Knowledge Management: The Essence of the Competitive Edge

by Moya K. Mason

Currently, no universally accepted definition of knowledge management exists, but there are some basic concepts to be explored, and considered. Simply put, knowledge management undertakes to identify what is in essence a human asset buried in the minds and hard drives of individuals working in an organization. Knowledge management also requires a system that will allow the creation of new knowledge, a dissemination system that will reach every employee, with the ability to package knowledge as value-added in products, services and systems. However, knowledge management goes far beyond the storage and manipulation of data, or even of information. There is a need for a more structured approach to transferring knowledge to decision-makers before it is needed and enabling access to information in a timely fashion.

To remain competitive in the future, organizations will need to abandon their ideas of information hoarding and embrace knowledge sharing. Competitive success will be based less on how strategically physical and financial resources are allocated, and more on how strategically intellectual capital is managed -- from capturing, coding and disseminating information, to acquiring new competencies through training and development, and to re-engineering business processes. In view of these trends, and recognizing that knowledge has great potential value and because there is a corresponding failure to fully exploit it, some corporations have embarked on comprehensive knowledge management programs.

Above all, companies, governments, and large corporations often do not know what they know. Knowledge management attempts to prevent problems such as lost knowledge or lost income by establishing human and technological networks capable of harnessing a company's collective expertise and experience. The move from an industrially-based economy to a knowledge or information-based one demands a top-notch knowledge management system to secure a competitive edge and a capacity for learning. An organization's ability to quickly tap into wisdom gives it a competitive edge in the marketplace. As a result, knowledge is displacing capital, natural resources, and labor as the basic economic resource. Governments know this all too well.

If an organization wants to begin managing knowledge as a resource, what should it should it take into consideration? The organization needs to design and install procedures and processes to create, protect, and use known knowledge, while articulating the purpose and nature of managing knowledge as a resource and embodying it in other initiatives and programs. In addition, anyone considering a foray into the knowledge management arena needs to plan and build environments that will allow employees to feel safe to discover and release their own tacit knowledge. Knowledge management systems administer the skills and competencies that lie within an organization, and allow them to blossom by freeing people to be the best that they can be.

Through allowing deep personal reflection about one's own sense of purpose and deepest aspirations, and through cultivating individual and collective responsibility for the future, goes a long way to create an organization that has the creation of knowledge as an ongoing goal. When people bring their 'grand will' instead of their 'unfree will' to authentic inquiry into the questions of where are we going and what are we here for it can breathe life into an organization. It is the key to the future of strategy in an independent world.

Two Kinds of Knowledge

There are two kinds of knowledge: tacit, which is hard to articulate, versus explicit knowledge, which can be expressed in words and numbers and can be easily communicated and shared in hard form, as scientific formulas, codified procedures, or universal principles. Tacit or unarticulated knowledge is more personal, experiential, context specific, and hard to formalize. This kind of knowledge is difficult to communicate or share with others, and is generally inside the heads of individuals and teams. Since knowledge may be an organization's only sustainable competitive advantage, it is very important to capture tacit knowledge. How can we transfer it?

By putting mechanisms of socialization, mentorships, apprenticeships, and opportunities for face-to-face communication in place. Intranets and email can help it flow through an organization, but tacit knowledge often moves laterally through informal channels of communication, through communities of practice. For example, those groups that hang around the coffee machine are exchanging knowledge, just as are the smokers who huddle near the entrance to the building at break time. The information that is passed in this way is very important because it is useful for helping people to get their work done more effectively, in part, because nobody is willing to question or think about the process very much. Communities of practice must have their place in a comprehensive knowledge management effort.

Knowledge is intangible, dynamic, and difficult to measure, but without it no organization can survive; flows of knowledge are an organization's capacity to learn. They are all you really have.

The Knowledge Economy

Currently, governments around the world, multinational corporations, and a multitude of companies are interested, even concerned about the concept of knowledge management. The shift from a local and national economy to a transnational one is changing the way all organizations are doing business. Organizations and governments can no longer rely purely upon national approaches to maintain their profitable growth. More and more, companies and industries of all types must globalize in order to maximize their profits.

