Knowledge A Significant Factor In Economic Life Commerce Essay

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Knowledge apparently proves to be a significant factor in the economic life, as it encourages a better understanding of business needs and several ways to add value for customers that will eventually lead to profit achievement. There is vague clarity between IM and KM being discussed in the knowledge management literature. Some authors perceive KM as a newly up-and-coming branch of learning. On a different note Information Management has a long history as several other historical books have suggested that mankind for over 100,000 years have been researching, collecting, organizing and sharing, creating systems as varied as the cultures that produced them.

Information management and Knowledge management have similar usefulness in the business world but can be distinguished by simply understanding the differences in the meanings of information and knowledge. Knowledge is dependent on the context, as It depends on the sector and period used, when used out of context it becomes information (Little et al., 2002). Some differences between knowledge and information are documented in the Table 1.


Processed data

Actionable information

Simply gives us facts

Allow making predications, or predictive decisions

Clear, crisp, structured and simplistic

Muddy, partly unstructured

Easily expressed in written form.

Intuitive, hard to communicate, and difficult to express in word and illustrations.

Obtained by condensing, correcting, contextualizing and calculating data

Lies in connections, conversations between people, experienced based intuition, and people's ability to compare situations, problems and solutions.

Devoid of owner dependencies

Depend on the owner

Table 1: Differences between Information and Knowledge (Abdullah et al., 2005)

Distinguish IM, KM and KT?

Few authors have attempted to distinguish between KM and IM but most only define knowledge, information and data. Nonaka & Takeuchi (1995) defines knowledge and information as "information is a flow of messages while knowledge is created from that very flow of information, anchored in the beliefs and commitment of its holder." Data transformation to information is achieved by adding value by contextual analyses, categorizing, calculation, correcting errors and condensing in bits, making the data to the receiver meaningful as information (Davenport & Prusak, 2000).

Davenport & Prusak (2000) define information or thinks of information as data that makes a difference and knowledge as a fluid mix of framed experience, values, information in context and insight that provides a basis to build new framework for experiences and information. For example when we buy parts of a machine, and it provides a self assembling 'information', and utilizing and understanding this information to know how to assemble it is 'knowledge'.

Figure 1: Difference between knowledge and information in process control. (Wiig M. K., 1999)

Looking at the above one can understand that knowledge is derived from information. To understand knowledge one must understand the different categories of organizational knowledge. Nonaka & Takeuchi (1995) presented two types of knowledge, tacit and explicit while Choo (2006) described three categories of knowledge: tacit, explicit and cultural knowledge. Tacit knowledge is personal, residual, inherent 'know how' which is hard to codify because it resides in human heads which is derived from experience and can only be transferred and shared. Explicit knowledge often known as 'know what' can be formally expressed, which can be codified, stored, communicated easily or represented by artifacts or guiding principles in form of documents, videos, films, voice recording etc. Cultural knowledge consists of shared beliefs based on experience, observation, reflection about itself and organization environment for the judgment and selection of alternatives and new ideas to evaluate projects and proposals. The fundamental difference between information and knowledge with respect to business management is that information can be easily identified, managed and circulated where as knowledge is really hard to manage as it is resident in human minds (Terra C. J. et al, 2002). Knowledge Transfer means to swap innovative ideas, research results, 'know how' or 'know what' and experiences between different enterprise, associations or individuals to innovate new products, services. It includes the communication, translation, conversion, filtering, rendering and storage of knowledge. KM subjects organizations to generating knowledge by capturing and gathering knowledge of employees within and outside and distributing it when and where it is required, advocating reuse by other knowledge workers in an environment that encourages teamwork, this is shown in the processes described in Figure 2.

Knowledge Generation





Knowledge Sharing & Distribution




Knowledg Capture & Storage




Figure 2: Knowledge management key practices (Sourced from lectures notes on Blackboard, 2010).

