Chapter 12

Knowledge Management

1
Knowledge Management
 KM is a process that helps organizations
identify, select, organize, disseminate,
and transfer important information and
expertise that are part of the
organization’s memory.

 Intellectual capital is a synonym of KM

2
Real World Examples

 Ernst and Young implemented a state-of-the-art

knowledge management system.
 It was made available to 84,000 people in the
companies global organization to share best
practices and intelligence.
 This system permits the user to search among more
than 1,200 knowledge bases and external sources.
 In 2002 E&Y was ranked as one of the top 10 Most
Admired Knowledge Enterprises.

3
KM and IS
 KM is related to IS in three ways:
• IT makes up the infrastructure for KM systems
• KM systems make up the data infrastructure for many IS
applications
• KM is often referred to as an application of IS
 Recently a new position called “Coordinator for
International Intellectual Property Enforcement”
was created by the US Department of Commerce.

4
Knowledge Management
 Structuring of knowledge enables
 effective and efficient problem solving
 dynamic learning
 strategic planning
 decision making.

 Knowledge management initiatives focus on

 identifyingknowledge
 how it can be shared in a formal manner
 leveraging its value through reuse.

 Knowledge management can

 promote organizational learning
 help solve problems
5
Applying Knowledge Management

 KM is not a new concept, but one reinvigorated

by IT such as collaborative systems, the Internet
and intranets.
 KM is still an emerging discipline
 Ultimately, an organization’s only sustainable
competitive advantage lies in how its employees
apply knowledge to business problems
 KM is not a magic bullet and can not solve all
business problems.

6
Data, Information and Knowledge
Knowledge is very distinct from data and information and provides
a higher level of meaning about that data and information.
The ability to act is an integral part of being knowledgeable.

 Data are a collection of:

 Facts
 Measurements
 Statistics
 Information is organized or processed data that are:
 Timely
 Accurate
 Knowledge is information that is:
 Contextual
 Relevant
 Actionable.

Having knowledge implies that it can be exercised to

solve a problem, whereas having information does not.
7
Knowledge
 Knowledge is a mix of contextual information,
experiences, rules, and values.
 Richer, deeper, and more valuable.
 Consider knowing –
 What? - based upon assembling information and
eventually applying it.
 How? – applying knowledge leads to learning how to
do something.
 Why? – casual knowledge of why something occurs.

8
Taxonomy of Knowledge (Kim & Kwak)

Reasoning
Know-Why
Information Procedure

Know-What Application Know-How

Experience

9
Tacit vs. Explicit Knowledge

 Tacit knowledge is personal, context-

specific and hard to formalize and
communicate
 Explicit knowledge can be easily
collected, organized and transferred
through digital means.

10
Knowledge – Explicit knowledge
Explicit knowledge has been codified (documented) in a form that
can be distributed to others or transformed into a process or
strategy without requiring interpersonal interaction.
 Explicit knowledge (or leaky knowledge) deals with objective, rational,
and technical knowledge
 Data
 Policies
 Procedures
 Software
 Documents
 Products
 Strategies
 Goals
 Mission
 Core competencies

The more that knowledge is made explicit, the more

economically it can be transferred.
11
Knowledge – Tacit knowledge
Tacit knowledge is usually in the domain of subjective, cognitive,
and experiential learning; it is highly personal and difficult to
formalize. It is also referred to as embedded knowledge since it is
usually either localized within the brain of an individual or
embedded in the group interactions within a department or
business unit.
 Tacit knowledge is the cumulative store
 of the corporate experiences
 Mental maps
 Insights
 Acumen
 Expertise
 Know-how
 Trade secrets
 Skill sets
 Learning of an organization
 The organizational culture

Tacit knowledge is generally slow and costly to

transfer and can be plagued by ambiguity.
12
 Why Manage Knowledge
 Information and knowledge have become the
fields in which businesses compete.
 Several important factors include:
 Sharing Best Practice
 Globalization
 Rapid Change
 Downsizing
 Managing Information and Communication Demand
 Knowledge Embedded in Products
 Sustainable Competitive Advantage

