Organizations are realizing how important it is to “know what they know” and be able to make maximum use of it. In an economy where the only certainty is uncertainty, one sure source of lasting competitive advantage is knowledge. Success in an increasingly competitive marketplace depends critically on the quality and effective management of knowledge which organizations apply to their key business processes. This paper discusses how to manage knowledge effectively. In its introduction part, it discusses the need and importance of knowledge, an intellectual capital, in today’s information age. It starts with discussing the main component that is knowledge and its different types and continues with sections defining knowledge management, its objectives and activities to give a good insight of purpose, need and importance of knowledge management. Then follows the main part that is how this intellectual capital can be managed effectively. For effective management of knowledge, a knowledge management infrastructure has been proposed which is based on three components which are Culture, Strategy, and Technology and, it is discussed how we can manage knowledge effectively through these components
Early in the industrial era, organizations improved their efficiency, effectiveness and hence their competitive edge, by automating manual labor and reducing redundancy. Now in the age of Knowledge workers, many organizations have gone through massive restructuring to eliminate redundant workers and jobs. Sometimes these efforts lead to the ideas of business process engineering. Downsizing resulted in major loses, sometimes irreplaceable, of core knowledge assets as employees walked out the door with their knowledge. The effects of such knowledge dissipation are stunned innovation, teamwork and productivity.
In 1990s, the nature of competition changed rapidly because of increased global connectivity, distributed expertise and shorter product development cycles. Organizations are now, streamlining their processes and exploring ways of working smarter through improved collaboration and communication. As the whole world (almost) continues to migrate towards a knowledge-based economy, knowledge management has emerged as a methodology for capturing and managing the intellectual assets of an organization as a key to sustaining competitive advantage. Knowledge management is a new strategic initiative that is changing the paradigm of information systems from one of processing data and providing information to one of harvesting and capitalizing on the knowledge of an entire organization, ranging from expertise in individuals‘ heads to documented material.
Through a supportive organizational climate, and today along with good knowledge management, an organization can bring its entire organizational memory and knowledge to bear on any problem anywhere in the world and at anytime. Knowledge about how problems are solved can be captured so that knowledge management can promote organizational learning, leading to further knowledge creation. Today, organizations are making major long-term investments in knowledge management. Worldwide spending on knowledge management services is expected to grow from $1.8 billion to more than $8 billion by 2003 (Dyer, 2000) (KM news archive, 2000).
Knowledge management requires a major transformation in organizational culture to create a desire to share, the development of methods that ensure that knowledge bases are kept current and relevant, and a commitment at levels of a firm for it to succeed.
Before discussing knowledge management, a brief description is given about the Knowledge and its distinction with data and information in the context of information systems. Data are collection of facts, measurements and statistics whereas Information is defined as organized or processed data that are timely (i.e., inference from the data are drawn within the time frame of applicability) and accurate (i.e., with reference to original data). Knowledge is information that is contextual, relevant and actionable. Therefore the implication is that knowledge has strong experiential and reflective elements that distinguish it from information in a given context. Having knowledge implies that it can be exercised to solve a problem, whereas having information does not carry the same connotation. While data, information and knowledge can all be viewed as assets of an organization, knowledge provides higher level of meaning about data and information. It conveys meaning and hence tends to be much more valuable. Also, while information as a resource is not always valuable (i.e., information overload can distract from the important), knowledge as a resource is valuable because it focuses attention back towards what is important. Knowledge is still valuable or reusable after lapse of time and has historical relevance, while the value of information tends to decline with time without preservation of the context in which it was acquired. Over time, information accumulates while knowledge evolves.
Types of Knowledge
Holsapple and Whinston (1996) & Zack (1999) define six types of knowledge that knowledge management application can contain. These include:
¨ Assimilative knowledge
Descriptive knowledge is information about the past, present, future, or hypothetical states of relevance concerned with knowing what. Procedural knowledge is concerned with knowing how and specifies step-by-step procedures for how tasks are accomplished. Reasoning knowledge is concerned with knowing why, evaluating conclusions that are valid for set of circumstances. Presentation knowledge facilitates communication and it is concerned with the method of delivery of knowledge. Linguistics knowledge interprets communication once it has been received. Assimilative knowledge helps to maintain the knowledge base by improving on existing knowledge. The first three types are the basic knowledge that an organization has in terms of performing its business processes. The latter three provide communicating, understanding and learning of knowledge in order to use it.
