Posted: May 25th, 2022

Knowledge Management in Business

Knowledge Management


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Knowledge Management in Business

A manager is compared to the captain of a ship who must make effective decisions, directed at accomplishing organizational goals. In order to be effective, the decisions must be actionable. Most of these come from a store of knowledge on the past decisions of previous managers and the consequences of those decisions (Pollock 2001). For knowledge to be of use to the manager’s decision-making, it must be gathered from authoritative sources, processed and must make sense. Hence, it should be distinguished from raw or mere data and mere information. It must be organized and directed to the achievement of organizational goals. Managing that store of knowledge must serve the organization from within and those outside, such as clients, and therefore, must be a two-way strategy (Pollock).

A system, which puts people, organizations, knowledge and processes together through technology, must be set up to allow these sectors to mix and exchange information and expertise (Snook and Wilker 2007). It should perform the function of discovering, selecting, organizing, distilling, sharing, developing and using information with a social context. It should aim at improving the effectiveness of organizations. Basically, that system acquires information, establishes rules for sifting information, formats it within the appropriate context, assesses it and then transmits it to the leaders of an organization to use in making decisions (Snook and Wilker).

Gallup-surveyed firms, which have been implementing knowledge management or KM, recognized its value and benefits in understanding and interpreting the market, evaluating customer requirements with a high degree of accuracy, and, by integrating these with organizational resources, determine what products and/or services to create and sell (Choi et al. 2004). Surveys said that these companies pointed to organizational leadership and commitment as the enabling tools for the success of knowledge management (Choi et al.).

Statement of the Problem

This study will examine how knowledge management benefits businesses and the business community. It will answer the following questions:

1) What is knowledge management and what is its role in business?

2) How is organizational know-how measured?

3) How does knowledge management work as a two-way strategy?

4) What does knowledge management consist of and what are its requirements?

5) What is the role played by business intelligence in knowledge management?

6) Why should knowledge be e-business-focused?

7) What does knowledge management do that benefits business?

8) What does it require an organization in order to succeed?

9) What are the differences between organizations’ actual and perceived success in knowledge management?

10) What is the function of special custodians?


Sources of know-how within an organization include customer capital, human capital, intellectual capital, relationship capital, and systems performance (Rylatt 2003). Customer capital refers to the value set on the nature and quality of customer relationships, customer satisfaction rates, growth of customer learning, and involvement and improvement in decision-making and consultation. It includes agreements, contracts and permits; average response rate to customers; customer satisfaction, acquisition cost, churn rates and yield; lists and names of customers; market share; online sales per day; ratio of sales contacts to sales closed; percentage of revenue per customer; repeat orders; service awards; and share of new customers. Human capital consists of the current know-how of people under the organization’s control. This consists of intellectual asset, which employees take home with them every night (Jack Fitz-Enz as qtd in Rylatt). This can be measured by the average years of service; brain drain or voluntary separations; employee satisfaction; costs of hiring; training and employee costs; turnover of experts; level and type of education; competency of key employees; personnel complement; support staff proportion to core business; employee profitability; employee suggestion program success; staff morale; and succession planning. Intellectual capital refers to perceived value of trade market, secrets, patents, and branding. It is measurable by brand and internet domain names; computer software and licenses; industry awards; patents, copyrights, franchises, trademarks and patents; rights; and unpatented technology. Relationships capital covers important and strategic links, collaborative relationships, business partnerships, joint ventures and industry associations aimed at building and enhancing reputation and standing in the industry. It is measurable by business partnerships and contract portfolio; cross-functional team by interdisciplinary collaboration; knowledge-enhancing customers and suppliers; projects; and strategic alliances and joint ventures. And systems performance looks into how systems and processes directly or indirectly produce, benefit or improve know-how. Measures can include investment in digital technology or the use, replication or improvement of practices; productivity; reduced wastage; and efficiency savings. Measuring know-how was expected to remain in the main agenda of businesses in establishing ways of seeking out vital knowledge and how it generates value. Training and development would be directed in exploring how it could generate and use knowledge for business in the future (Ryatt).

The sharing of knowledge is central to any knowledge management program (Woods 2001). It involves spreading possessed or acquired knowledge. Knowledge sharing does not emanate from the CEO’s office or get learned from a one-day management seminar. It evolves from, and requires, careful planning and objectives, interactive technology and the proper attitude from top management all the way down the bottom in the exchange of information. The information enhances productivity and innovation. Transferring it is also the right thing to do in pursuing and preserving the intrinsic value of an organization. More and more businesses are acknowledging the importance of evaluating the organization’s collective knowledge. But even the best practices and all the culled corporate information will fail expectations if it cannot spill over to people who can use it to their benefit and advantage. These systems can be developed as an external and internal strategy. The emphasis is that learning and teaching should be an ongoing process the organization should apply in obtaining new knowledge, skills or behaviors. If everyone in it has access to the collection of knowledge, the leaders do not have to instruct the employees on what to do or how to do things all the time. The organization can go forward at its own initiative (Woods).

