Knowledge management is increasingly seen, not as the latest management fad, but as an organic and holistic way of understanding and exploiting the role of knowledge in the processes of managing and doing work.
As business environment is increasingly becoming competitive and complex, companies find it difficult to survive. And as they struggle to find competitive edge, the one thing that is increasingly becoming clear is what differentiates a winner from a loser or laggard, is the asset called knowledge. True, knowledge is the key to success in these turbulent times. However, in today’s borderless world, knowledge becomes obsolete as soon as it is created; new knowledge has to be created constantly in all functions. If we closely watch the factors that are attributed to the long-term survival and competitive success of companies, it becomes evident that it is not their financial muscles and size, but the manner in which they consciously attempt to learn, codify, create, and utilize knowledge.
Against this backdrop, many of the organizations have begun focusing more and more on managing their organizational knowledge. However, organizations should not just manage knowledge but also enable creation of new knowledge. Accordingly, business enterprises are no longer labeling their workforce as workers but as intellectual capital. It facilitates organizations in responding quickly and effectively to rapid changes in their business environment. Experts opine that learning is at the core of these activities, be it learning a new skill or learning to manage existing knowledge or creating organizational improvement and structure that supports continuous learning.
Today, the real driver of business is knowledge as information becomes a key input. Organizations have emerged from command-and-control, manual and clerical workers to knowledge workers. It helps organizations to learn faster than the competitor. Knowledge is an asset for organizations and they present opportunities and ultimately help organizations derive the most value from intellectual rather than physical assets. In this environment, knowledge is the only certainty and is one sure source of lasting competitive advantage. And hence knowledge management becomes a key imperative for organizations today.
Dimensions of KM
However, there is little agreement over the exact definition of Knowledge Management among practitioners. A generic definition of Knowledge Management is “It is the process of capture, refinement, aggregation and sharing of data and information between employees, departments, subsidiaries and partner organizations to achieve a position of knowledge-based competitive advantage.” Simply put, it is the process through which organizations generate value from their intellectual and knowledge-based assets. It helps organizations to respond to rapid changes in a systematic manner.
According to the global management and technology consulting firm, Accenture, the knowledge of how manufacturing goods are built and how they work accounts for 70% of their development costs. In service businesses, the knowledge component of development cost may be as high as 90%. Going by this, it is not surprising that organizations are increasingly realizing the virtue of intellectual capital. To manage their intellectual assets competently, top companies are introducing knowledge management activities in their corporate strategy. According to a study by research and consulting firm Best Practices, LLC, identifying and sharing internal best practices enables organizations to gain market position and drive long-term growth. While some companies lay off employees to cut costs in a slow economy, leading companies utilize employees’ valuable knowledge to reduce expenses. In this global knowledge-based economy, knowledge has become a competitive weapon and it is gaining momentum as value is found more in intangibles than tangibles. So the vital assets of this economy are not factories and equipments, but accumulated knowledge and the people who possess it.
In the past, most knowledge management initiatives were viewed primarily as information systems projects. Accordingly, a majority of the managers intuitively considered that strategic advantage could be gained from knowing more than their competitors. However, with this mindset they were unable to explicitly articulate the link between knowledge and strategy. That experience endorses the view that today knowledge is the most strategically important capability for business organizations. According to a research done by Michael H Zack, College of Business Administration, Northeastern University, US, the most important context for guiding knowledge management is the company’s strategy. An organization’s strategic context helps to identify knowledge management initiatives that support its purpose or mission, strengthen its competitive position, and create shareholder value. Zack suggests that competing successfully in knowledge requires either aligning strategy to what the organization knows, or developing the knowledge and capabilities needed to support a desired strategy. At the outset, it becomes clear that the firm that knows more about its customers, products, technologies, markets and their linkages should perform better.
Over the years, organizations have used many tools to create and sustain competitive advantage. In the process, the organizations are now focusing on the methods of creating new knowledge and harnessing existing knowledge to gain sustainable competitive advantage. During the 1990s, the initial emphasis in knowledge management was on information systems. Then the focus shifted towards organizational development, intellectual capital management, and competence management. However, to gain and maintain competitive advantage, knowledge sharing among individuals or groups within organization is one of the most important processes. Without sharing, new knowledge cannot be created. Thus over the years, knowledge management has evolved from a buzzword to become apart of today’s business language. Knowledge management is a powerful tool and if implemented in the right way, it has the potential to make the future both exciting and rewarding.
The importance of knowledge management is increasing on account of increased competition, and rapid change. Understanding and applying knowledge management is becoming an increasing competitive imperative for companies around the world. In fact, in the new economy, a company’s success depends on its ability to acquire, codify and transfer knowledge more effectively and with greater speed than the competition. Knowledge management is increasingly seen, not as the latest management fad, but as an organic and holistic way of understanding and exploiting the role of knowledge in the processes of managing and doing work. Over the years, the availability of a strong knowledge base in many corporations played a significant role in their success.
It’s time now for business organizations to understand the potential scope of knowledge management and the need to implement it as creatively and broadly as possible. Remember, this is not a process that meets the criteria of “one size fits all” but must be adopted to fit the constant changing information needs and the changing access patterns to information. The future of any company and its ability to compete in the global economy would, to a great extent, depend on how well it understands and uses knowledge.
N Janardhan Rao, Lead Economist.