Knowledge has also been classified as advantaged knowledge, which can be described as the knowledge that can provide competitive advantage; base knowledge as knowledge that is integral to an organization, providing it with short-term advantages (best practices); and trivial knowledge as knowledge that has no major impact on the organization (Clarke,1998). Intellectual capital is another term for knowledge about which Ulrich (1998) defines intellectual capital as the competence of an individual and the commitment of the individual to contribute to the organization’s goals (Intellectual Commitment = Competence × Commitment). Besides this, other classification of knowledge is Tacit knowledge and Explicit knowledge. Tacit knowledge is the cumulative store of experiences, insights, expertise, know-how, trade secrets, understanding and learning. It is also referred as embedded knowledge and is unstructured and intangible and thus hard to codify. Explicit knowledge is the policies, procedural guides, reports, strategies etc of the enterprise that has been codified and can be distributed to others without interpersonal interactions.
What is Knowledge Management?
Knowledge management is fundamentally the management of corporate knowledge and intellectual assets that can improve a range of organizational performance characteristics and add value by enabling an enterprise to act more intelligently (Gupta et al., 2002).
Knowledge Management is a process that helps organizations identify, select, organize, disseminate and transfer important information and expertise that are a part of the organizational memory that typically resides within an organization in an unstructured manner. This enables effective and efficient problem solving, dynamic learning, strategic planning and decision making. Knowledge management focuses on identifying knowledge, explicating it in a way so that it can be shared in a formal manner, and thus reusing it (Gupta et al., 2002).
Knowledge management enables the communication of knowledge from one person to another so that it can be used by the other person. The domains in which knowledge concepts are leveraged in organization through knowledge initiatives are:
¨ sharing knowledge and best practices
¨ instilling responsibility for sharing knowledge
¨ capturing and reusing best practices
¨ embedding knowledge in products , services and processes
¨ producing knowledge as a product
¨ driving knowledge generation for innovation
¨ mapping networks of experts
¨ building and mining customer knowledge bases
¨ understanding and measuring the value of knowledge
¨ Leveraging intellectual assets (Barth, 2000).
Knowledge management is the art of performing knowledge actions such as organizing, blocking, filtering, storing gathering, sharing, disseminating and using knowledge objects such as data, information, experiences, evaluations, insights, wisdom and initiatives. In general terms it is the performance of knowledge actions on knowledge objects (Sivan, 2001) as shown in the Figure 1.
Knowledge management = Knowledge Actions × Knowledge Objects
The art of performing knowledge actions on knowledge objects …
Organizing, storing, gathering, sharing, disseminating, using ….
Data, information, experience, evaluations, insights, wisdom,….
Another strategic view about knowledge management given by, chief knowledge officer (CKO), Yogesh Malhotra (1998) says that knowledge management caters to the critical issues of organizational adaptation, survival and competence in face of increasingly discontinuous environmental change. Essentially it embodies the organizational processes that seek synergistic combination of data and information processing capacity of information technologies and the creative and innovative capacity of human beings. This view considers the synergy between technological and behavioral issues. The need for synergy of technological and human capabilities is based on the distinction between the ‘old world of business’ and the ‘new world of business’.
Within this view, the former is characterized by predictable environments in which focus is on prediction and optimization based efficiencies. This is the world of competence based on information as the strategic assets and the emphasis is on controlling the behavior of organizational agents towards fulfillment of pre-specified organizational goals and objectives. Information and control systems are used in this world for achieving the alignment of the organizational actors with pre-defined ‘best-practices’.
In contrast, the ‘new world of business’ is characterized by high levels of uncertainty and inability to predict the future. Use of the information and control systems and compliance with pre-defined goals, objectives and best practices may not necessarily achieve long term organizational competence. Today’s world needs the capability to understand the problems afresh given the changing environmental conditions. The focus is not only on finding the right answers but on finding the right questions. This world is contrasted from the ‘old world’ by its emphasis on ‘doing the right things’ rather than ‘doing things right ’.