Present computing systems are B2C business-to-consumer or e-tailing, such as; C2C consumer-to-consumer, such as la eBay’ and B2B or business-to -business marketplace; and P2P or peer-to-peer computing (Woods 2001). P2P is considered the next killer application and expected to become the ultimate tool in online knowledge sharing. Using this technology, any number of users can engage in a virtual meeting room and freely share or transfer instant messages, share files, edit, draw, surf and even speak with one another or altogether real time without need for servers and firewalls. People everywhere have been telecommuting and working at different offices in different parts of the world. Enterprises have been dispersed. These situations have created the need to bring groups of people together without need to rely on it to set the links up. Experts have commented that technologies then must possess the “directness and spontaneity of a phone call, the visual immediacy of a fax, the asynchrony of email, and the privacy of a closed-door meeting (Ray Ozzie as qtd in Woods). It presents a realm beyond the internet where intranets and extranets facilitate extensive interchange (Woods).

The Department of Navy Chief Information Officer described knowledge management or KM as a process for making best use of intellectual capital in achieving organizational objectives (Pollock 2001). In simpler terms, it is applying management to knowledge. Managing knowledge involves creating, generating, classifying, storing, distributing, communicating, shaping and reusing knowledge. Knowledge differs from data and information. Data consist of the raw pieces or inputs, which when properly assembled, constitute information. Completed information is knowledge. Knowledge is then understood to be a set of processed information, which understandable and actionable. An organization is comparable to a ship and the captain as the manager. The manager must often make actionable decisions, the basic input being knowledge. The captain must possess understanding and wisdom in rendering right or wise decisions. A knowledge base of past decisions by previous captains provides him with a basis for the decision under similar circumstances and the consequences of those past decisions (Pollock).

The typical methods used in knowledge management are social and technical, which are ideally combined by using technology (Pollock 2001). Informally, people transfer and acquire information all the time. It is knowledge management or KM, which adds meaning, purpose, organization, consciousness and organizational recognition to the process. The mere recognition of the value of KM to the organization will, by itself, be a strong input in enhancing its effectiveness (Pollock).

Knowledge management manages mental capital for effective use in the future (Snook and Wilker 2007). The experiences and wisdom of heroes and other earlier men and women must be recorded and passed on to those who follow them. Those who follow add their own experiences and wisdom and, in the process, improve the procedure. These need to be captured and documented properly. This is part of the process of KM, which systematically puts people, organizations and processes together as technology allows them to exchange operationally relevant information and expertise. The KM process discovers, selects, organizes, purifies, shares, develops and uses information within a social context. The objective is to improve organizational effectiveness. In combination with information management, it establishes an organizational framework with which to gather, produce and spread actionable knowledge. It obtains information, sets business rules for sifting and formulating it, frames it within a comprehensible context, evaluates and then presents it to organization’s leaders in rendering or enhancing a decision (Snook and Wilker).

Although most companies viewed KM as strange and difficult to implement, more and more have come to recognize its value in providing real, verifiable and significant end-results (Craig 2000). It is a composite of software products and business practices, which assist an organization in obtaining, analyzing and distilling information it needs for learning. Obstacles to the successful implementation of a KM solution are organizational and cultural, rather than technical. It requires heavy investment in training and employee participation in the commitment. It is a demanding and long-time investment. A typical company in 2000 would spend $2.7 million. Furthermore, it requires in-house expertise to implement the procedure (Craig).

Experts also discovered the significance of the face-to-face aspect of managing knowledge in addition to technology (Overman 2003). Scott Beaty of Shell commented that a million data transpire among those who come face-to-face. This was why Harvard Business Review editor Thomas a. Stewart suggested asking employees attending sessions about what they learned and would do with their new learning. He and other experts also recommended the search for custodians of gathered knowledge they called knowledge intermediaries. These intermediaries would understand what knowledge is and who would “bond, bridge, collect, capture, stir” and “provoke” the flow of the KM process (Overman).

Surveyed U.S. firms in the Gallup database considered top management leadership and commitment critical to the success of KM (Choi, et al. 2004). These companies, which have already been implementing KM, viewed leadership and commitment as the enabling tools for KM success. This finding was consistent with earlier ones. The participating companies’ responses were gathered from 1,000 questionnaires (Choi et al.).

They regarded KM as capable of understanding the market, accurately appraising customer requirements, and deriving products and services from these by integrating the resources of the organization (Choi et al. 2004). The first objective of the study was to identify differences between the perceived importance and the actual importance attributes of a successful KM implementation. The second objective was to develop and empirically test human resource factors affecting its success. The study found that attributes with a lower degree of perceived importance were less often implemented and that top management support was critical for KM success (Choi et al.).

Business intelligence is part of KM and among the day-to-day efforts of the corporate knowledge worker (Walker and Millington 2003). A case study of LINC Berlex Laboratories illustrates this. Gathering or capturing knowledge and information in the pharmaceutical industry traverses different areas of medicine. While expanding, the company found it increasingly hard to locate varied sources of information stored in different places. There was need to develop a single and integrated repository. The company realized that its management decisions and initiatives depended on its customer base and thus developed a useful tool, which would contain current business information taken from many sources into a portal of overall information gathered. In order to do this, the company needed to know its users and how they use it, its current usage and the gaps and potentials for personalization. Its purpose is to find new and better ways of presenting its carefully gathered and stored information to its users (Walker and Millington).