Indeed, even individual Canadian provinces have an interest in understanding the flow of knowledge within their confines, trying to become more aware of the structures that exist within their hierarchies and in the folds of their bureaucracies. There has been a shift from bureaucracies to networks because traditional hierarchical designs that served the industrial era are no longer flexible enough to harness an organization's full intellectual capability. For example, Prince Edward Island has agreed to become the first world test site for a new Knowledge Assessment Methodology (KAM) developed by the U.S. National Research Council in Washington, and coordinated by the Institute of Island Studies. What the tool does is assess Prince Edward Island's ability to compete in a knowledge economy. The new source of wealth is knowledge, and not labor, land, or financial capital. A knowledge economy requires real change and has a built-in necessity for less information and more knowledge. Thomas Stewart, Board of Editors of Fortune magazine has the following to say:

1991 was the crossover year when capital spending by U.S. companies was greater on telecommunications, copying and computer equipment than on industrial, construction, mining, and farming equipment. We tend to think of the mid-1990s as the transition point, but we actually made this shift, from a macroeconomic perspective, around 1991.

The knowledge economy differs from the traditional economy in several key respects: the economics is not of scarcity, but rather of abundance, and unlike most resources that deplete when used, information and knowledge can be shared, and actually grow through application. In addition, the effect of location is diminished. By using appropriate technology and methods, virtual marketplaces and virtual organizations can be created offering benefits such as speed and agility, and an a-round-the-clock global operation.

Do You Really Need KM?

Only if your department wants to stop constantly reengineering and downsizing: talented people are assets to be developed for a global 21st century. Partly as a reaction to downsizing, some organizations are now trying to use technology to capture the knowledge residing in the minds of their employees so it can be easily shared across the enterprise. No longer should companies have to worry that employees will walk out the door with valuable knowledge that it no longer has access to. Although many individuals may come and go, their learning is embedded for future use. Knowledge when locked into systems or processes has higher inherent value than when it can 'walk out of the door' in people's heads. Leveraging organizational knowledge is emerging as the solution to an increasingly fragmented and globally dispersed workplace. For many of these companies, knowledge management has become the next silver bullet. In effect, knowledge management is the successor to the reengineering and downsizing efforts that marked the last decade.

If you are interested in the knowledge grid, you probably need a knowledge management system. Knowledge cultures are those in which formal attention is paid to what some academics have called the "knowledge grid." It has four categories: "what we know we know; what we know we don't know; what we don't know we know; and what we don't know we don't know." If you understand that reuse of knowledge saves work, reduces communication costs, and allows a company to take on more projects, then knowledge management is for your organization.

What is needed is a similar mindset about the collection of intellectual assets: it belongs to everyone employed in a particular place, and it has to be shared. This kind of policy saves money right across the board and allows something just as valuable as money to be saved: TIME. Saving time means more work can be generated because you do not have to reinvent the wheel every time a new project is taken on. Competitive success will be based on how strategically intellectual capital is managed. Increasingly, senior executives are recognizing that knowledge and learning represent the preeminent source of sustainable advantage in a fast-moving, highly competitive world. They know it is no longer enough to leave critical knowledge sitting passively in the minds of individual employees in a period of radical change.

Capturing the knowledge residing in the minds of employees so that it can be easily shared across the enterprise. Workforce mobility, falling educational standards, and the rapid rate of business change mean that individuals can no longer be relied upon to provide consistent, comprehensive insight. Instead, the knowledge trapped within the employee base must be leveraged to the organizational level, where it can be accessed, synthesized, augmented, and deployed for the benefit of all. Organizations and individuals must learn rapidly and uniformly across different functions and levels of the organization. The best reason for an organization to develop a knowledge management system is to gain a competitive advantage in the marketplace: by turning intellectual assets into value through innovation. The real differentiator for those leading companies is knowing how to use innovation to create value and ongoing growth.

