Topic X Managing

Knowledge
1
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Discuss the importance of managing knowledge in organisations;
2. Define what knowledge management is and the need for it;
3. Describe the driving forces of knowledge management; and
4. Discuss how knowledge management initiatives are implemented.

X INTRODUCTION

„Give a man a fish and you feed him for a day.

Teach him to fish and you feed him for a lifetime. ‰

Figure 1.1: Chinese proverb

Figure 1.1 illustrates a well-known Chinese proverb. This proverb shows the
importance of knowledge for a person, as it will always be with him until
the end. Knowledge is what one seeks throughout his/her life by means of
formal or informal education, training and apprenticeship.
2 X TOPIC 1 MANAGING KNOWLEDGE

In this topic, you will learn about the following: the importance of managing
knowledge, what Knowledge Management (KM) is and why KM is important. The
topic will also touch on the driving forces of knowledge management.

ACTIVITY 1.1

Discuss the importance of knowledge in your daily life and the

motivations for you to seek knowledge.

1.1 THE IMPORTANCE OF MANAGING

KNOWLEDGE
Proper management of knowledge in organisations has become the key factor for
success in the knowledge economy. Organisations throughout the world are
engaging in knowledge management projects and strategies to harvest the value
of knowledge in order to stay competitive, build future opportunities and be
innovative. Knowledge management can be viewed as the process of
systematically managing individuals and groups and organising knowledge.

Knowledge management is an evolving trend that spans different domains such

as business, organisational studies, management, human resources and computer
technology (Argote et al., 2003). The emergence of a knowledge economy (k-
economy), business globalisation and innovative forces of technology have
combined to create a revolution that forces organisations to reinvent themselves
(Rowley, 1999; Holsapple & Jones, 2004) and this is achievable through effective
management of organisational knowledge (Garavelli et al., 2004). In recent years,
many large organisations have engaged in KM projects either to improve profits,
to be competitively innovative or simply to survive (Nonaka &Takeuchi, 1995;
Davenport & Prusak, 2000; Holsapple & Jones, 2004).

Research in the field of knowledge management concentrates mainly on finding

effective ways of managing knowledge through social and management
perspectives, as it resides in human memory; managing is seen as a human-
oriented, rather than technology-based process. However, the increasing power
and importance of information and communication technology (ICT) means that
it may now be possible to harness the capacity of such technologies to find
solutions which will be of value in managing knowledge.

The process of managing knowledge involves the execution of such actions as

knowledge gathering and acquisition, knowledge structuring, knowledge
refining and knowledge distribution (Benjamins et al., 1998; Holsapple and Jones,
 TOPIC 1 MANAGING KNOWLEDGE W 3

2004). These processes are implemented using a combination of organisational,

social and managerial initiatives as well as appropriate deployment of
technology (Marwick, 2001; Moffett et al., 2004).

1.2 WHAT IS KNOWLEDGE MANAGEMENT?

This section discusses knowledge management in detail. The main emphasis here
is on the different views people have on knowledge management.

1.2.1 Definition
Although there is a strong interest from the commercial world, the term
„knowledge management‰ still suffers from a high degree of ambiguity (Hildreth
& Kimble, 2002). There is no consensus about what the term really means (Shin et
al., 2001; Salisbury, 2003; Call, 2005) and researchers are constantly attempting to
form their own definitions as shown in the work of Geng et al. (2005).

Knowledge management involves the systematic management of knowledge

resources within the organisation (Holsapple &Jones, 2004) in order to create
value from its knowledge assets (Ergazakis et al., 2005) by creating, coding,
storing, distributing and exchanging explicit knowledge using technology as an
important contributor and enabler (Davenport & Prusak, 1998; Benbya & Belbaly,
2005). Nevertheless, it is not completely technology-based as it involves
managing people, their tacit knowledge (Currie & Kerrin, 2003) and their social
interaction (Butler, 2003). Types of knowledge will be discussed in Topic 3.

As currently there is no agreed definition, and there is no prospect of one in the

near future, the following view of knowledge management (KM), based on that
offered by Sallis and Jones (2002) has been adopted in this module. KM is viewed
as „a systematic method for managing individual, group and organisational
knowledge using the appropriate means and technology. At its root it is to do
with managing people, what they know, their social interactions in performing
tasks, their decision making, the way information flows and the enterpriseÊs
work culture‰. This view represents the scope of discussion in this module.