Some of the described KM practices could be realized via management activities Table 2

Creating and Discovering

Sharing and Learning

Organising and Managing

Creativity Techniques

Data Mining

Text Mining

Environmental Scanning

Knowledge Elicitation

Business Simulation

Content Analysis

Intelligent Agents

Communities of Practice

Learning Networks

Sharing Best Practice

After Action Reviews

Structured Dialogue

Share Fairs

Cross Functional Teams

Decision Diaries

Knowledge Centres

Expertise Profiling

Knowledge Mapping

Decision Support System

Information Audits/Inventory

IRM (Information Resources Management)

Measuring Intellectual Capital

CRM (Customer Relationship Management)

BPR (Business Process Re-engineering)

Table2: Knowledge Management collaborative practices (Adapted from Skyrme, 2008)

Nonaka's SECI Model

Nonaka & Takeuchi (1995) established that after long years of research on Japanese companies that the relevant source of Japanese global competitive edge has been due to the creation of knowledge. They presented a knowledge creation model SECI (Socialization, Externalization, Combination and Internalization) to explain how knowledge in organizations is generated, transferred and recreated. They referred the knowledge creating process in organizations as "knowledge creating company" in the form of employee/ transfer of knowledge from

Tacit to Tacit.

Tacit to Explicit

Explicit to Explicit and

Explicit to Tacit


Socialization: Aiding employees acquire new tacit knowledge via shared experiences; typically observed in traditional apprenticeship, informal unofficial social meetings. Organisations exploit from this tacit knowledge in customers, skilled employees and even their suppliers by interaction with them.

Externalization: This aims to articulate tacit 'know how' into explicit 'know what', crystallising knowledge and making it readily accessible for sharing, this could be observed using metaphoric forms, analogy, concepts and model frameworks.

Combination: In this process explicit knowledge already in place is used to create more complex explicit knowledge through converting of explicit knowledge from inside and outside organisations via communications, meetings, documents and individuals exchange and combined and converted into a more complex and logical set of knowledge system. POS (point-of-sales) system of retailer is an example where the data collected is not only used to check what is sold or not but the information is used to create a new better system

Internalization; This is the process of internalising in individuals or employees, the explicit knowledge in an organisation differentiating into tacit knowledge through actions and practice, for example via training programmes, and by reflecting upon layer down documents to enrich the tacit knowledge base.

This SECI model of creating knowledge is diagrammatically represented in the Figure 3

Tacit Knowledge


Explicit Knowledge





Tacit Knowledge


Explicit Knowledge

Figure 3: Four modes of knowledge conversion (Nonaka & Takeuchi, 1995)

This model frame work has been utilized to create knowledge through the active interaction of tacit and explicit knowledge that allows individuals and organizations to convert, transfer and generate fresh knowledge through all the social levels of aggregation such as individuals, groups, and context. This is achieved through different systems and structures and with a corporate culture that encourages the interaction of the four knowledge creating processes. (Nonaka & Takeuchi, 1995)

Choo's Decision Making, Sensemaking and Knowledge Creation Models

Choo W. C. (2006) argues that an organization without understanding how to use, create and transform information would not appreciate information processes, resources and technologies. To use information advantageously for organizations Choo proposed three models (organizations as Decision Making Systems, Sense making Communities and Knowledge Creating Enterprises). The explanation of the first two models of organizations as Decision Making Systems and Sense making Communities:

Organizations as Decision Making Systems

To make important decisions organizations explores information and evaluates it purposefully before agreeing on the decision. The decision making model is a reasonable and sensible model thus the organizational structure and function can be realized through the characteristics of human decision-making processes and rational human opinions. Bounded rationality prevents too much extent organization's individuals from making decisions which could be changed by influencing organization environment. In the Figure 4, organizations investigate rational behavior in terms of actions to achieve goals and objective and individuals behaviors are constrained according to their cognitive ability, information and values. The gap between individual's bounded rationality and organizational rationality is to design decision routines and premises. The goals and objectives are set first and when participant find any problems to achieve the goals a search for information to alternatives takes place followed by the evaluation of outcomes.

Organizationally Rational

Decision Behavior

Figure 4: Organizations decision making system (Choo, 2006)

Organizations as Sense making Communities

The 'sensemaking' model explains how organisations make sense by altering their external environment. The two goals of such organisations are short term goal which includes:

Sharing common understanding of organisation's members of what organization is and what it is doing and

Long term goals which includes assurance of organisation's continuous adoption of encouraging a dynamic environment) .

Figure 5, describes the four inter-locking processes of sensmaking model.

Figure 5: Sensemaking process in an Organization (Choo, 2006)

Sensemaking process begins due to the changes in the organisation's external environment which initiates disturbances in the flow of experiences that affects organisation's people. The different stages above starts from the ecological process where organisation members try to comprehend the changes and closely evaluate the effects of the changes, through the second stage enactment process, which extracts meanings and actions from the environmental changes, Then the third stage which is the selection process, examines the events to ascertain what has happened. The final fourth stage retention process, as the name implies retains the sensemaking products for future use.