Knowledge management is necessary for companies because what worked yesterday may or may not work tomorrow because market needs are changing rapidly. The same holds for assumptions about the optimal organization structure, the control and coordination systems, the motivation and incentive schemes. To remain aligned with the dynamically changing needs of the business environment, organizations need to continuously assess their internal theories of business for ongoing effectiveness.
Goals and Objectives of Knowledge Management
Knowledge management involves a strategic commitment to improving the organization’s effectiveness, as well as to improving its opportunity enhancement. The goal of knowledge management as a process is to improve the organization’s ability to execute its core processes more efficiently.
Davenport et al. (1998) describes four broad objectives of knowledge management systems in practice:
¨ create knowledge repository
¨ improve knowledge assets
¨ enhance the knowledge environment
¨ manage knowledge as an asset
The key to knowledge management is capturing intellectual assets for the tangible benefits for the organization. As such, imperatives of knowledge management are to:
¨ transform knowledge to add value to the processes and operations of the business
¨ leverage knowledge strategic to business to accelerate growth and innovation
¨ Use knowledge to provide a competitive advantage for the business.
The aim of knowledge management is to continuously improve an organization’s performance through the improvement and sharing of organizational knowledge throughout the organization (i.e., the aim is to ensure the organization has the right knowledge at the right time and place). Knowledge management is the set of proactive activities to support an organization in creating, assimilating, disseminating, and applying its knowledge. Knowledge management is a continuous process to understand the organization’s knowledge needs, the location of the knowledge, and how to improve the knowledge.
Knowledge Management Activities
Knowledge management consists of four basic functions: externalization, internalization, intermediation and cognition (Frappaolo, 1998):
Externalization is capturing knowledge in an external repository and organizing it by some framework in an effort to discover similar knowledge. Technologies that support externalization are imaging systems, databases, workflow technologies, document management systems using clustering techniques, etc.
Internalization is the process of identifying knowledge, usually explicit, relevant to a particular user’s needs. It involves mapping a particular problem, situation, or a point of interest against the body of knowledge already captured through externalization.
Intermediation is similar to the brokering process for matching a knowledge seeker with the best source of knowledge (usually tacit) by tracking the experience and interest of individuals and groups of individuals. Some technologies that facilitate these processes are groupware, intranets, workflow and document management systems.
Cognition applies the knowledge exchanged preceding three processes. This is probably the knowledge management component that is most difficult to automate because it relies on human cognition to recognize where and how knowledge can be used.
Managing Knowledge Effectively
Effective knowledge management is neither panacea nor bromide, it is one of many components of good management. Sound planning, savvy marketing, high-quality products and services, attention to customers, the efficient structuring of work, and the thoughtful management of an organization's resources is not diminished in importance by the acknowledgement that knowledge is critical to success and needs to be managed. However, when a business faces competitors that perform well on those other dimensions, the difference between success and failure may well turn on how effectively it manages its knowledge (Davenport et al, 1998). Knowledge management success factors may be links to economic performance or industry value; a technical and organizational infrastructure; a standard, flexible knowledge structure; a knowledge-friendly culture; a clear purpose and language; a change in motivational practices; multiple channels for knowledge transfer and senior management support (Davenport et al., 1998).
In order to manage knowledge effectively in corporates and organizations, besides other factors, special attention should be given to contextual dimensions of organization such as strategy, technology and culture, that is:
¨ Most important is building a strong culture to adopt and support it.
¨ Defining effective strategies for using all knowledge resources efficiently.
¨ Using information technologies (digital documents, intranets, expert systems etc) for developing knowledge management systems.
Knowledge infrastructure can be built on these three dimensions or foundations. The first foundation, that is culture, should be considered before practicing knowledge management. Knowledge management, at its core, has a strong human component. An organization’s knowledge management strategy cannot be successful unless the organization has developed a trusting knowledge culture that emphasizes the role and value of knowledge in day-to-day business decisions and enterprises. The culture must be geared towards rewarding innovation, learning, experimentation, scrutiny and reflection (Allee, 1997).
