management strategy?

From the introduction to “An open Discussion of Knowledge Management “by Brian (Bo) Newman, he states that knowledge management is the collection of processes that govern the creation, dissemination and utilization of knowledge (1991). An article in Harvard Management Update defines knowledge management as “a formal, directed process of figuring out what information a company has that could benefit others in the company, then devising ways of making it easily available (Anon, 1999). Knowledge management is such an ageless and broad topic, hence what role does it play in today’s organisation (ibid.,1991)? These processes exist whether we acknowledge them or not and they do effect the decisions we make and the actions we take, both of which are enabled by knowledge of some type (ibid.,1991). If that is the case, why don’t we recognize and learn the processes involved so that we could improve the decisions and actions taken (ibid.,1991).

In theory, there are different types of knowledge that firms need to know before they can effectively manage their knowledge to survive in the knowledge-based competition world. Other than that, knowledge management strategy that organisations choose is influenced by the type of knowledge that they possess (James M Bloodgood, Wm David Salisbury, 2001). The main types of knowledge are ‘explicit knowledge’ and ‘tacit knowledge’ (Anon, 2004). Explicit knowledge is knowledge that can be articulated into formal language, including grammatical statements (words and numbers), mathematical expressions, specifications, manuals and others (ibid.,2004). Explicit knowledge can be readily transmitted to others and be easily processed by a computer, transmitted electronically or stored in databases (ibid.,2004). On the other hand, tacit knowledge is personal knowledge embedded in individual experience and involves intangible factors such as personal beliefs, perspectives and the value system (ibid.,2004). Tacit knowledge is hard but not impossible to articulate with formal language (ibid.,2004). Before tacit knowledge can be communicated, it must be converted into words, models or numbers that can be understood (ibid.,2004). There are two dimensions of tacit knowledge which are technical and cognitive dimension (ibid.,2004). Thus, based on type of knowledge that the organisations possessed, they can start thinking about which strategy they could use to leverage their assets.

Organisations can implement change, and gain and maintain competitive advantage through the use of three general knowledge management strategies; knowledge creation, knowledge transfer and knowledge application. (James M Bloodgood, Wm David Salisbury, 2001). Knowledge creation refers to the development of new knowledge through the interplay of tacit and explicit knowledge at different ontological levels (Alavi M and Tiwana A, 2002). In simpler terms, organisations that use this strategy focus on creativity, experimentation, and to an extent, create a shared understanding within the creating group to construct new knowledge (ibid.,2001). Knowledge creation mostly occurs within the context of social systems such as problem solving groups and project teams (ibid.,2002). Knowledge creation strategy creates new knowledge based on ongoing experiences and uses the combination of existing and new knowledge to produce an updated knowledge for developing new products and services (Anon, 2004).

Knowledge transfer is about disseminating knowledge throughout the organization in an effort to utilize the knowledge to its fullest extent as quickly as possible (ibid., 2001). New knowledge, especially tacit knowledge will be explicated using this type of strategy (Alavi M and Tiwana A, 2002). Codification of tacit knowledge is facilitated by mechanisms that formalize and embed it in documents, software and systems (ibid., 2002). Writing down steps for a given process in executing tasks, for example, a step by step recipe that a worker in a coffee shop can use to make an Italian style cafe latte represents the knowledge transfer (ibid., 2002). As we all know, tacit knowledge do have high implicit characteristics hence the higher the element of tacit element in the knowledge, the more difficult it is to codify the knowledge (ibid., 2002). This is when codification of complex knowledge will rely on information technology that are primarily developed to support them such as expert systems, decision support systems, relational database tools and document management systems (ibid., 2002).

The third strategy of knowledge management is knowledge application and this is where existing knowledge is brought to bear on the problem at hand (ibid., 2002). This is the most important stage in managing knowledge as in knowledge management, value is created when knowledge distributed throughout an organisation is located and transferred from its previous site and applied where it is needed (ibid., 2002). In simpler words, without knowledge application, knowledge creation and knowledge transfer only will not add value nor improve performance of organisations (ibid., 2002). Once an early Islamic philosopher Abu Bakr said, “Without knowledge action is useless and knowledge without action is fultile”. We will take a glance of an example: a global oil company has invested millions of dollars in the development of a web- based knowledge repository (Watts- Sussman, 1998). The repository contains the best practices, the most important lessons learned, and a host of principles, techniques and procedures which all represents the company’s objectives of the firm’s different divisions (ibid.,1998). The knowledge repository is hardly used and the firm’s considerable investment in KMS goes unrealized (ibid.,1998).. This shows that the firm is not realizing the full value of its knowledge assets (ibid.,1998).

