The ability to manage knowledge is crucial in today ’ s knowledge economy. The creation and diffusion of knowledge have become increasingly important factors in competitiveness. More and more, knowledge is being thought of as a valuable commodity that is embedded in products (especially high-technology products) and embedded in the tacit knowledge of highly mobile employees. While knowledge is increasingly being viewed as a commodity or intellectual asset, there are some paradoxical characteristics of knowledge that are radically different from other valuable commodities. These knowledge characteristics include the following:
• Using knowledge does not consume it.
• Transferring knowledge does not result in losing it.
• Knowledge is abundant, but the ability to use it is scarce.
• Much of an organization ’ s valuable knowledge walks out the door at the end of the day.
The advent of the Internet, the World Wide Web, has made unlimited sources of knowledge available to us all. Pundits are heralding the dawn of the Knowledge Age supplanting the Industrial Era. Forty-fi ve years ago, nearly half of all workers in industrialized countries were making or helping to make things. By the year 2000, only 20 percent of workers were devoted to industrial work — the rest was knowledge work ( Drucker 1994 ; Barth 2000 ). Davenport (2005, p. 5) says about knowledge
workers that “ at a minimum, they comprise a quarter of the U.S. workforce, and at a maximum about half. ”Labor-intensive manufacturing with a large pool of relatively cheap, relatively homogenous labor and hierarchical management has given way to
knowledge-based organizations. There are fewer people who need to do more work. Organizational hierarchies are being put aside as knowledge work calls for more collaboration. A firm only gains sustainable advances from what it collectively knows,
how effi ciently it uses what it knows, and how quickly it acquires and uses new knowledge ( Davenport and Prusak 1998 ). An organization in the Knowledge Age is one that learns, remembers, and acts based on the best available information, knowledge,
All of these developments have created a strong need for a deliberate and systematic approach to cultivating and sharing a company ’ s knowledge base — one populated with valid and valuable lessons learned and best practices. In other words, in order to be successful in today ’ s challenging organizational environment, companies need to learn from their past errors and not reinvent the wheel. Organizational knowledge is not intended to replace individual knowledge but to complement it by making it
stronger, more coherent, and more broadly applied. Knowledge management represents a deliberate and systematic approach to ensure the full utilization of the organization ’ s knowledge base, coupled with the potential of individual skills, competencies,
thoughts, innovations, and ideas to create a more effi cient and effective organization.
Increasingly, companies will differentiate themselves on the basis of what they know. A relevant variation on Sidney Winter’s defi nition of a business fi rm as an organization that knows how to do things would defi ne a business fi rm that thrives over the next decade as an organization that knows how to do new things well and quickly. ( Davenport and Prusak 1998 , 13)
Knowledge management was initially defi ned as the process of applying a systematic approach to the capture, structuring, management, and dissemination of knowledge throughout an organization to work faster, reuse best practices, and reduce costly
rework from project to project (Nonaka and Takeuchi, 1995; Pasternack and Viscio 1998; Pfeffer and Sutton, 1999; Ruggles and Holtshouse, 1999). KM is often characterized by a pack rat approach to content: “ save it, it may prove useful some time in the
future. ”Many documents tend to be warehoused, sophisticated search engines are then used to try to retrieve some of this content, and fairly large-scale and costly KM systems are built. Knowledge management solutions have proven to be most successful in the capture, storage, and subsequent dissemination of knowledge that has been rendered explicit — particularly lessons learned and best practices.
The focus of intellectual capital management (ICM), on the other hand, is on those pieces of knowledge that are of business value to the organization — referred to as intellectual capital or assets. Stewart (1997) defi nes intellectual capital as “ organized knowledge that can be used to produce wealth. ”While some of these assets are more visible (e.g., patents, intellectual property), the majority consists of know-how, know-why, experience, and expertise that tends to reside within the head of one or a few employees ( Klein 1998 ; Stewart 1997 ). ICM is characterized less by content — because content is fi ltered and judged, and only the best ideas re inventoried (the top ten for example). ICM content tends to be more representative of the real thinking of individuals (contextual information, opinions, stories) because of its focus on actionable knowledge and know-how. The outcome is less costly endeavors and a focus on learning (at the individual, community, and organizational levels) rather than on the building of systems.
A good defi nition of knowledge management would incorporate both the capturing and storing of knowledge perspective, together with the valuing of intellectual assets. For example:
Knowledge management is the deliberate and systematic coordination of an organization ’s people, technology, processes, and organizational structure in order to add value through reuse and innovation. This is achieved through the promotion of creating, sharing, and applying knowledge as well as through the feeding of valuable lessons learned and best practices into
corporate memory in order to foster continued organizational learning.
When asked, most executives will state that their greatest asset is the knowledge held by their employees. “ When employees walk out the door, they take valuable organizational knowledge with them ”( Lesser and Prusak 2001 , 1). Managers also invariably add that they have no idea how to manage this knowledge! Using the intellectual capital or asset approach, it is essential to identify knowledge that is of value and is also at risk of being lost to the organization through retirement, turnover, and
competition.. As Lesser and Prusak (2001, 1) note: “ The most knowledgeable employees often leave first. ”In addition, the selective or value-based knowledge management approach should be a three-tiered one, that is, it should also be applied to three organizational levels: the individual, the group or community, and the organization itself. The best way to retain valuable knowledge is to identify intellectual assets and then ensure legacy materials are produced and subsequently stored in such a way as to make their future retrieval and reuse as easy as possible ( Stewart 2000 ). These tangible byproducts need to flow from individual to individual, between members of a community of practice and, of course, back to the organization itself, in the form of lessons learned, best practices, and corporate memory.
Many knowledge management efforts have been largely concerned with capturing, codifying, and sharing the knowledge held by people in organizations. Although there is still a lack of consensus over what constitutes a good defi nition of KM (see next
section), there is widespread agreement as to the goals of an organization that undertakes KM. Nickols (2000) summarizes this as follows: “ the basic aim of knowledge management is to leverage knowledge to the organization ’s advantage. ”Some of
management ’ s motives are obvious: the loss of skilled people through turnover, pressure to avoid reinventing the wheel, pressure for organization-wide innovations in processes as well as products, managing risk, and the accelerating rate with which new knowledge is being created. Some typical knowledge management objectives would be to:
• Facilitate a smooth transition from those retiring to their successors who are recruited to fill their positions
• Minimize loss of corporate memory due to attrition and retirement
• Identify critical resources and critical areas of knowledge so that the corporation knows what it knows and does well — and why
• Build up a toolkit of methods that can be used with individuals, with groups, and with the organization to stem the potential loss of intellectual capital.
Subscribe for latestet update on Knowledge Management. Next topic in this series is “What is Knowledge Management?”. It will be published on 18th June, 2017.