Managing organisational knowledge has many benefits, some of which are easily
perceived and understood, while others are not. Nowadays, organisations are
mostly valued for their intellectual capital and an example of this is the widening
gap between corporate balance sheets and the perceived value of the corporation
by investors.
4 X TOPIC 1 MANAGING KNOWLEDGE

Intellectual capital is composed of human and structural capital and is the most
precious enterprise resource. Human capital refers to the body of knowledge that
the organisation owns, which resides in the minds of the employee as well as
vendors and customers. Structural capital refers to what remains when an
organisationÊs employees go home from office, which is in the form of databases,
customersÊ files, software, manuals, trademarks and others.

This can be seen in Microsoft, one of the worldÊs highest most valued company.
MicrosoftÊs worth is not only in physical assets but also in its intellectual assets in
the form of structural capital, such as copyrights, customer databases, and
software for business processes. Intellectual capital here also includes the
knowledge that resides in the mind of MicrosoftÊs employees (software
developers, researchers, product managers and academic collaborators).

Therefore, collective knowledge residing in the minds of the organisationÊs

employees, customers and vendors can be argued as the most important resource
in todayÊs enterprise. As such, knowledge management can also be seen as the
processes involved in identifying, capturing, organising and disseminating the
intellectual assets, which are crucial for the organisationÊs performance.

SELF-CHECK 1.1

1. Identify the two types of knowledge that are discussed in this section.
2. Why is there a need for knowledge to be managed?
3. Can we use technology to manage knowledge?

ACTIVITY 1.2

1. Define knowledge management based on your academic or

professional background.
2. Discuss why there can be no formal definition of knowledge
management.
3. Discuss the importance of intellectual capital for organisations.

In the next section, you will look at the need for knowledge management and
how it can help organisations. You need to understand why organisations need
to manage knowledge.
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1.2.2 The Need for Knowledge Management

In the previous section, you were introduced to the concept of knowledge
management and intellectual capital. This section discusses why knowledge
needs to be managed and the benefits of managing (organisational)
knowledge.

Knowledge as a resource has to be managed from the following perspectives:

delivered at the right time; available at the right place; present in the right shape,
satisfying the quality requirement and obtained at the lowest possible cost
(Holsapple & Jones, 2004; Call, 2005). Organisations have undergone many
changes to the ways they operate as a result of many factors, including the shift
from industrial economy to knowledge economy and re-engineering of business
processes due to technological innovations. The focus change from products to
services has placed more emphasis on the importance of knowledge held within
organisations. Knowledge can simply be seen as the process of changing
information (structured data) and previous experience into significant
associations that can be comprehended and applied by people.

The need to manage knowledge differs between organisations as business

processes vary between them. However, most organisations need to continually
improve business process effectiveness and this is shown in the survey
conducted by the Ernst & Young Center for Business Innovation and Business
Intelligence of 431 US and European companies in 1997 (Binney, 2001; Housel &
Bell, 2001). Almost three quarters of respondents in the survey agreed that
knowledge management would be beneficial to them in:
(a) Improving decision-making processes (89%);
(b) Improving responsiveness to customers (84%);
(c) Improving efficiency of people and operations (73%);
(d) Improving innovation (73%); and
(e) Delivering better products and services (73%).

A survey of senior executives in Western Europe, conducted by the Economist

Intelligence Unit (EIU) (EIU, 2005) reported similar benefits as to what companies
hope to obtain through knowledge management projects. However,
improvement in managing knowledge about customers (65%) and business
processes and performance (46%) were found to be more important than decision
making (44%). Other main benefits reported were: effective product/service
development (41%), smoother collaboration across teams and departments (31%),
6 X TOPIC 1 MANAGING KNOWLEDGE

greater customisation of products and services (23%), improved compliance

(16%), improved corporate governance (10%), better corporate security (7%) and
improved employee loyalty and retention.

These examples clearly indicate that knowledge management needs to part of

every aspect of the enterprise to improve business efficiency and productivity.
This has resulted in knowledge emerging as the most important commodity;
what are bought and sold contain knowledge elements, and managing
knowledge has become a crucial task for organisations (Schreiber et al., 1999;
EIU, 2005).

Another important need for engaging in KM projects is to overcome the

problem of human turnover in organisations. A lifetime accumulation of facts,
events, procedures and so on is stored in personal memories that enable people
to work in and make sense of the world that surrounds them. However, with
the ending of the single-job-for-life culture, businesses lose much of that
knowledge when an individual leaves the organisation. Some have argued (e.g.
Hildreth et al., 1999) ) that this threat of "lost knowledge" is the principal driver
behind the emergence of KM. A number of authors have stated that KM
provides the answer to the problem of brain drain (Gardan & Gardan, 2003;
Lau et al., 2003; Leung et al., 2003).