Organizations should establish a culture conducive to more effective knowledge creation, transfer, and use. Today many companies are engaged in high-level and general efforts to change the organizational norms and values related to knowledge. They are making efforts to make their personnels understand the importance of this valuable asset. Effective knowledge management requires a good fit between the organization’s culture and its knowledge management initiatives. Changes that don't fit the culture probably won't thrive, so management needs to align its approach with its existing culture or be prepared for a long-term culture change effort. In general, if the cultural soil isn't fertile for knowledge management initiatives, no amount of technology, knowledge content, or good knowledge management practices will make the effort successful. Organizational culture should have several components with regard to knowledge:
¨ People should have a positive orientation to knowledge, that is, employees should be bright, intellectually curious, willing and free to explore and also executives should encourage their knowledge creation and use.
¨ People should not be inhibited in sharing knowledge, that is, they should feel that they are not alienated or resentful of the company and don't fear that sharing knowledge will cost them their jobs.
Therefore effective knowledge management requires a healthy and conducive culture as a prerequisite.
Another foundation of knowledge infrastructure is devising, implementing and integrating an effective strategy. The real point of knowledge management strategy is to create an environment for leveraging the organization’s intellectual property into a collaborative platform, making this knowledge actionable. Knowledge management is about action, not just about collection and consolidation. It is about leveraging what the organization knows. Forming a knowledge strategy is straightforward. The first step is to develop sophisticated scenarios for current and future competitive environments. The next step is to describe ideal successful companies with respect to the future scenarios. A vital characteristic of this step is evaluation of the advantages and base knowledge required in these successful organizations (Clarke, 1998). Following the identifications of the knowledge needed at successful firm, the next step is to identify the individuals within the firm who have the knowledge required or the capability to acquire that knowledge. It is important to identify external knowledge sources to help determine and understand current and future customers, suppliers and markets. The source of intellectual capital may not reside within the organization but can be leveraged elsewhere. The step for the organization is to model its efforts on those of a conceptually an ideal company. The business strategy for such an ideal company would include a plan in acquiring and maintaining the necessary knowledge. Once the knowledge strategy is in place, the strategy is set. It is then time to develop the system. Zack (1999) suggested that knowledge assets should be analyzed in relation to their support of business strategy by performing a SWOT analysis. This makes intuitive sense in that knowledge management has strategic value.
Generally implementing a knowledge management methodology follows seven steps:
1. Identifying the problem. Corporate knowledge is typically found in isolated systems or knowledge silos. The access and technological barriers protecting this knowledge lead users to perceive that there is lack of knowledge. The knowledge segments should be identified.
2. Preparing for change. This refers to change in terms of business efforts, especially in how the business is operated.
3. Creating the team. Most organizations that have successfully implemented knowledge management have created a corporate level knowledge management team charged with and responsible for implementing a pilot project. Here chief knowledge officer should be appointed to lead the effort.
4. Mapping out the knowledge. Identify what the knowledge is, where it is, who has it, and who needs it. Once the knowledge map is clear, define and prioritize the key feature and identify appropriate technologies that can be used to implement the knowledge management system.
5. Creating a feedback mechanism. A feedback system should be created to indicate management how the system is used and should report any difficulties.
6. Defining the building blocks for a knowledge management system. The base structures of a viable knowledge management system should consist of a knowledge repository, knowledge contribution and collection processes, knowledge retrieval systems, a knowledge directory and content management.
7. Integrating existing information systems to contribute and capture knowledge in an appropriate format.
Initially a prototyping process should be used, starting with a small group in a pilot program. Once it has demonstrated success, then other members of the organization should request access and this way the stem will expand.
Based on successful adoption of knowledge management, Huang et al. (1999) identified the following 10 strategies for successful knowledge management implementations:
1. Establishing a knowledge management methodology. This can be based on the intellectual capital management (ICM) methodology adopted by IBM global services. The key components of ICM are a vision that values sharing and reusing knowledge; processes for efficiently gathering, evaluating, structuring and distributing intellectual capital; a competency community of practice consisting of knowledge workers in a core competency area; technology that enable company wide knowledge sharing and incentives to encourage intellectual contribution and reuse.
