knowledge moment
Knowledge Management – Week 2
Presentation of the Knowledge Management Economy II
• The importance of Knowledge Management today – a recap on week 1
Knowledge management is important because it boosts the efficiency of an organization’s
decision-making ability.
In making sure that all employees have access to the overall expertise held within the
organization, a smarter workforce is built who are more able to make quick, informed decisions
that benefit the company.
Innovation is easier to foster within the organization, customers benefit from increased access to
best practices and employee turnover is reduced.
The importance of knowledge management is growing every year. As the marketplace becomes
ever more competitive, one of the best ways to stay ahead of the curve is to build your
organization in an intelligent, flexible manner. You want to be able to spot issues from a
distance and respond quickly to new information and innovations.
Companies begin the knowledge management process for many different reasons.
1. A merger or acquisition could spur the need for codifying knowledge and
encouraging teams to share their expertise.
2. The imminent retirement of key employees could demonstrate the need to
capture their knowledge.
3. An upcoming recruitment drive shows the wisdom in using knowledge
management to assist in the training of new employees.
Benefits of knowledge management
1. More efficient workplace
2. Faster, better decision making
3. Increased collaboration
4. Building organizational knowledge
5. Onboarding and training process is optimized
6. Increased employee happiness and retention, due to the valuing of knowledge,
training, and innovation
Knowledge management is an important tool in any company that wants to increase their
bottom line and market share.
• Trends and implications in the management of knowledge
Shifting emphasis from knowledge to influence
Knowledge management practice now includes the creation of internal communities to foster
face-to-face and e-mail interaction among staff. But, current studies indicate that these
communities tend to be used for improving specific business processes (how work is being
done), rather than leading to innovation (new knowledge) or change outside of the enterprise.1
Knowledge mobilization addresses how external knowledge (outside of the organization) is
sought out and combined with internal knowledge to create new knowledge that meets the needs
of target users/clients.2 Knowledge mobilization emphasizes purpose (meeting the needs of
clients) and looks to how one brings in the knowledge of others. It recognizes that organizing
one’s own intellectual capital does not necessarily lead to innovation or change; implicit in the
concept is the need for working relationships with others.
New focus on social capital and social networks
Social capital is becoming recognized as being as important as intellectual capital. Social capital
is built through interaction and leads to improved knowledge-sharing. Organizations are now
looking at the tools and training for staff to map their existing social networks and to understand
how to build “social capital” with their colleagues, clients and audiences. Social network
analysis is the mapping and measuring of how knowledge flows through these relationships. It
is a new view of the old adage that “it’s not what you know, it’s who you know.” As groups
begin to explore how to bridge research, policy and action, it will become critical to understand
how information flows through social networks and how to build social capital with decision-
makers to create those channels for knowledge.
• Knowing what knowledge to harness: business strategy in knowledge management
3 case studies
1. Anderson Consulting and Ernst & Young
Some large consulting companies, such as Andersen Consulting and Ernst & Young, have pursued
a codification strategy. Over the last five years, they have developed elaborate ways to codify,
store, and reuse knowledge. Knowledge is codified using a “people-to-documents” approach: it is
extracted from the person who developed it, made independent of that person, and reused for
various purposes.
This approach allows many people to search for and retrieve codified knowledge without having to
contact the person who originally developed it. That opens up the possibility of achieving scale in
knowledge reuse and thus of growing the business.
2. Bain, Boston Consulting Group and McKinsey
By contrast, strategy consulting firms such as Bain, Boston Consulting Group, and McKinsey
emphasize a personalization strategy. They focus on dialogue between individuals, not knowledge
objects in a database. Knowledge that has not been codified—and probably couldn’t be—is
transferred in brainstorming sessions and one-on-one conversations. Consultants collectively arrive
at deeper insights by going back and forth on problems they need to solve.
3. Dell
Dell’s competitive strategy is to assemble inexpensive PCs that are made to order and sell them
directly to customers. A sophisticated knowledge management system lies behind that business
model. Dell has invested heavily in an electronic repository that contains a list of available
components. The system drives the operation: customers choose configurations from a menu,
suppliers provide components based on their orders, and manufacturing retrieves orders from the
system and schedules assembly. Dell does not deliver highly customized orders, and it raises its
prices considerably for orders with special components.
Dell has to invest a good deal up front to determine and specify configurations, but its investment
pays off because of the knowledge’s reuse. In 1997, Dell shipped 11 million PCs. Those systems
were put together from 40,000 possible configurations (competitors typically offer only about 100
configurations), which means that each configuration was used on average 275 times. That level
of reuse allows Dell to lower its costs and charge less than the competition. Propelled in part by its
knowledge reuse model, Dell’s net income for 1997 was $944 million on sales of $12.3 billion;
the company’s revenues have grown 83% annually over the last four years.
• Assessing or measuring knowledge and its value, impact and importance
To remain competitive, an organization's core processes must produce a bottom-line
profitability that will attract investors, maintain the organization's market capitalization, and
enhance corporate value production while ensuring that customers get the value they want in the
products and services they receive. Managers must constantly analyze and design processes that
meet these requirements. In organizations whose growth and viability increasingly depend on
rigorous deployment of knowledge assets, management needs measures that quantify the
performance of core process knowledge assets and tie them directly to the bottom line.
Currently, management design options are based on heuristics, "rules-of-thumb" that provide
semi-empirical support for their creative strategies. However, these heuristics cannot produce
codifiable insights as to whether actual or proposed changes to core processes have had or will
have the desired impact on the firm's bottom line. The use of creative knowledge represents a
special case for knowledge measurement. Creative knowledge is by definition not codifiable.
Trying to manage and measure this type of knowledge is problematic. For example, the value of
the creative knowledge used in the research and development area of a company can only be
determined after the outputs of this knowledge have been translated into core processes that
produce final products. Knowledge metrics become useful for managers of creative knowledge
because, using knowledge metrics, they can track the speed with which this kind of knowledge
results in changes in core processes and the amount of new or changed "codifiable" knowledge
in core processes. In this manner, knowledge metrics also will reveal the embedding of such
creative knowledge in the company's other core processes. This provides a means to identify,
quantify, and help manage the transformation of knowledge into value.
• Engineers and Entrepreneurs in knowledge management
Knowledge entrepreneurship describes the ability to recognize or create an opportunity and
take action aimed at realizing an innovative knowledge practice or product.
Knowledge entrepreneurship is different from 'traditional' economic entrepreneurship in that it
does not aim at the realization of monetary profit, but focuses on opportunities with the goal to
improve the production (research) and throughout of knowledge (as in personal
transformation[1]), rather than to maximize monetary profit. It has been argued that knowledge
entrepreneurship is the most suitable form of entrepreneurship for not-for-profit educators,
researchers and educational institutions.