You will notice several benefits of managing knowledge in this section and these are:
(a) Knowledge has become the new economic resource. Companies such as
Google and Microsoft depend on their staffÊs knowledge for developing
software.
(b) Improves organisational decision making as better and improved decisions
are made.
(c) Knowledge enables organisation to be innovative and innovation provides a
competitive edge.
(d) Improves collaboration between people and teams in an organisation.
(e) Improved business processes.

SELF-CHECK 1.2

1. What are the important perspectives on knowledge as a resource?

2. Why are there differences in the need to manage knowledge
between organisations?
3. What is meant by innovation and being innovative?
 TOPIC 1 MANAGING KNOWLEDGE W 7

In this section, you have studied the need to manage knowledge and the
associated benefits of managing it well. In the next section, you will learn about
the forces driving knowledge management.

1.3 FORCES DRIVING KNOWLEDGE

MANAGEMENT
Nowadays, an organisationÊs decision makers are highly dependent on input
from several domains to make critical decisions. Ideal decision makers have
comprehensive understanding of the specific domains they work with. That
understanding enables them to act quickly and decisively on the information
obtained. The reason for this is that decision making has become more complex
over the years and employees are expected to perform under various
circumstances. The following trends of increasing domain complexity,
accelerating market volatility, intensified speed of responsiveness and
diminishing individual experience are considered as vital forces that drive
knowledge management (Becerra-Fernandez, Gonzalez & Sabherwal, 2004).
Sections 1.3.1 to 1.3.4 will explain this in detail.

1.3.1 Increasing Domain Complexity

Domain knowledge is getting more complex and as a result, the complexity of
the knowledge required to carry out specific business process tasks has
increased. The rise in complexity is attributed to the state of the internal and
external processes, increased competition, and rapid advancement of technology.
In the case of new product development, participation and collaboration from
different organisational units, such as finance, marketing, human resources,
engineering and others, are required. Consequently, organisations need to recruit
people who are not only academically excellent but are equally competent in
communication and team skills. Such skills will make knowledge sharing
possible between employees of the organisation and achieve shorter cycles for
new product development, as well as facilitate and manage organisational
innovation.

1.3.2 Accelerating Market Volatility

The pace of change within each market domain has increased rapidly over the
years. Organisations operate in ever changing market and environment
surroundings, which require them to easily adapt to these changes. Corporate
announcement of missed financial targets can be damaging to the companyÊs
stock price and the whole industry. Survival in such volatile markets requires
8 X TOPIC 1 MANAGING KNOWLEDGE

knowledge about the market, and sharing this knowledge among decision
makers will enable them to react quickly to adverse market effects on the
organisationÊs stock prices.

1.3.3 Intensified Speed of Responsiveness

The time needed to carry out action based on subtle changes within and across
domains is reduced rapidly due to advancements in technology. This changes the
decision-making process as timely decisions are needed to be implemented
quickly to grab the opportunities that are available. For example, in the past,
many decision-making activities required adequate processing time, which give
stakeholders a „comfort zone‰ in decision making. The time taken to respond to
a customerÊs inquiry would typically consist of several actions such as receiving
inquiry, obtaining managerÊs permission, getting quotation from finance,
preparing the proposal and other tasks performed by several people in the
organisation. However, with the invention of the internet, intranet and extranet,
these processes can be done simultaneously at the speed of light. Newer
development in information communication technologies also enable employees
to collaborate, communicate, share files, synchronise schedules and perform
other tasks faster and move accurately.

1.3.4 Diminishing Individual Experience

Organisations these days experience high employee turnover rates and this has
resulted in employees with decision-making authority having less tenure within
the organisations than ever before. Frequent changes in trends have resulted in
the experience of experienced decision makers becoming irrelevant to current
decisions that need to be made. A major result of these trends is that there are
now decision makers with immature intuition due to the complexity of the
domain and lack of experience. They are also less able to withstand external
pressures and to respond quickly to make clear and correct decisions. The
swiftness in implementing actions based on the decisions made allows for little
market tolerance for wrong or ambiguous decisions. Increased complexity, a
volatile market and accelerated responsiveness make younger managers feel less
adequate in making difficult decisions daily. As the knowledge required for
making good decisions cannot be learned by individual decision makers, there is
a need to provide them with the necessary knowledge for making correct and
timely decisions.
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ACTIVITY 1.3

1. Discuss how these forces driving knowledge management can affect

the organisationÊs decision-making process.
2. List three reasons domain knowledge is important as a source of
competitive advantage among competitiors.
3. Identify the types or categories of domain knowledge in your field.
4. Discuss the importance of collaboration as a way of sharing
knowledge.
5. Explain why companies are experiencing high employee turnover
rates.

1.4 KNOWLEDGE MANAGEMENT AT INFOSYS

TECHNOLOGIES – DISCUSSION CASE
In this section, we will discuss how knowledge is managed at Infosys
Technologies.