The Knowledge organization

The organization that effectively and efficiently incorporates all the three models, (decision making, and sense making and knowledge creation) is called a knowledge organization.

Figure 6: The knowledge Organization (Choo, 2006)

The three individual models represent the three central layers of organizational behaviors having every inner layer depend upon the information yield of the outer layer and complement each other by providing the needed pieces of information to function properly (Choo, 2006). Accenture is an example of a knowledge organization which has proven reactive to emergent and transforming environments.

Communities of practice (Cop)

Communities of practice (Cop) are groups of people who share a passion for something that they know how to do, and who interact regularly to learn how to do it better. Cops can exist face to face, in social gatherings, online.

A community of practice was first coined by Jean Lave and Etienne Wenger in 1991. Cop formed by people who engage in process of collective learning sharing a common domain (Wenger, 2002). In Cop groups of people with common interest share their ideas to solve problems such as research students, a group of doctors, etc. Wenger (2002) explains Cop with a simple quick guide as shown in Figure 7.

Figure 7: A Quick Guide of Cop (Wenger, 2002)

In the Global environment today people have now realized and appreciated the concept of Cop as they know knowledge is a significant asset and Cop enable people to transfer knowingly and unknowingly from each other. This form of Cop initiative is now been evident in several small, medium and large organizations (Wenger, 2002).

Task 2

British petroleum is the choice of KM/IM in this task. The author recognizes BP organization for its cognizance to KM initiatives. Researching on the data and information available from staff, management, company statements, and other researchers, this author analyzes IM/KM initiative of BP with respect to how it's being appreciated and the outcomes.

British petroleum also known as BP Amoco implemented knowledge management practices in its oil and gas division BP Exploration BPX some few years ago after observing disparity in the oil and gas production relatively to other organizations in the world (knowledge Wharton, 1999).

To initiate this practice, its regional operating centers were divided into a 42 independent business assets called "a federation of assets". (Davenport & Prusak, 2000). This was introduced in 1993 by the then BP managing director John Browne, who wanted this units to be independent in creating ideas to solve problems particular to them and BP would benefit from the creative power of these units sharing their tacit knowledge and the most useful innovations could be used for future processes in the company. BPX launched an 18month project called the Virtual Teamwork Program, which was to create efficient modes of correspondence of team members at the different distant units. Though not tagged a KM project, but was actually the beginning of KM at BPX. The aim of the VTP project was to enhance collaboration across the different units using IT as a catalyst. With vast BP repository of expertise called the 'Connect', which enabled members set up their individual web page using web2.0 technologies with an intention to communicate with other members easily to share information and learn from individuals 'know how' about oil and gas production. Hard ware and software tools used include video conferencing equipment, multimedia, email, application sharing, scanner, video clip recorder etc. This project was about communication, business redesign and corporate behaviour, not focusing on just technology. The team members communicated using life broadcast demonstrative tools for mutual work and knowledge sharing known as 'VT stations'. BP eventually had yellow pages of knowledge workers and sub-networks that the members associate with such as the drilling learning network, the refinery operations, green operations network, manager's network and the engineering authorities' network. They implemented tools like 'peer assist' that enables a team to gain understanding of a job from other teams before starting the job, this encourages personal contacts and enables team members to discover and make use of untapped abilities in themselves, BP's peers assist "A way to get people talking -in the right way" (Slideshare, no date), cuts cost required to bring professional to the site of a knowledge gap, hence encourages the network across the company (Collison, 1997). BP's peers assist is represented in Table 4

What you know

What's possible?

What we both know

What I know

Table 4: BP's peers assist : BP Knowledge Management:(

The importance of this knowledge creating approach is that if properly captured and retained it is cheaper to reuse again in future business process, which eventually saves time and money, for example, the knowledge and experience gained from drilling any of its most profitable oil well could be reused again in the future. Thus using existing knowledge to get similar or even better results . The approach at BP is an open source of information where members contribute their intellects to add up to a warehouse of expertise for easy access and making information source decentralized. BP and other organizations like GlaxoWellcome, GM, Xerox, Ford, coca cola and the US Army have since been working as communities of practice with innovative ideas sharing beneficial knowledge to create strong competitive advantages in the world and also maximizing huge financial resources (Collison, 1997).