Does a KM System Need a Chief Knowledge Officer?

Only if your organization is serious about implementing a knowledge management program. Economic realities and and competitive edge factors play a large role. If your organization or department is serious about implementing a knowledge management program, then appointing a CKO is one way of initiating, and coordinating such a strategy. In this post-industrial knowledge economy, no one can forget that knowledge is the most important resource; forgetting could be fatal. Knowledge, its creation, uses, and innovation is the only real competitive edge when governments are moving from industrial-based economies to knowledge-intensive ones. The best scenario would be that, like total quality management, knowledge management would become embedded in organizations, with knowledge a source of value. Of course, in the long-term the goal will see all members of the organization owning and driving the knowledge management system, and over time, seeing the need for CKOs decline.

However, today's CKOs are discovering that knowledge management comprises a large agenda and that making substantial progress takes time. In the beginning, a leader or coordinator is imperative for initiating, keeping up the momentum, deciding on software and systems (with the IT staff), distilling, codifying, and helping others learn to share their unique or tacit knowledge so that an organization can raise its knowledge capabilities. Therefore, appointing a CKO is likely the best place to start when embarking on a knowledge management program, and even if an appointee does not have the title of Chief Knowledge Officer. As long as your CKO has the requisite profile, performs activities that propel a knowledge management project forward, has access to the proper resources, and possesses success factors that work.

What's the Strategy?

There are two very different knowledge management strategies. In some companies, the strategy centers on computer hardware, and knowledge is carefully codified and stored in databases, so that it can be easily accessed by anyone in the organization. This is called the codification strategy. In other organizations, knowledge is closely tied to the person who developed it and is shared mainly through direct person-to-person contacts, as in gatekeepers passing information to mentees.

Emphasizing the wrong strategy or trying to pursue both at the same time can quickly undermine a business. Companies, such as Anderson Consulting, that follow a codification strategy rely on employees reusing information it has already created. By contrast, the personalization strategy relies on harnessing the tacit knowledge of experts in the organization. Companies that use knowledge effectively pursue one strategy predominantly and use the second strategy to support the first. Think of this as the 80-20 split: 80% of their knowledge sharing follows one strategy, 20% the other. It is tempting to think that the two knowledge management models can coexist in different business units within one corporation. Indeed, they can coexist, but only in corporations where business units operate like stand-alone companies. In a company like General Motors, where the car divisions have little to do with the credit and finance divisions, different models can in fact work in each business unit. Companies with tightly integrated business units, however, should either focus on only one of the strategies or spin off units that do not fit the mold. The issue is sometimes complicated by two additional concerns: the existence of multiple business units and the commoditization of knowledge over time.

Knowledge Management Types

1. Competency management is one of the fastest growing areas of knowledge management. It focuses on displaying information in sophisticated ways to understand labor trends and compensation. Telecommunications giant L.M. Ericsson in Sweden has already embraced the idea of tracking skills and competencies throughout its organization. The company has used knowledge management to post consistent performance gains throughout the 1990s.

2. Another type of KM that is attracting attention is knowledge sharing. A growing number of firms use Intranets and online forums to spread knowledge. Glance into the inner workings of Buckman Laboratories and you can get an idea of how knowledge can flow in every direction and how each person can become a willing participant in the program.

3. Competitive knowledge management is yet another area of KM that blends competency management and knowledge sharing. Since Arthur Andersen's Atlanta-based business consulting division established an Intranet two years ago, consultants at the firm post knowledge workplans, methodologies, research, proposals and resumes, so that others in the organization can tap into high-level expertise on an as-needed basis. It's called: not reinventing the wheel logic.