2. Designate a point-person. Appoint a chief knowledge officer to promote and manage the knowledge management activities in the company.
3. Empower knowledge workers. In any organization knowledge originates from its knowledge workers. Thus empowering and supporting knowledge workers by making them a key component of the knowledge management system is critical to the success of company’s knowledge management strategy.
4. Manage customer-centric knowledge. A firm can strengthen its position in a competitive environment not only by emphasizing customer satisfaction but also by focusing on both learning about and learning from their customers. e.g. BMW has used this strategy effectively to increase both customer service and market share.
5. Manage core competencies. Core competencies can vary among firms based on unique benefits they intend to provide to their customers by effectively combining human capital, intellectual and intangible assets, processes and technologies in the firm. Thus the core competencies of one firm may not be easily replicated by other firms, as their capabilities may not essentially be the same.
6. Foster collaboration and innovation. A firm can nurture collaboration by accentuating the importance of teamwork, learning, sharing, trust and flexibility. Developing an appropriate reward structure for innovation also fosters high creative potential among individuals.
7. Learn from best practices. By recording and sharing best practices, firms can prevent reinvention and thus be more efficient and more effective by encouraging reuse of the best ideas and methods. In the past, firms shared and learned about best practices through symposiums, conferences and seminars. Now web-based approaches are becoming norm.
8. Extend knowledge sourcing. Successful retrieval of information and dissemination of value-added knowledge are referred as knowledge sourcing. Through different media such as internet, intranet and extranet firms can retrieve and deliver knowledge.
9. Interconnect communities of expertise. Firms create a link between internal and external communities by using formal virtual communities and teams and through electronic libraries such as white papers or knowledge banks. Internal experts aid in problem solving, while experts are generally connected with senior management to advice on specific area.
10. Report the measured value of knowledge assets. It is important that firms measure how knowledge management contributes to the business. It is difficult task but important task to validate the development and use of a knowledge management system, as is true for any information system.
Organizations can gain several benefits from implementing knowledge management strategies. Tactically they can reduce loss of intellectual capital due to people leaving the company, reduce costs by decreasing and achieving economies of scale in obtaining information from external providers, reduce redundancy of knowledge based activities, increase productivity by making knowledge available more quickly and easily and increase employee satisfaction by enabling greater personal development and empowerment. Today, the best reason is a strategic need to gain a competitive advantage in the marketplace.
Another foundation of knowledge infrastructure, which is a practical aspect of knowledge management that can be employed to manage knowledge effectively, is technology. It plays a key role in the trend towards knowledge management. Today, information technologies support knowledge management and broad sharing of information and are good examples of effective knowledge management tools. Here we will discuss the intranet and expert system technologies only and how these tools manage knowledge effectively.
When facilitating knowledge management initiatives, information technology environments such as intranets can be utilized to establish a virtual meeting place where communities of practice can engage in dialogue and collaboration. Actions such as information creation, information seeking, and information interpretation can successfully be performed in these environments. To facilitate this, intranets must be designed to support not only the informational aspects but also include people by making salient networks of users with similar interests and allow these to communicate and collaborate. Stenmark (2002) has suggested a multi-perspective view of intranet, a technology that helps in creating an effective knowledge management environment, which are:
¨ Information perspective,
¨ Awareness perspective
¨ and Communication perspective.
The information perspective is the most obvious view of the intranet, since information provision is a fundamental part of the infrastructure. Seen from this perspective the intranet gives the organizational members access to both structured and unstructured information in form of databases and documents. Access to rich and diverse sets of information is important for organizational knowledge creation since it provides rich stimuli and requisite variety. The intranet thus affects the interaction between information and knowledge in today’s organizations by increasing the consumer’s access to information and the opportunities for producers to reach a larger audience. To merely read the text is not enough, though. The reader must also reflect upon her assumptions, her actions, her experiences, and what consequences changing the rules will have on her future actions. Information plays an important role as a catalyst for reflection and an information perspective on the intranet is thus highly relevant for work that requires knowledge. But on top of the infrastructure, applications must be built to complement the information perspective by providing awareness and facilitating communication.
