Knowledge is an essential driver of organisational growth in a business environment.
‘Whether the objective is to develop a new product, service, or to design a new technology, the key resource required is knowledge, knowledge of markets, customers, technology available, materials and distribution, all this knowledge leads to delivery of good or services’ (Sue et al, 1998). After identifying the benefits of knowledge for an organisation and implementing knowledge in processes at different levels, knowledge creates a competitive advantage that will enhance success over competitors and organisational learning.
According to Chaffey (2007 pg.486) ‘ knowledge is the combination of data and information to which is added expert opinion, skills, and experience, to result in a valuable asset which can be used to aid decision making’. Furthermore Pervais et al (2002) suggests that knowledge and information may be difficult to distinguish at times but knowledge and information are more valuable than raw data, the fact that knowledge begins as data and information base when intelligence is added to that information it is transformed in to knowledge. Examples of knowledge can be customer database, expertise and skills in the organisation, dealing with customer queries etc.
As suggested by Nonaka and Takeuchi (1995) Knowledge can be classified in to two groups, which are explicit knowledge and tacit knowledge, explicit knowledge can be easily communicated in a formal language including grammatical statements, mathematical expressions, specifications, and manuals, this kind of knowledge can be transferred through individuals formally and easily. ‘Tacit knowledge is difficult to express with a formal language, it is personal knowledge that is embedded in individual experience and involves factors such as personal belief, perception and value system’. Nonaka and Takeuchi (1995, pg. viii-ix).
Knowledge in an organisation can be obtained from employee’s skills and expertise or culture and structure of the organisation that encourages knowledge sharing as well as other intangible assets that an organisation has, furthermore other organisations and customers can be a source of knowledge.
‘Knowledge management is the management of activities and processes for leveraging knowledge enhance competitiveness through better use and creation of individual and collective knowledge resources’ Chaffey, 2007 pg487). The fact that knowledge may be from employees, customers, as well as culture, and other organisations companies have to work towards creating new knowledge, store, share and use knowledge for future success.
According to Nonaka and Takeuchi (1995) success of Japanese companies was not the technology competency, customer relationship or even human resources management, Japanese companies have been successful because of skills and expertise at creating organisational knowledge. The ability of the company to create knowledge spread it through the organisation and utilise it in products, services and systems and continuous innovation helps to gain competitive advantage.
Nonaka and Takeuchi (1995) suggest that organisations central activity should be working to make new knowledge, the authors add that knowledge is created through the interaction between tacit and explicit, there are four modes of knowledge conversion, that is from tacit knowledge to tacit knowledge, tacit to explicit knowledge, explicit to explicit knowledge and explicit to tacit knowledge. Interacting through socialization, externalisation, internalisation and combination of tacit and explicit knowledge enables organisations to create knowledge at individuals and group levels through improving something, sharing ideas, training, etc.
Knowledge creation can be between individuals and groups through different means. Nonaka & Takeuchi (1995) provides details of knowledge creation in practice through an example of Matsushita Electrical Industrial Company limited and the development of the bread making appliance. When Matsushita was developing a bread making appliance it depended on the bakers tacit knowledge, the knowledge gap that was identified by Matsushita was helped to show how the pursuit of tacit knowledge can enable organisations create knowledge.
Chaffey (2002) suggested that at an organisational level knowledge is created through establishing expert groups or use consultants to acquire knowledge. Also knowledge needs to be stored this requires a system that will enable organising, updating and categorising knowledge. Furthermore knowledge has to be shared and most importantly it should to be utilised for the benefit of the organisation.
