What is knowledge advantage?

An organization with knowledge advantage constantly increases or improves its knowledge stock, engages everybody in learning and innovation, and offers great value to its customers and other stakeholders as a result. Such an organization is a learning organization, an adaptive organization, and an intelligent organization. It is usually managed as a community guided by clearly communicated visions. Experimentation is a common way of life. Open discussions backed by mutual trust take place at every corner and acrosss organizational boundaries. Technologies are used to automate tedious and repetitive tasks. Communication and analysis technologies also allow knowledge workers to excercise creative thinking and to collaborate with each other on tough projects. An organization with knowledge advantage is an adaptive and open system, maximizing its collective inlligence to solve problems and produce value.

Driving Forces of Knowledge Management

Knowledge management is important for organizations because they must effectively respond to multiple challenges originating from both outside and inside the organization. These challenges include: increasing domain complexity, accelerating market volatility, intensified speed of responsiveness, diminishing individual experience, convergence of product and service, and the ubiquitous connectivity.

Effective management of valuable knowledge enables continuous value innovation. Innovative products and services come from innovative people working together in a knowlege-friendly environment. Such an environment involves visionary leadership, proactive and sensitive management, and powerful tools. The famous 80/20 principle works here: 80% of the efforts in knowledge management is organizational and people-related measures and 20% is technology. The significance of technology is determined by the size factors such as numbers of collaborating locations and people and other knowledge components. The larger the organization, the higher the importance of the technology.

What is knowledge?

Two resources are especially valuable for the discussion of definitions of knowledge. The first one is a textbook published couple of years ago:

Becerra-Fernandez, Irma, Gonzalez, Arlina, and Sabherwal, Rajiv. (2004). Knowledge Management: Challenges, Solutions, and Technolgies. Upper Saddle River, New Jersey: Pearson Prentice Hall (ISBN: 0-13-101606-7).

Its chapter-by-chapter Powerpoint slides can be found on its companion website (http://wps.prenhall.com/bp_becerra_km_1/0,9020,1264561-,00.html). Click on Chapter 2 (1) to look at how knowledge is related to data and information.

Another one is a very popular professional book written by two well-known scholars and management consultants, Thomas H. Davenport and Laurence Prusak. The title of the book is Working Knowledge - How Organizations Manage What They Know, published by Harvard Business School Press (ISBN: 1-57851-301-4). In this book, knowledge is defined as "a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms. (p. 3)"

Data is representation of facts. Data can be transformed into information by adding value in several ways:

• Contextualized: for what purpose the data was gathered
• Categorized: by units of analysis or key components of the data
• Calculated: analyzed mathematically or statistically
• Corrected: errors are removed
• Condensed: summarized in a more concise form (2).

Transformation of data into information can be done automatically. However, the transformation of information into knowledge usually requires human efforts:

• Comparison: how does this situation compare to other situations?
• Consequences: implications of the information for decisions and actions
• Connections: how this knowledge relate to others?
• Conversation: what do other people think about this information?

Knowledge develops over time. Knowledge born of experience recognizes familiar patterns and can make connections between what is happening now and what happened then.

Knowledge is aware of what it doesn't know. It has been pointed out that the more knowledgeable one becomes, the more humble one feels about what one knows.

Unlike data and information, knowledge contains judgement. Once internalized, knowledge can exhibit its power in profound ways.

Knowledge even works through rules of thumb and intuition: felxible guides to action that developed through trial and error and over long experience and observation.

In a globalized economy, knowledge advantage may be company's greatest source of sustainable competitive advantage.

References:
1. Becerra-Fernandez, Irma, Gonzalez, Arlina, and Sabherwal, Rajiv. (2004). Knowledge Management: Challenges, Solutions, and Technolgies. Upper Saddle River, New Jersey: Pearson Prentice Hall.

2. Thomas H. Davenport and Laurence Prusak. (2000). Working Knowledge - How Organizations Manage What They Know. Boston, Massachusetts: Harvard Business School Press.

Knowledge economy differs from the traditional, physical economy in many ways:

• While physical economy revolves around tangible goods and services and consumes physical raw materials such as iron, coal, and oil, knowledge economy revolves around ideas, knowledge, and discovery.


• Natural raw materials are finite in quantity. Ideas and knowledge are in infinite quantity and are limited only by the imagination of the human race. Knowledge economy uses mental capabilities.


• Physical economy suffers from the law of diminishing returns. Knowledge economy is driven by the law of increasing returns.


• An important force driving the law of increasing returns is the network effect. At its very basic, network effect means as more users sign up to use the network, the value of the network increases to its users. Increasing returns also mean the more you know, the more you'll be able to learn. This is the notion of absorption capacity in the field of technology management.

Learning ought to be fun to be productive. What can be more fun than being dynamic and interactive? It'd be more hassle and requires more attention and effort on my part. But, that's exactly what makes it fun. In an interactive and dynamic learning environment, everybody gets to be a learner. People just try, learn, and share. The communication is two-way and learning is at a deep level.

Why is knowledge management (KM) an important issue? A quick answer is because we are living in the knowledge society. In the knowledge society, there is no shortage of data. Information overload is more a problem than a blessing. When faced with a problem, data is raw material and information is parts or building blocks for a solution. Knowledge is required to solve a problem. Unfortunately, most if not all organizations that are loaded with data and overwhelmed by information are in pretty poor conditions regarding knowledge. Good knowledge is either unavailable or readily inaccessible. New and better knowledge must be created, discovered, or collected to fuel innovation. Without innovative products/services, no company can sustain its competitive advantage. There is limitation on how much physical resource an organization possess. The limits on how much knowledge an organization can create is theoretically wide open.

Back to the question raised above. Why is KM a big deal? Three reasons have been mentioned in the Wikipedia: globalization, information/knowledge intensity, and computer networking and connectivity. The globalization of supply and demand has radically intensified competition. Information/knowledge intensity often affects customers' value perception. The powerful computer networking capabilities and ubiquitous connectivity offerd by relentless technological advancement has virtually transformed many traditional models into something we all are so very familiar and at the same time so very unfamiliar with. The power of particiption and collaboration has taken on a new level of significance.