Knowledge Management: The Focal Point of Business Success

Knowledge is a resource that enables organizations to solve problems and create value through improved performance, and it is this point that will narrow the gaps of success and failure, leading to more successful decision-making.

Knowledge is identified as a multifaceted concept and is distinct  from information and data. Knowledge often is elusive and changes on a day-to-day basis with discontinued products and the ever-changing vast array of technology. Therefore, to counter the definition of knowledge, Rudy Ruggles defines knowledge as “a blend of information, experiences, and codes.” The key takeaway for executives is that knowledge is a resource that enables organizations to solve problems and create value through improved performance, and it is this point that will narrow the gaps of success and failure, leading to more successful decision-making.   

Executives still wonder where knowledge is and how can it be captured, utilized, and enhanced when it comes to decision-making. Scholars found that within organizations, knowledge resides in various areas such as management, employees, culture, structure, systems, processes, and relationships.

Organizational knowledge cannot merely be described as the sum of individual knowledge, but as a systematic combination of knowledge based on social interactions shared among organizational members. Executives, being more conceptual, agree with Haridimos Tsoukas, who determines organizational knowledge as a collective mind, and Kiku Jones and Lori Leonard, who explain organizational knowledge as the knowledge that exists in the organization as a whole. Most importantly, organizational knowledge is owned and disseminated by the organization.

The Importance of Knowledge Management from a Customer Perspective

Similar to customer relationship management, knowledge management is an enabler for identifying and satisfying customers’ needs and manifests itself as a significant driver that motivates the development of relationships with customers. Scholars have proven that executives can use knowledge management to improve customer satisfaction through acquiring additional knowledge from customers, developing better relationships with them, and providing a higher quality of service and/or products for them.

The key function of knowledge management is to help executives use it for employee development. In this context, training is becoming the forefront to success in organizations worldwide. Why is this, you may ask? Because learning is a process that leads to acquiring new insights and knowledge, and potentially to correct sub-optimal or ineffective actions and behaviors that cause companies to spiral out of control.

How can we establish the relationship between knowledge management and organizational learning? Well, one scholar, Haft Bapuji Bayyavarapu, suggests a learning-based approach to knowledge management to understand how organizational learning is related to various processes of knowledge management. More importantly, the effective implementation of knowledge management requires learning and sharing of best practices and experiences among employees and thus enhances overall organizational performance. However, a more comprehensive model needs to be introduced to put together the various aspects of potential contributions to organizational performance. For example, industry research conducted by Adela Lau and Eric Tsui shows that effective organizational learning requires various processes such as knowledge acquisition, collaboration, dissemination, sharing, generation, and storage to acquire knowledge within an organization. Thus, knowledge management improves organizational processes through various practices and also can enhance organizational learning that increases both follower engagement and personal development.

Knowledge Management Is the Key to Firm Performance 

Executives today realize that knowledge is the one of most strategic factors for organizations from a competitive standpoint. The question lies in how to maintain it, store it, retrieve it, and protect it. This has been a focal point of organizations since the corporation was first initiated and will always be an ongoing issue for leaders. For example, knowledge creation and utilization is pertinent to an organization’s success. Thus, executives create new ideas and knowledge for innovation and to motivate employees to solve their current problems in a more innovative manner. The acquisition of new knowledge is an ongoing process and can be essential to identify the needs of customers and recognize changes in the business environment.

Executives then integrate knowledge internally to enhance the effectiveness and efficiencies in various systems and processes, as well as to be more responsive to market changes. In knowledge integration, the accumulated knowledge is shared and synthesized with an aim of providing higher-quality products and services. This can improve financial and non-financial performance in various metrics such as the customer focus, the quality of products and services, and organizational revenue. Shared knowledge can contribute to the development of a learning organization in which people continuously grow and develop both personally and professionally.

Executives also must curtail the knowledge within organizations. The integrated knowledge needs to be reconfigured to meet environmental changes and new challenges and, at the same time, should not be leaked to the competition in any shape or form unless agreed upon by senior executives. Therefore, knowledge reconfiguration enables organizations to actively respond to environmental changes through developing interactions and awareness from the external environment. Knowledge management, therefore, can improve financial and non-financial performance through increased sales, customer satisfaction, learning opportunities, innovation, and the quality of products and services. 

Knowledge management has been a focal point of executive span of control but has not been associated with firm performance enough to make it an integral part of business success. Executives now can take a new view toward managerial decision-making and leading: knowledge management. From the scholar’s corner, I place a great deal of emphasis on the literature on knowledge management as a significant indicator for firm performance.

References

Bayyavarapu, H.B. (2005). “Knowledge Management Strategies and Firm Performance,” Doctoral Dissertation, The University of Western Ontario, Canada.

Jones, K., and Leonard, L.K. (2009). “From Tacit Knowledge to Organizational Knowledge for Successful KM,” In W.R. King (Eds.), Knowledge Management and Organizational Learning, (pp. 27-39), Berlin: Springer.

Lau, A., and Tsui, E. (2009). “Knowledge Management Perspective on E-Learning Effectiveness,” Knowledge-Based Systems, 22(4), 324-325.

Ruggles, RL (1997). “Knowledge Management Tools,” Boston, MA: Butterworth-Heinemann.

Tsoukas, H. (1996). “The Firm as a Distributed Knowledge System: A Constructionist Approach,” Strategic Management Journal, 17, 11-25.

Mostafa Sayyadi, CAHRI, AFAIM, CPMgr, works with senior business leaders to effectively develop innovation in organizations, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and long-time contributor to HR.com and Consulting Magazine.

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