The awareness perspective suggests that not only explicit information links but also tacitly expressed connections should be exploited to hook up organizational members with information and people they might otherwise have missed. The large amount of information available can result in information overload, and to avoid such a situation and maintain the awareness perspective, tools to assist the organizational member by prompting when new and relevant information is added must be developed. By making users aware of peers who not only share an official job description but also have accessed the same information or authored similar documents, the networks of practice can be established. Such a network is a prerequisite for community building, and increases the likelihood for successful communication and collaboration.
The communication perspective, finally, enables the organizational members to collectively interpret the available information by supporting various forms of channels for conversations and negotiations. The intranet communication perspective promotes reflection by making salient different interpretations and viewpoints. By offering workflows and coordinating routines as well as support for more informal collaboration such as shared whiteboards and project areas, the intranet provides means for organizational members to work together. When engaged in collaborative work with peers that share your objectives and understand your vocabulary, the common context necessary for knowledge sharing exists. From a communication perspective, we can act upon our new understanding, thereby transforming our knowledge to organizational benefit. A major objective for the intranet is therefore to enable people to actively work together based on the information available to them, and facilitate the documentation of their experiences. The intranet would thereby leverage the knowledge of the organizational members. Also the communication perspective must not be isolated from the information and the awareness perspectives.
Thus intranet technology can be an effective tool for managing knowledge inside the organizations, therefore enhancing productivity and helping organizations to improve their performance in today’s environment that is highly competitive and full of uncertainties.
Another tool that helps in managing knowledge effectively and provides a solution to the problem that most of the organization’s are facing today, that is loss of experts, is expert system. Today, this system plays a very important role in organizations and is to large extent reducing dependency of organization on highly expensive professionals and experts.
Expert systems are computerized advisory programs that attempt to imitate the reasoning process of experts in solving difficult problems. These are in use more that any other applied Artificial Intelligence technology. Expert systems are of great interest to organizations because they can increase productivity and augment workforces in specialty areas where human experts are becoming increasingly difficult to find and retain or are too expensive to hire.
As we know today’s business environment is highly complex and full of uncertainties and therefore operating in this type of environment needs highly knowledgeable persons. On the other hand, expertise is the extensive, task-specific knowledge acquired from training, reading and experience. It enables experts to make better and faster decisions than non-experts in solving complex problem and this expertise takes a long time to acquire, also it is distributed in organizations in an uneven manner. Retaining and hiring of these experts is most of the times very expensive for the organizations. Therefore in order to solve this problem, this highly valuable knowledge (expertise) is transferred from an expert to the computer where it is stored in the knowledge repositories called knowledge bases in the form of facts, symbols, frames or rules. In order to manage the knowledge of these experts, expert systems are build with the help of knowledge engineers. The whole process, transfer of knowledge to its use, involves four activities:
¨ Knowledge acquisition from experts or other sources
¨ Knowledge representation as fact, symbols, rules, etc in the computer
¨ Knowledge inferencing that is reasoning and formulating conclusions
¨ Knowledge transfer to the user
Knowledge is acquired from experts or from documented sources. Through the activity of knowledge representation, acquired knowledge is organized as rules or frames and stored electronically in a knowledge base. With the help of this stored knowledge, key component that is inference engine makes inferencing. It results in an advice or a recommendation for novices. Thus, this way the valuable knowledge that is transferred to users, is managed effectively and is economical.
Now almost every organization has recognized that in order to survive in today’s competitive and global environment, it has to face knowledge-based economy revolution. They have realized the need and importance of this valuable asset. Since knowledge management caters to the critical issues of organizational adaptation, survival and competence in face of increasingly environmental change, therefore there is an essential need of managing it effectively. Three components that can play effective role in managing this valuable asset effectively include: defining effective strategies for its management, using state of art information technologies for implementing these strategies and developing knowledge management systems and a strong culture that can recognize its need and importance and thus adapt it. Also since knowledge is a prerequisite of learning, therefore it is effective management can result in improvement in capabilities and business activities of a learning organization which as a result can add value to its services or products, thus improving its overall performance and giving a competitive edge to it.
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