13
 Reasons for Managing Knowledge
Sustainable Competitive
Advantage
•Shorter life-cycle of innovation
•Knowledge as an infinite resource
•Direct bottom-line returns Managing Overload
Sharing Best Practices •Inability to assimilate knowledge
•Avoid “ reinventing the wheel” •Data organization and storage
•Build on previous work is needed

Downsizing Globalization
•Loss of knowledge Why Manage •Decreased cycle times
•Portability of workers Knowledge? •Increased competitive pressures
•Lack of time and resources •Global access to knowledge
for knowledge acquisition •Adapting to local conditions

Embedded Knowledge Rapid Change

•Smart products •Avoid obsolescence
•Blurring of distinction between •Build on previous work
service and manufacturing firms •Streamline processes
•Value-added through intangibles •Sense and respond to change
14
Knowledge Management Processes
1. Knowledge generation:
efforts by an organization to acquire or create new
knowledge.

 Research and Development (develop knowledge

internally)
 Adaptation (use existing knowledge in new ways)
 Buy or Rent (obtaining knowledge from another
source)
 Shared Problem Solving (knowledge generation
through “fusion” of different approaches)
 Communities of Practice (obtain knowledge
through an informal network)

15
Knowledge Management Processes
2. Knowledge capture:
takes into account the media to be used in the
codification process.

The 3 main knowledge capture activities are:

 Scanning (gather “raw” information) – can be electronic or
human.
 Organizing (move it into an acceptable form) – must be easy
for all types of users to access.
 Designing knowledge maps (providing a guide for navigating
the knowledge base)

16
Knowledge Management Processes

3. Knowledge codification:
puts the knowledge in a form that makes it possible to
easily find and use

 Knowledge must be used or shared to be of value.

 It is difficult to measure knowledge in discreet units
(since it changes over time).
 Knowledge has a shelf life.

 Boundaries of knowledge are difficult to identify

because of context sensitivity; one person’s crucial
fact is another person’s irrelevant trivia
17
Knowledge Management Processes
4. Knowledge transfer
 Socialization mode refers to the conversion of tacit
knowledge to new tacit knowledge through social
interactions and shared experience.
 Combination mode refers to the creation of new
explicit knowledge by merging, categorizing,
reclassifying, and synthesizing existing explicit
knowledge
 Externalization refers to converting tacit knowledge
to new explicit knowledge
 Internalization refers to the creation of new tacit
knowledge from explicit knowledge.

18
Knowledge Management Initiatives
 Knowledge management can have
either an internal or external focus,
and has thus far been built around the
following four themes:
1. Developing knowledge repositories
2. Providing knowledge access
3. Improving the knowledge environment
4. Evaluating knowledge assets

19
Measuring the Value of KM
 Measuring the success of KM projects is
often done by measuring the specific benefits
of the project.
 Enhanced effectiveness
 Revenue generated from extant knowledge assets
 Increased value of extant products and services
 Increased organizational adaptability
 More efficient re-use of knowledge assets
 Reduced costs
 Reduced cycle time

20
Valuation of Knowledge Capital
 Strassmann: “Knowledge capital” is the
value a customer places on goods or
services over the cost of sales and cost
of capital
 It is the amount an investor is willing to
pay for intangible assets, in excess of
the cost of capital, for a risk-adjusted
interest in the future earnings of the
company
21
Caveats for Managing Knowledge

1. KM an emerging discipline
2. Competitive advantage increasingly depends on
knowledge assets that are hard to reproduce, so it is
sometimes in the best interests of the firm to keep
knowledge tacit, hidden, and nontransferable
3. Knowledge can create a shared context for thinking
about the future, not to know the future, but rather to
know what projections influence long-term strategy and
short-term tactics
4. The success of KM ultimately depends on a personal
and organizational willingness to learn

22