Companies use different things to acquire knowledge, first the benefits and values of knowledge should be understood, create an environment that encourages knowledge sharing, learn from the external environment as it may influence internal changes. To be able to manage knowledge different tools are kept in place to enhance knowledge creation, sharing, storage as well as using it. Organisational success is determined by the contribution and interaction of many factors, some are beyond influence or control while others are under control of an organisation internal environment. It is through management and utilization of these factors that knowledge management yields corporate goals (Pervais, 2002), For example in 1978 the managers of Honda were determined to convert tacit to explicit knowledge within the organisation and formed teams that were to create a product concept that the company has never done, in the car manufacturing sector though the task may seem tough but this is how tacit knowledge is made explicit and may once the task as complete the knowledge becomes the company’s asset that later results in to success. (Nonaka and takeuchi, 1995)
Technology has a great impact on knowledge management, from sharing knowledge at a normal face to face interaction. Technology has influenced people to work remote from the office. A project can be completed with teams that are geographically distributed across different countries, through video conferencing, e-mails and other forms of virtual communication. Hence companies should develop systems that enable proper storage of knowledge for effective use in offices and Tele workers. However, Easterby- smith and Lyles (2003 pg.461- 462) argue that ‘without trust, knowledge initiatives will fail regardless of how
thoroughly they are supported by technology, therefore the issue of trust should be part of knowledge sharing’.
Knowledge management can be central success of an organisation. As suggested by Pervais et al (2002) in the COST knowledge management model which comprises of customer, supplier, organisation and technology
To begin with the customer, customer satisfaction and customer retention is what organisations need in a competitive business environment. The organisation needs to know changing customer needs, and how to meet those needs. All these are done to learn from customers and to be effective and competitive in business. Organisations invest on different CRM programmes that enable data warehouse and data mining just to get customer information which will be stored as knowledge in the organisations systems in order to integrate them in their changing processes and provide that exclusive service. This shows how beneficial knowledge is and how managing it could make a successful organisation.
Having customer knowledge helps an organisation to be able to penetrate in to new market, understand how to boost sales as well as increase market share, Therefore knowledge if identified and properly managed can be a factor for success example, British airways (BA) seeks knowledge as a key to the future success in the airline industry, BA believes that managing knowledge will help innovation and creativity which will meet the customer needs. (Pervais, et al 2002)
Once the organisation has identified the benefits of knowledge, the key skills and expertise within an organisation is another key to success of the business, organisations invest in retaining the talent this will enable knowledge creation, storage, as well as the use of the knowledge for the benefit of the company. By having enough expertise in the organisation the knowledge they have may contribute in decision making which may improve efficiency and enhance profitability of the company. Example Ernst and young centre for Business Innovation and Business Intelligence is a knowledge intensive business, the professionals that the company has and the knowledge that is gained from the employees as well as customers is the key to success for the organisation. (Pervais et al, 2002).
Suppliers, having a good relationship and understanding suppliers for an organisation is necessary, organisation may obtain high quality material at a reasonable cost with efficient delivery service, from the supplier the fact that organisation may obtain all that through the quality programmes, knowledge about your suppliers in relation to your competitors is very important.
Technology as a tool is another key to organisation success that is used to manage knowledge. Transfer of information from one person to another may enhance knowledge sharing. Intranets are often used to support knowledge access and knowledge exchange within organisations. Capturing employee knowledge may be the main facilitator of transfer of knowledge among individuals in an organisation, software’s to facilitate group discussions and skills directories are kept in place to enhance knowledge transfer through the organisation that is why organisations capitalise in the knowledge based assets.
IBM an intellectual capital intensive company, its perspective of knowledge is business management, project management and intellectual capital management each of the knowledge has its own goals, processes and information that is then transformed to knowledge through human interaction and social process in teams and groups such as the knowledge café, the ICM asset web and knowledge Cock pit. The frequent dialog of teams encourage sharing of tacit and explicit knowledge which is beneficial for the business.(Pervais et al 2002) This is a good example of a company that uses technology to successfully manage knowledge.
However some knowledge management programmes are failing to produce the great impact, many companies spend millions annually by investing on to knowledge programmes. Some companies have been successful while others have not .According to Pervais et al (2002) organisations that have not performed well in knowledge management have failed to close the four key gaps, technology gap, Implementation gap, the transfer gap and integration gap.