While e-business revolutionized business operations, it has not blended well with internal knowledge management (Fahey et al. 2001). By developing e-business focused knowledge, an organization can evaluate its type of work within the e-business environment, understand its way of doing the work, and find out why certain practices and companies will likely change in the foreseeable future. KM, thus, is a framework, which helps in comprehending and guiding the e-business change of operating processes. KM methods forge electronic human connections, which in turn, enable insights to form and intelligence develop. These are germane to hard decisions about adopting or changing to e-business operating processes (Fahey).

A recent study was conducted on the differences between the perceived success and the actual success of KM in organizations (Choi et al. 2005). Using the responses of executives and managers as primary subjects to 1000 questionnaires, it discovered that the greatest differences lie in benchmarking and knowledge sharing capability. On the other hand, the least differences were in organizations with KM-supportive culture and those with top-management leadership and commitment to KM. It found that information system attributes were not used as to signify their importance. It suggested that it was hard to recognize the importance and impact of information systems on KM if one’s job was unrelated to information technology. Furthermore, only a third of the respondents’ organizations were either just starting to develop or implement KM. These meant that information systems could not assume a vital role if the organization was not prepared to implement KM. Most of the respondents could not grasp the difference between perceived and actual KM success because most of their organizations had not begun establishing or implementing KM. On the other hand, attributes related to KM organizational environment, human resource activity support and top management commitment to KM raised the perception of their importance. Other studies suggested that cultural and top management support with the suitable training and teamwork promotion were the best enhancements for success all the way from initiation to implementation (Choi et al.).

Summary and Conclusion

Business success necessarily draws from the organization’s store of profitable knowledge. Knowledge is a basic and indispensable input to decision-making and to steering the course of business. A manager is the captain of that ship, which is the organization through its collection of know-how (Pollock 2001). Know-how is measured by the organization’s customer capital, human capital, intellectual capital, relationships capital, and systems performance (Rylatt 2003). It works both as an internal strategy in disseminating knowledge within the organization and as an external strategy by acquiring it from and transmitting it to clients (Woods 2001). It consists of software products and gathered business practices needed for learning. It requires big investment in training and employee commitment and in-house experts, valued at $2.7 million (Craig 2000). These experts are special custodians who will handle the learning and direct the course and flow of knowledge (Overman 2003). Within the sphere of KM is business intelligence as a basic component. It requires an efficient customer database, consisting of current business information from appropriate sources and directed to a portal (Walker and Millington 2007). Today’s organization also needs to acquire an e-business-focused knowledge in order to evaluate the work it does and to determine what practices to change in the future (Fahey et al. 2001). This is best done within the KM framework, which through electronic-human connection, induce the development of insights and intelligence (Fahey et al.).

Success in knowledge management, therefore, redounds to business success. It circulates much-needed knowledge for decision-making on the part of managers and performance on the part of employees. But KM requires no less than top management leadership and commitment to work and make a difference (Choi et al. 2004). A study also found that KM was less implemented in organizations with a lower degree of its importance and that top management support was critical to KM success (Choi et al.).

Taken together, the sum total of all productive know-how and knowledge in the organization is indispensable to the success of a business and that of the business community itself. Gathering, processing and disseminating knowledge is the function of KM. But it needs top management leadership and commitment and employee support to work and achieve the purpose. #


Choi, Y.S., et al. (2005). Comparative Study of Knowledge Management Success. 6 pages. Journal of the Academy of Business and Economics. International Academy of Business and Economics

– (2004). Knowledge Management Supportive Human Resource Environment.

Craig, R. (2000). KM Comes of Age — Knowledge Management Technology Information. 2 pages. ENT: Boucher Communications, Inc.

Fahey, L., et al. (2001). Linking E-Business and Operating Processes: the Role of Knowledge Management. 23 pages. IBM Systems Journal: IBM Systems

Overman, S. (2003). Human Contact Critical to Knowledge Management. 2 pages. HR Magazine: Society for Human Resource Management

Pollock, N. (2001). Knowledge Management: Next Step to Competitive Advantage — Organizational Excellence. 7 pages. Program Manager: Defense Acquisition University Press

Rylatt, a. (2003). Measuring Know-How. T & D: American Society for Training and Development, Inc.

Walker, a. And Millington, K. (2003). Business Intelligence and Knowledge Management: Tools to Personalize Knowledge Delivery. 3 pages. Special Libraries Association

Snook, K. And Wilkr, P. (2007). Knowledge Management: Harnessing Mental Capital for the Future. 3 pages. DISAM Journal: Defense and Institute of Security Assistance Management

Woods, B. (2001). Speaking the Language of Business Knowledge Management. 4 pages. The Chief Executive: Chief Executive Publishing

-. (2001). Sharing the Intellectual Wealth: Knowledge Management. 6 pages.

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