Knowledge Management Enablers

Organizational requirements for leveraging intellectual capital require that attention be paid to what have been recognized as Knowledge Enablers: structures and attributes that must be in place for a successful knowledge management program. Knowledge management programs need enabling factors if there is to be any real success. The following knowledge management enablers should be considered:

Learning culture leadership is absolutely critical to liberate the creativity of teams, and yet not have chaos. In a sustainable knowledge managed learning organization, leadership is often expressed as the self-confidence to navigate the unknown waters of the future.

Access to knowledge and making sure it is available provides value. The challenges are to facilitate access to the right content at the right time and place, be content rich and navigation lean, manage regulations and copyrights, and provide flexibility and ease of access.

Technological infrastructure that can link people enterprise-wide, support collaboration, and allow people in the organization to access all global resources. Information technology is most effective when it converts the tacit knowledge of an individual into explicit knowledge that is then accessible by all. Companies must think through their technological systems to ensure they have the capabilities needed for the 21st century because technology such as Intranets and advanced collaborative software have made knowledge management possible. Technology provides the tools to help the employees and the organization to develop and apply its management capital. Arthur Andersen's Michael Stone explains it this way:

Technology allows people to collect, find, filter and distribute information far more rapidly than ever before. It is now possible to move large volumes of information quickly, and institutionalize what has always been an informal and haphazard process.

A learning culture embeds a learning attitude and places value on competency development. Historically, more training expenditures have gone to developing cognitive skills than to developing motivated creativity. Those days are gone now. Currently, the goal is to see intelligent people using innovation to create knowledge out of information. To do so, there needs to be a corresponding culture that values organizational behaviors and supports an environment of trust and collaboration. Changing the culture is imperative. To create a climate in which employees volunteer their creativity and expertise, managers need to look beyond the traditional tools at their disposal. They need to find ways to build trust and develop fair process. That means getting the gatekeepers to facilitate the flow of information rather than hoard it, and to offer rewards and incentives. Buckman Laboratories' Koskiniemi reports:

Successful knowledge sharing is ninety percent cultural, five percent tools and five percent magic. All the technology and tools in the world won't make you a knowledge-based organization if you do not establish a culture that believes in sharing. To encourage knowledge sharing, some companies are creating central knowledge repositories.

Workplace culture is paramount because although management may pay lip service to the value of cooperation and its ability to facilitate organizational knowledge, sometimes that is not what they are thinking. There is an underlying belief that performance is really driven by "corporate stars" and that internal competition must be in place to attract these superstars since only under-performers can be found in cooperative, team-oriented workplaces.

Rewards and incentives signal what behaviors and outcomes are most valued by management. It should not be surprising that knowledge accumulation and sharing are not valued. Management sends strong signals through its compensation policies: different roles are perceived of value according to their allocated compensation. So be careful about sending mixed signals, and keep in mind that culture is more than just compensation, and it is responsive to influences other than paychecks. Management sends signals about what is important through its recruiting priorities, promotions, and, possibly more than anything, through its own behavior. These deeply embedded cultural assumptions are significant.

Knowledge management programs need all enabling factors, and not just one or two, if there is to be any real success. Knowledge tools, controls, and new organizational structures will go far to create a new culture in which informed decision making is valued, but explicit efforts to cultivate that culture are still needed. Knowledge and skills can never substitute for the motivation only an effective organizational culture can provide. And that is why it is important to have the knowledge process facilitated by a steady development of a knowledge culture, based on incentives, and strong management leadership that values, shares, and uses knowledge.

Expect Organizational Changes

Not surprisingly, knowledge management blurs the line between departments and operating divisions. Managers traditionally have kept a tight leash on their own department's data, and they have frequently interpreted it in narrow, rigid ways. Knowledge management collapses these boundaries, and allows people to use information across applications. An interesting representation of what is going on in business comes in the form of a quote from Paul Saffo at the Institute for the Future:

It is hardly news that the corporation as we know it is headed for the scrap heap of business history. Internal corporate structures are already mutating beyond recognition. Corporate boundaries are dissolving into commercial irrelevance as businesses explore entirely new modes of association and interaction.

