Strategic Importance of Knowledge Management

Abstract

Today the world has more and more of free flow of information leading to transfer of knowledge from a person or an organization to others. Whereas this invariably leads to faster development, it also impacts the competitive advantage held by the innovators of processes or technology. It has therefore become strategically important for one and all in business to understand the knowledge, processes and controls to effectively manage the

system of sharing and transferring the information in the most beneficial fashion.

This paper dwells upon definition, types, scope, technology and modeling of knowledge and Knowledge Management while examining its strategic importance for retaining the competitive advantage by the organizations.

What is knowledge?

Plato first defined the concept of knowledge as ''justified true belief'' in his Meno, Phaedo and Theaetetus. Although not very accurate in terms of logic, this definition has been predominant in Western philosophy (Nonaka and Takeuchi, 1995). Davenport et al. (1998) define knowledge as ``information combined with experience, context, interpretation and reflection''.

The terms ''knowledge'' and ''information'' are often used inter-changeably in the literature and praxis but a distinction is helpful. The chain of knowledge flow is data-information-knowledge. Information is data to which meaning has been added by being categorized, classified, corrected, and condensed. Information and experience, key components of definitions of knowledge, are put into categories through the process of labeling with abstract symbols. This allows the process of synthesis to occur more efficiently than when dealing with masses of individual bits of information. Information coded into symbols to make it "knowledge" may be stored both inside and outside the individuals. Thus, knowledge may be stored within a person in his mind or outside the person in books, manuscripts, pictures, and audio and videotapes or discs. However, while only the individual himself may retrieve knowledge stored within his mind, knowledge stored outside can be retrieved by anybody familiar with the storage systems.

In organizations, knowledge is often embedded not only in documents and presentations but also in "organizational routines, processes, practices, and norms," and through person-to-person contacts. Even the simplest information about the environment requires the use of rules for interpreting it. This means that for information to become knowledge, people make interpretations, apply rules, and create knowledge. "People with different values 'see' different things in the same situation" and organize information so as to create different kinds of knowledge (Davenport and Prusak, 1998).

Types of Knowledge

Systemic knowledge

Systemic knowledge is a sort of knowing how we know. Systemic knowledge is both a process and a product. As a process it is expressed by Maturana and Varela (1987) as - "reflection is a process of knowing how we know". As a product it is knowledge on how we think. Systemic knowledge has bearing on the perspectives of individuals, i.e. what is seen and how this is perceived. In this way, systemic knowledge directly influences the people's perception as to what type of explicit knowledge is relevant and meaningful for the organization. The more uniform this perspective is among the most important actors of the organization, the more influential this perspective will be as to what knowledge type (e.g. explicit versus tacit) is critical to the competitive position of the organization.

Explicit knowledge

Explicit knowledge is the part of the knowledge base that can be easily communicated to others as information. Explicit knowledge involves knowing facts (Sveiby, 1997). Explicit knowledge can be objective and inter-subjective. Bunge (1983) defines objective knowledge in the following way: "Let p be a piece of explicit knowledge. Then p is objective if and only if (a) p is public (intersubjective) in some society, and (b) p is testable (checkable) either conceptually or empirically".

Tacit knowledge

Tacit knowledge (Polanyi, 1962) is a form of skill, ability or ''techne'', i.e. know how, which is difficult to communicate to others as information, but "much of what Michael Polanyi has called tacit knowledge is expressible - in so far as it is expressible at all - in metaphor" (Nisbet, 1969). In the context of tacit knowledge, Drucker (1993) opines, "the only way to learn techne was through apprenticeship and experience". David and Foray (1995) also stress that no knowledge is tacit by nature, what has to be done is to create incentives to make tacit knowledge communicable. Polanyi (1962) says that this sort of knowledge also can be regarded as connoisseurship. Such knowledge is deeply rooted in employee experience or in company culture making it more valuable in sustaining the competitive advantage because it is much harder for competitors to imitate.

Hidden knowledge

Hidden knowledge influences the way we think and act, as a sort of personal paradigm, or the technical-economic paradigm in the business world, a trajectory which leads our way of thinking and acting when expressing and interpreting, among other things, new ideas. Hidden knowledge organizes the development of mental models, the nature of the abstraction we make, the choice of variables, problems or phenomena, the facts we choose to focus on, our underlying metaphysical positions, our theoretical ''tastes'' etc. Support for the concept ''hidden knowledge'' is found in Schutz' (1990, Vols. 1 and 2) ''epoche'' concept.

Relationship knowledge

Relationship knowledge "involves the social capability to establish relationships to specialized groups in order to draw upon their expertise" (Lundvall, 1995). In a time where turbulence, change and hypercompetition, are accelerating it is crucial for organizational survival to invest in relationship knowledge. The type of relationship knowledge which is relatively easy to communicate, may be classified as explicit knowledge.

Knowledge management [KM]

A business discipline called Knowledge Management emerged that identifies captures,