BP's knowledge management methodology comprises of a simple framework, which describes a learning cycle - before, during and after any event - which is supported by simple process tools as seen in Figure 9. The lessons arising from that learning loop are agreed and dispersed by a community of practice. Finally, the lessons - both specific and generic are incorporated into "Knowledge Assets" on the corporate

Figure 9: BP's KM frame work: BP Knowledge Management:(

BP encourages individual professionals:

To capture company related information

Share interests, expertise, experiences, processes, and so on

Most importantly BP maintains the record of expertise those have know-how to solve a problems so that they could be contacted when others needs them.

British Petroleum has a worldwide reputation for commitment to knowledge management (KM).

The business benefits of applying a consistent approach to knowledge management in BP have been very significant. BP business managers attributed over two hundred million of dollars of added value as a direct result of using this approach (SAIC, no date). A practical example of this has been in the cost reduction in the construction of European retail sites. Similar examples of increased performance have come from BP's KM application in speeding up business restructuring, developing new oil & gas fields, improving plant productivity and accelerating new retail market entry.

Knowledge communities are a useful resource of knowledge for any organization. Most of the company knowledge is residual in its peoples (employees) not in document, therefore networks are the most suitable way of accessing, updating and refreshing knowledge (Beep knowledge system, 2002). There are more than 100,000 employees in more than 100 countries working in BP. BP has two kinds of knowledge communities enabling networks and delivery network. Enabling network, similar to communities of practice, consist of company employees who exchange job related know how. Delivery network are knowledge communities, have more sequential and with distinct knowledge goals. There are more than 200 communities or networks at BP and the largest community is 'Green Operation' having over a thousand members and up to 15% activity of members as at May 2002. (Beep knowledge system, 2002)

Task 3

BP is a one example of an organization that could be clearly used to distinguish between IM and KM. Knowledge Management was introduced to the business processes in BP with little awareness of it at that time, In essence Information Management was what was intended. The simple creation of several separate business units and virtual teams took was an IM/IT initiative, which implies that knowledge sharing, working jointly and remotely on projects and many other collaborative activities also exist in IM/IT. The Virtual Team Project clearly reveals KM that suggests the 'retain and reuse' attributes. Successful implementation of this project brought about new opportunities for BP to realize its largest intangible asset of codifying its cached means of knowhow. In this way knowledge management practice assumed full recognition in BP.

BP organisation implemented KM satisfactorily by centralizing KM practices with individuals as knowledge workers. The use of collaborative tools in BP such as the 'Peer assist', 'Connect' etc encouraged independent struggle for expertise, as each team is set with a goal of achieving the best results, which is one of the aim of KM to tap the know how out of individuals, instead of compelling employees to go by the laid down step by step rules and regulations. KM practices like that implemented by BP allows for co-creation of value by the interaction between managers, employees and the different network of expertise. The use of a 'Highly Immersive Visualization Environment' as a KM tool has been useful in cutting cost and reducing the spent hours on a project. According to BP's Knowledge architect, Chris Collison "The best medium for knowledge is human brain, and the best networking protocol is conversation". A huge investment on IT infrastructures facilitates conversation, but the infrastructures should provide a conventional language and processes to easy sharing and capturing of knowledge.

BP having experienced several successes as a result of KM initiatives also suffers(ed) some threats such as safety, environmental, ethical issues and some failed. BP needs to restrategise its knowledge framework especially for workers safety and environmental so that every member of company must be made fully aware of work safety rules.

BP having clearly utilized KM to attain quality in performance, saving of time and cost in new projects developments and implementations, still does not assume fully the Choo's "Knowing Organization" due to the lack of sensemaking model that enables an organisation to be an adaptive in anticipating and reacting changing environments as explained by the model.. Further suitable recommendations for BP, though some already in use includes:

With the global competition, even with cross organisations in recent times BP and other similar organisations should initiate collaborative moves across, through the network of expertise to the customers to expand the knowledge creation practices via customer- company interactions to add value to their products and services.

Taking every employee as a key figure in any KM process, therefore organisations must put respect as a core value for these individuals and their skills.

Expert selection and mobilization should be based on good points and should be for whoever deserves the job and not by influence.

Knowledge processes should continue to revolve around communities of practice, and not always be mandated by management.

Organisations must continue utilisation of employees based on the task and the expertise, and minimize unwanted potentials not required for the task.

Companies should welcome suggestions from all sections of the firm.

Knowledge co-creation among all stakeholders should be founded on the use of the DART (dialogue, access, risk assessment, and transparency) building blocks

Organisational infrastructures must ease the sharing of information from all sources simultaneously connecting managers and all networks.

Organisation database should remain archived and made available for future use.