Dissolution of boundaries is an important goal because a knowledge management system cannot work through hierarchies. This means that while knowledge management does not have to be driven from the top, it does very much have to originate from the top. In order to justify financial investments in technology, CKOs must understand organization structure, motivation of people, and cross-boundary processes. Since it is a bottom-up and peer-to-peer tool that seeds an organization with intellectual capital, it is foreign ground for most organizations.

And do not isolate knowledge management. Some CEOs have put knowledge management at the top of their agendas. Others have not given it the same attention as they have given cost cutting, restructuring, or international expansion. In companies where that is the case, knowledge management takes place - if at all - in functional departments such as HR or IT. But companies that isolate knowledge management risk losing its benefits, which are highest when it is coordinated with HR, IT, and competitive strategy. While corporate directives to share information and create cross-functional teams can improve knowledge management efforts, real innovation and self-directed learning happen only at the individual and team level. Individual and team learning processes must become the true driver of organizational learning.

Why KM? What's the Big Deal?

There are so many reasons for instituting a knowledge management-intensive learning organization. Here are just a few:

  1. There is an increase in employee satisfaction due to greater personal development and empowerment.
  2. It helps you keep your employees longer and thereby, reduces the loss of intellectual capital from people leaving the company.
  3. Saves money by not reinventing the wheel for each new project.
  4. Reduces costs by decreasing and achieving economies of scale in obtaining information from external providers.
  5. Increases productivity by making knowledge available more quickly and easily.
  6. Provides workers with a more democratic place to work by allowing everyone access to knowledge.
  7. You can learn faster with KM.
  8. Learning faster means staying competitive.
  9. KM software and technological infrastructures allow for global access to an organization's knowledge, at a keystroke.
  10. An organization does not have to reinvent the wheel each time a new project comes along, and that saves time.

Knowledge Management and Future Planning

Scenario thinking can help us to see the blind spots, and help to create the future we want. One of the major problems with governments, corporations, companies, organizations, and private citizens is that they have no concept of the future and never think about its ramifications. Future studies must be figured into an organization's overall knowledge management system because to sustain a commitment over the course of months and years, people need to have awareness of the whole and understand the direction in which an organization is going. The challenge of organizational strategy and purpose is to revitalize and rethink the organization's business focus, and figure out where it is heading. To expect ongoing knowledge creation, it must have some relevance to the future you are creating. Therefore, a future element must be ever-present. Knowledge Management must somehow be connected to future studies for at least one significant reason and that is because to have a knowledge management system, it presupposes the ongoing creation of new knowledge.

Where are we going? What are we here for? People need awareness of the whole, and are truly interested in what direction the organization is taking. Gone are the days when employees could be expected to stay in one place of work forever. As well, levels of education have surely risen and good employees no longer have to stay where they find the organizational and leadership structure lacking. Leveraging organizational knowledge is emerging as the solution to an increasingly fragmented and globally-dispersed workplace. Organizations that do provide a goal to reach in the future can provide great incentive for a KM initiative. Effective leveraging lies within an organization's capacity for rethinking and recreating. One thing for certain is that when questions, big questions (questions that matter to the future of an organization) are asked and explored, it can be a very powerful force because it is essential for co-evolving the futures we want, rather than the futures we get.

Sustainability of a Knowledge Management Endeavor

To achieve sustainability, there must be a focus on learning, and learning how to harness the learning capabilities that lead to innovation. There are three fundamental processes that sustain profound changes such as the introduction of a comprehensive knowledge management system, and they are to improve business results; to enhance personal results; and to develop networks of committed people who like where they work and what they are doing.

For a knowledge management effort to work, it must be understood that no progress is sustainable unless innovators learn to understand why the system is pushing back, and how their own attitudes and perceptions contribute to the "pushback." Until they see this, there will be no development of systematic strategies for sustaining profound change. (Once there is intellectual understanding there can be emotional engagement, leading to sustained action, all in a positive feedback loop.)