In contrast, we will look at how a company has developed effectively the knowledge management strategy for knowledge integration and application that leads to consistent product innovations and profitability (Davenport & Prusak, 1997). 3M is a company which produced over 400 new products in 1996 and one of the goals of the CEO was to generate 10% of the revenue from the new products (ibid., 1997). 3M has invested considerable resources to promote the knowledge application (ibid., 1997). For instance, an on-line database of technical expertise is available throughout the firm and 3M also sponsors annual 3-day knowledge fair and researchers are given time to not only to assess technical knowledge but also to experiment with, absorb and apply the knowledge (ibid., 1997). This is to prove that they has realized their knowledge assets to the full value and this requires time, effort and money as it does not occur easily and effortlessly (ibid., 1997).

An article written by Bloodgood J.M and Salisbury W.D (2001) stated that there are 3 strategies of knowledge management but instead of knowledge application, they use the term knowledge protection. This strategy focus on maintaining knowledge in its original and constructive state [i.e. not losing it nor allowing it to become altered or obsolete] and keeping knowledge from unauthorized transfer to other organizations [i.e. using security and legal measures] (ibid.,2001). In broader terms, organizations which choose this strategy need to be aware of their precious assets from being transferred to other organizations to prevent imitations made by other organizations (ibid.,2001).

Organisations could not employ all the strategies at once since the resources are limited, hence they should focus on relevant knowledge management strategies under various situations (ibid.,2001). Apart from that, organisations need to be aware of the challenges and difficulties of managing knowledge no matter what strategy they choose. Employees are the biggest challenge that organisations must face because they are the one who decides which strategy to choose and how they are going to successfully implement the strategy. Early collection of case studies recognised the importance of knowledge management dimensions of strategy, process and management (Morey, Mayburry and Thuraisingham, 2002). Key lessons that have been learned includes people and the cultures that influence their behaviours are the single most critical resource for successful knowledge creation, dissemination and application; cognitive, social and organizational learning processes are essential to the success of a knowledge management strategy; and measurement, benchmarking and incentives are essential to accelerate the learning process and to drive cultural change (ibid.,2002). To conclude, knowledge management can gain amazing benefits to individuals and organizations if they are purposeful, concrete and action- oriented (ibid.,2002).

Contradiction between strategies also brings difficulties to the organisations. Focussing too much on knowledge creation would mean little attention will be given to knowledge transfer and knowledge application. Knowledge creation involves high levels of tacit and explicit knowledge (Nonaka I, Takeuchi H, 1995). Competitive advantage derived from knowledge creation will not be everlasting if insufficient effort is given to make the knowledge transferable and applicable throughout the organisations (Badaracco J.L, 1991). There is a direct relationship between types of knowledge that organisations possessed and knowledge management strategy that they choose to employ (James M Bloodgood, Wm David Salisbury, 2001). This means that when there are significant amounts of explicit knowledge, knowledge transfer will be the most preferred strategy (ibid., 2001). Nonetheless, competitive advantage may not be everlasting because knowledge that is easily transferred within the firm will also be easily transferred outside the organisations (ibid.,2001), hence making it difficult to protect (G. Von Krogh, J. Roos, 1996). On the other hand, organisations would prefer to employ knowledge protection strategy if there is high amount of tacit knowledge in an organisation because of the difficulty of copying this type of knowledge (Hall.R, 1992). However, this strategy could prevent knowledge being transferred to certain parts of organisations which would benefits from its use (ibid.,2001). The contradiction between strategies raised issues on which is the best strategy to employ under certain circumstances since resources is also limited.

What about roles of information technology in managing the knowledge? IT can be seen as embodying two general capabilities with respect to knowledge: codifying knowledge and creating networks (Hansen M.T, Nohria,N, Tierney T,1999). Codifying knowledge is a process of making the tacit knowledge explicit while creating networks is a process involved in transferring the knowledge while keeping the tacit knowledge tacit (James M Bloodgood, Wm David Salisbury, 2001). Creating networks can be done by for example, keeping tracks of people with particular expertise and enabling rapid communication between them, thus organisations can quickly contact them when needed (ibid., 2001). Although IT can be used in all types of knowledge management, the congruence between the effect of IT on codifying knowledge and explicit knowledge makes it favourable by IT (ibid.,2001). Codification strategy with IT to make knowledge more explicit in order to make them easier and quicker to disseminate throughout the organisations [i.e. making it readily available in databases, decision support system and expert systems] give organisations the advantage over their competitors who disseminate their knowledge more slowly (ibid.,2001). On the other hand, explicated versions of tacit knowledge give benefits in the sense that they help in making the knowledge more visible to the organisations (ibid.,2001). However, apart from the high cost of making the tacit knowledge explicit, codification of tacit knowledge abuses the primary benefit of tacit knowledge which is its inimitability (ibid.,2001). Competitive advantage that is gained from rapid dissemination will be set off by easier imitation by competitors. Hence, codifying knowledge is preferable towards explicit knowledge rather than tacit knowledge and this is when creating networks is useful [i.e. transferring tacit knowledge while keeping its tacitness] (ibid.,2001).

In conclusion, organisations who plan to gain everlasting, sustainable competitive advantage must value the knowledge they acquire and originally possessed to the best they could by managing the knowledge as effectively as possible.

2040 words

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