Technology gap, information technology has led companies to use intranets and internet which has enabled employees to work from different locations and time, however, despite the availability of technology companies have not been able to leverage knowledge. The issue of trust between individuals comes up, when virtual teams need to be set up when the individuals are still used to freely share knowledge to people they can interact and see face to face. To make technology work, the work habits will have to change as well, which in turn will influence a change on the organisational culture to make technology work for an organisation. Organisations need to leverage knowledge from the user perspective that is if knowledge is shared across individuals then the technology should implement a community focus that creates forums the community will share knowledge and organise, maintain and distribute knowledge by integrating to the work flow with the support of information technology. Example Microsoft uses technology well to enhance interaction between teams.
Implementation gap, understanding the nature of organisations knowledge and managing the knowledge is one thing being able to implement knowledge management may be difficult, the gap between the company activities and the knowledge it has an how the two are implemented in the organisations knowledge management strategy is a different issue all together. To be able to implement knowledge, putting things in to action, take risks and learn from mistakes, having knowledge is not enough, implementing action is what makes performance. Organisations fail to manage knowledge because of having large amounts of knowledge and action is not of the organisations interest. Example of Oil company chevron implements knowledge management through connection that is connection to explicit knowledge through intranet in a portal, connect individuals with specialised knowledge through an expertise locator, connect to communities in practice which help individuals to share knowledge and learning from others, and lastly connection of knowledge and people processes, products, and services. (Saunders, 2000) cited by Chaffey (2000 pg. 489)
The transfer gap, many companies invest a lot in creating knowledge and developing the best practice, ignorance of the source and the recipient may be a barrier to knowledge transfer this may be a downside a organisations when knowledge creating cost millions, lack of relationship between an organisation may influence knowledge management transfer gap. Pervais et al (2002) suggests that a reward system should change to encourage sharing transfer, leverage knowledge for the benefit of the business. Furthermore, integration gap, According to Pervais et al (2002) the failure to perform may be due to the fact that the knowledge has not been integrated properly in to the business processes
Psychology can be a barrier to organisation learning hence knowledge creation and management may be an issue. Shein 1993 cited by Dierkes et al (2001) suggest that ‘anxiety can be an obstacle to organisational learning, the psychological study of human perception have revealed many biases people search for information in ways that can confirm their initial beliefs’, Dierkes et al (2002 pg. 329). He further argues that people are ignorant about or misperceive their own organisation, Example managers work hard to create performance quality by different training and improvement measure by they don’t know the level of their organisational performance. This is barrier to managing knowledge since the knowledge itself is not identified.
In conclusion, to have a learning organisation that identify and manage knowledge is necessary. This will enable an organisation to create a competitive advantage. It is through understanding the competencies and working on the external environment to identify, share, store and use knowledge. Efficient tools should be kept in place to allow effective sharing, storage and most of all use of knowledge. Integration of technology in sharing and transferring knowledge is important with regard to virtual organisation. However there can be technological difficulties to create virtual communities that work efficiently in knowledge management but identifying and managing knowledge effectively may be a key to success for a business which may be evidenced by improved efficiency, growth of company sales and profitability. Increase market share, Develop communication linkages between workers. Retain of expertise. Knowledge has proved to create a competitive advantage through discusses examples and has largely been a key to success for businesses.
1. Chaffey, D (2007) E-Business and E-commerce management, 3rd ed. Pearson education limited. England
2. Dierkes, M et al (2001) Handbook of organisational learning and knowledge. Oxford university press. Oxford
3. Easterby-smith, M & Lyles. A. Marjorie (2003) Handbook of Organisational learning and knowledge management. Blackwell publishing Ltd. Australia
4. Nonaka, I and Takeuchi H. (1995). The knowledge creating company, Oxford university press. New York.
5. Pervais, A. et al (2002) Learning through knowledge management. Butterworth-Heinemann. Oxford
6. Sue, N. et al (2002) Managing knowledge work, Palgrave Macmillan. New York.
By Elizabeth Ernest