The enhancement of personal results is often the first source of reinforcing energy for sustaining deep change. And, it is inherently satisfying to work in a network of committed people. Given the choice, very few people would not want to become part of a network where there is excitement, perseverance, innovation, experimentation, and commitment. As Dr. W. Edwards Deming used to say, "People seek joy in work." In this day of bottom line focus, when employees often assume that personal needs are subservient to the organization's needs, it is truly liberating to discover that the two can be aligned rather than in opposition. For those who have gone from a run-of-the-mill organization to one, which literally supports learning and knowledge for everyone, feel transformed. They learn to understand just how much they are worth, and what they can give to the workplace. They become intellectually-stimulated, energized, and emotionally-engaged.

For significant change to lead to sustainability, hierarchical control must be put aside. The emergence and development of informal networks must be supported so that people can share their tacit knowledge and help one another. Communities of practice can be geared so that people continually learn to help each other. The diffusion of innovative practices needs informal networks through which new ideas can spread in and across organizations. Such informal networks are almost always superior to hierarchical channels for spreading new innovations because these informal networks already exist; experimenting with new ideas requires help and time to think in a safe context; and because there is a strong element of credibility with people whom we know. Without active internal communities of practice, an organization cannot expect profound and sustained change.

Managers need to surrender control in order for learning capabilities to be enhanced. This will lead to greater business results by eliminating wasteful practices, and bring about the development of new business practices that lead to better results. And mental models need to be examined. The limits that block organizational learning initiatives have a great deal to do with the mental models embedded in the culture of an organization. For example: hoarders, hierarchies, and stars are the order of the day! For organizations to attain sustainability for their KM efforts, they must be prepared to develop new mental models for thinking about their workplaces and new ways to reach across internal and external boundaries.

Mental Models must be managed because they do prevent new and powerful insights and organizational practices from becoming implemented. The process begins with self- reflection, unearthing deeply held belief structures and generalizations, and understanding how they dramatically influence the way we operate in our own lives. Until there is realization and a focus on openness, real change can never be implemented. This is hard work, particularly because the pull of sustainable development as an aspiration may bring diverse groups of people together in collaborations that require breaking down old boundaries and hierarchies. However, once employees are forced to let go of the existing conventional wisdom of the organization, they can be innovative and creative, designing new approaches and learning to learn faster.

Commentary

Much of the confusion and disappointment concerning knowledge management stems from confusion between information and knowledge since not even KM experts link knowledge to action. There is no clarity. People are investing in systems to capture, organize, and disseminate information, and then call it knowledge. But knowledge, by definition, cannot be converted into an object and given from one person to another. Knowledge only diffuses when there are learning processes whereby human beings develop new capacities for effective action, with internal learning communities in place that offer psychological safety and trust. When there is negativity and unrealistic expectations in the workplace, and arrogant people who believe they know everything, knowledge cannot be diffused. Lack of communication within an organization made evident by continually reinventing the same wheel is one sure sign that the knowledge base is not being utilized and built upon.

Much of the interest in knowledge management comes from the problem of diffusing innovative practices within an organization. Improved diffusion of knowledge will not happen simply because the CEO says it should, or because management buys new information technology hardware. Information technology, while critical for enabling the spread of information, cannot capture and store knowledge. Only people can do that. Effective organizational learning infrastructure will need to augment the natural workings of the informal communities of practice that already exist. One of the key challenges of the knowledge-based economy will to foster innovation. The only way to accomplish that goal is to build an infrastructure that is not dependent upon traditional hierarchies because they do not encourage the dissemination of knowledge. And remember, if you want to build an organization for the 21st Century, hire for diversity, curiosity and allow your employees to grow beyond their wildest dreams. Let them explore their own limits, collaborate with each other, and most importantly, give them enough time to reflect on what they know so they can give back to the organization. You may be surprised to find out just how much expertise your company already has in place. How do you know you have a good system in place? When information is widely disseminated throughout the organization. Wherever it is needed, it is accessible, and it is accessible at a fast rate of speed.

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