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Knowledge Management: Leveraging Knowledge for Competitive Advantage

2024/5/13 (Update:2024/5/13)

Knowledge Management: Leveraging Knowledge for Competitive Advantage

1. The Fundamentals of Knowledge Management

Knowledge management involves collecting, sharing, and using internal knowledge to foster innovation, improve efficiency and to boost a company’s competitive edge.

The foundations of knowledge management were laid in the 1970s by business gurus Peter Drucker and Paul Strassman, but it was first used on a company-wide level in the 1980s when Japanese companies shared knowledge and experience in quality management and production processes across their organizations in order to promote global expansion.

In the 1990s, advancements in information technology facilitated more efficient knowledge collection and sharing. In 1995 Ikukiro Nonaka and Hirotaka Takeuchi put forward their Knowledge Spiral Model, demonstrating how knowledge is generated, shared, and reproduced in a company.

They named these processes “SECI”, and the SECI Model has become a key concept in the study of Knowledge Management. They argued that new knowledge is key to responding quickly to shifting trends in demand, the development of new and innovative products and business practices, and for sustaining a competitive edge.

By the 2000s, when globalization had intensified the competition faced by companies, the need for knowledge sharing across diverse regions and cultures became even more vital.

Today, advancements in big data, AI, and machine learning are enabling ever more effective knowledge extraction and automation, highlighting the importance of proper knowledge management for building competitive advantage.

2. Types of Knowledge Management

Knowledge management can be categorized into four approaches: Best Practice Sharing, Expert Knowledge Networks, Intellectual Capital Aggregation, and Customer Knowledge Sharing.

The success of knowledge management hinges on selecting the appropriate approach or approaches based on an organization’s needs and culture. It is crucial to consider the organization’s characteristics and goals when choosing which to implement and execute.

  1. Best Practice Sharing
    Best practice sharing involves collecting and sharing successful processes and optimal methods within an organization.

    This allows the entire organization to acquire know-how, avoid repeating mistakes, and to establish efficient processes.

  2. Expert Knowledge Networks
    This approach uses expertise in an organization to create a network of knowledge for problem-solving and decision-making. It is especially useful in technical or specialized fields and in promoting employee skill development and knowledge.
  3. Intellectual Capital Aggregation
    Intellectual Capital Aggregation is used when an organization’s knowledge and know-how is its core USP when doing business with its customers. It supports the organization’s sustained competitiveness through effective knowledge storage, organization, and accessibility in order to meet its customers’ needs.
  4. Customer Knowledge Sharing
    This approach involves collecting and sharing customer feedback and information within the organization to improve products and services, enhancing customer satisfaction and market adaptability.

3. The SECI Model and Knowledge Conversion

As mentioned earlier, one central concept in knowledge management is the SECI Model. The four SECI processes are:

  • Socialization
    In this process, individuals share knowledge among themselves. Tacit knowledge (personal experiences and skills) is shared with others through oral communication, shadowing and OJT, fostering shared experiences and empathy within an organization.
  • Externalization
    This process involves converting tacit knowledge, the knowledge in someone’s head, into explicit knowledge, knowledge that is documented and can be shared.
  • Combination
    This is the process of combining explicit knowledge to generate new information, knowledge and ideas. By utilizing organizational databases and information systems, knowledge from different sources can be linked to gain new insights.
  • Internalization
    This is the process of internalizing explicit knowledge so that it becomes an individual’s tacit knowledge. Internalization can occur through personal work experience performing a particular task or process.

4. Elements for Implementing Knowledge Management

In order to implement Knowledge Management effectively it is crucial that organizations do not rely on individual members of staff to gain, retain and share critical knowledge. To achieve this, organizations need to have a number of elements in place.

  • Management Commitment:
    Strong and consistent support for Knowledge Management senior executives and managers is very important for allowing investment in time, resources and tools. Management commitment also helps to create a knowledge centric corporate culture.
  • Cultivating Organizational Culture:
    Knowledge Management needs to become part of an organization’s culture. As such, it is important to have clear values, open channels, and dynamic processes to promote sharing and collaboration. As well as knowledge about success, organizations should value knowledge about failure, since this will help them predict and avoid future issues. Offering continuous training helps to instill and sustain these values.
  • Information Visualization:
    Implementing systems that organize and visualize information in different ways helps to improve accessibility and learning.
  • Tool Implementation:
    Knowledge management tools such as document management systems, collaboration tools, and databases help to store, organize and retrieve knowledge quickly, safely and efficiently.
    Popular tools include Flouu, NotePM, and Google Workspace which are used to facilitate information organization, communication enhancement, and promote widespread knowledge access within organizations.

    Their implementation improves information visualization and decision-making speed, which of course enhances competitiveness and maximizes knowledge utilization.

5. The Future of Knowledge Management

In recent years knowledge management has evolved thanks to increased automation and the introduction of AI. AI algorithms are used to analyze and categorize the collected data, identifying key insights, trends, and best practices.

This has many positive implications. Imagine a large multinational company with operations dotted around the world. Traditionally, this company depended on people to evaluate, process, organize and distribute knowledge and information from different departments and locations. Despite the best intentions and hard work of the people involved, weaknesses in the knowledge network inevitably occurred. With a largely automated centralized system employing AI technology, consistency in management and distribution can be achieved.

In addition, AI can proactively recommend relevant information to employees based on their roles, projects, and areas of interest, meaning employees can access the knowledge they need, collaborate, and get insights from experts in their organization from anywhere in the world. Using this, they can make informed decisions and solve problems more quickly.

Many companies undervalue the benefits of knowledge. This is clearly a risk and leaves organizations vulnerable to competition from more forward thinking and knowledge savvy competitors.

If you feel your company could manage its knowledge better, why not talk to one of our consultants. Contact us to set up an obligation free meeting.