(a) The Problem

A global software services company based in India, Infosys Technologies, is
a worldwide leader in outsourcing. With over 23,000 employees and
globally distributed operations, Infosys develops IT solutions for some of
the largest corporations in the world. During the past 10 years, Infosys has
experienced a 30 percent annual growth rate. Infosys faced a challenge in
keeping its large employee base up-to-date and ahead of both its
competitors and clients, and ensuring that the lessons learned in one part of
the organisation were available to other parts. A member of the knowledge
management (KM) group said: „An IT company like ours cannot survive if
we donÊt have mechanisms to reuse the knowledge that we createÊLearn
once, use everywhereÊ is our motto.‰ The vision is that every instance of
learning should be available to every employee; but how does an
organisation turn such a vision into reality?

(b) The Solution

Infosys TechnologiesÊ effort to convert each employeeÊs knowledge into an
organisational resource began in the early 1990s and extended well into the
first decade of 2000. In the early 1990s, Infosys launched its bodies of
knowledge (BOK) initiative. This involved encouraging employees to
provide a written account of their experiences across various topics, such as
10 X TOPIC 1 MANAGING KNOWLEDGE

technologies, software development and living abroad. These were shared in

hard-copy form with all other employees. This early effort ballooned into a
full-fledged KM effort supported by e-mail, bulletin boards and various
knowledge repositories. In 1996, a corporate intranet was developed to make
BOKs, in the HTML format, easily accessible to all. In 1999, Infosys began an
organisation-wide programme to integrate the various knowledge initiatives.
A central knowledge portal, called KShop, was created and while the KM
group developed the technological infrastructure, local groups were
encouraged to maintain their own content on KShop.

The content of KShop consisted of different content types – BOKs, case

studies, reusable artefacts and downloadable software – each with its own
homepage. The content was carefully categorised by the KM group to
ensure that as the amount of content increased, it would still be possible for
people to quickly find what they needed.

In early 2000, Infosys appeared to have a very functional KM system, yet

patronage by employees remained low. The KM group then initiated a
reward scheme to increase participation. The scheme gave employees who
contributed to KShop knowledge currency units (KCUs) that could be
accumulated and exchanged for monetary rewards or prizes.

(c) The Results

Within a year of the introduction of the KCU scheme, 2,400 new knowledge
assets had been contributed to KShop by some 20 percent of InfosysÊ
employees. However, as the volume of content increased, so too did the
problems relating to finding useful information. Moreover, the heavy
growth in contributions taxed the limited number of volunteer reviewers,
who served an important quality control function. The KM group then
modified the KCU incentive scheme. It developed a new KCU scheme that
rated the usefulness of the knowledge from the perspectives of the users of
the knowledge, rather than the reviewers. To increase accountability, the
KM group requested tangible proof to justify any high ratings. Finally, the
KM group raised the bar for cashing in KCU points for monetary rewards.
Source: Turban, Leidner, McLean & Wetherbe, (2007)
 TOPIC 1 MANAGING KNOWLEDGE W 11

ACTIVITY 1.4
Activity 1.4
1. Give three reasons for Infosys Technologies to manage its
employeesÊ knowledge.
2. Justify why the management should reward participants for
sharing knowledge in an organisation.
3. Discuss why people do not want to share their knowledge with
others.
4. Knowledge management initiatives involve technology and non-
technology implementation. Elaborate this statement.
5. Implementing a knowledge management initiative involves
creative thinking. Do you agree with this statement?

ACTIVITY 1.5
Activity 1.4
1. Discuss the basic knowledge management practices that you have
done. For example, having a template for letter writing in soft
copy.
2. Discuss some knowledge management books and articles that you
have read before.
3. Make up a working definition for the following terms:
(a) Knowledge
(b) Domain knowledge
(c) Intellectual capital

x Knowledge is an important resource that needs to be managed systematically

to harness its value.

x Knowledge management is the umbrella concept used to refer to activities of

managing knowledge.
12 X TOPIC 1 MANAGING KNOWLEDGE

x There exist many definitions of knowledge management as different people

have different views on knowledge. The basic view is that it involves
managing individuals and groups and organising knowledge using
appropriate tools and techniques.

x Benefits of managing knowledge are improved decisions, better

collaboration between employees, improved leaner business processes,
encourages innovations and others.

x The forces driving knowledge management in organisations are increasing

domain complexity, accelerating market volatility, intensified speed of
responsiveness and diminishing individual experience.

Collaboration Intellectual capital

Decision makers Knowledge
Domain knowledge Knowledge management
Human capital Structural capital
Innovation

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managing knowledge in organisations: Creating, retaining, and transferring
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