Knowledge Management in Companies – How Knowledge Shapes Businesses

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Laura Baciu

Knowledge management refers to the creation, sharing, and exploitation of the knowledge inside a company to increase its performance.

A World Dominated by Knowledge and Technology

We live in a world dominated by knowledge and technology. Knowledge represents the valuable combination between data, information, experience, and expertise at a certain moment in time. 

Knowledge management is the management of the knowledge generated by a company. The knowledge management strategy refers to the creation, distribution, and exploitation of knowledge. The main goal is to harness economic value.

Without cultivating innovation, and science- and technology-based activities, companies will become marginalized by the competitors, customers, and stakeholders. 

Today’s article proposes key elements from the book Knowledge-Based Social Entrepreneurship by Mitt Nowshade Kabir.

The Knowledge Economy 

According to the definition given by the OECD, the knowledge economy is an economic system based on intellectual capital and knowledge production, consumption, and dissemination .

The most advanced countries rely on intellectual capital in the first place. Products and services are created through the transformation of ideas at a fast pace. The more ideas that generate value and innovation, the better the situation for these countries. Secondly, knowledge production, consumption, and dissemination are all around us.

Let’s see the following 3 examples.

Knowledge Economy Examples

Example 1. A database management company is offering cloud-based services to the companies. This company stores huge databases and creates knowledge that is valuable for the enterprises.

Example 2. Social media makes a profit through the consumption of knowledge generated by its users. The content keeps the platforms running while the algorithms learn each day from the users’ behavior.

Example 3. A European hub for start-ups pushes further the knowledge dissemination process and the knowledge produced by the start-ups. The start-ups share information and collaborate with other companies by using this particular platform. 

Several indicators show us how the economic system is dominated by knowledge:

  1. Presence of high technology in the production systems, industrial robots, and software that create a product from the beginning until the end. Sometimes, this happens without the help of human assistance.
  2. High demand for niche knowledge. The creation and the use of the new technologies are leading to a demand for niche approaches in all fields.
  3. Sophisticated innovation systems. Innovation is done in large hubs and requires sophisticated tools for harnessing the value of new ideas.
  4. Existence of a large pool of workforce with higher education. This transforms the economies with the expertise of highly educated and skilled workers using the new technologies.
  5. Existence of a strong entrepreneurial sector. Innovative knowledge and infrastructure are the key. More people have the chance to launch their businesses and to become full-time entrepreneurs. 
  6. A democracy-driven regime. Only in real democratic regimes, people and companies can produce and share knowledge that boosts the economy of the countries.
  7. Advanced ICT infrastructure. Germany is one example of how the economic system relies on advanced infrastructure for delivering commodities, products, and services (see the entire list of Most Technologically Advanced Countries 2021). 

Effects of the Knowledge Generated by the Creation and Use of Technology 

In the 21st century, knowledge is associated with and linked to technology. In some cases, knowledge is represented by the interaction with technology and vice versa. 

Thus, the knowledge generated by the creation and use of technology has effects on the companies:

  • The increasing level of intellectual capital – Use of intangible assets like the expertise of the employees to make profit. 
  • A different branding process – Develop a successful identity based on the information generated by internal and external research. 
  • The possibility to access, control and harness big databases – Companies store massive amounts of data and information in their software and programmes. 
  • Shifts in the management of human resources – Improve the management of the employees with better decision making. 
  • Competitiveness is maintained by the attributes of knowledge management – More knowledge on the market means a higher level of competitiveness.  

Knowledge Entrepreneurship and Economic Growth Cycle

To generate valuable knowledge, companies must collaborate with employees that possess education, training, and skills. The employees help the creation of new knowledge that is translated into profit. 

The automation of the jobs does not make employees obsolete. Instead, the employees should gain new skills regarding the niche activities inside the company. The routine work is then done by the machines.

This results in more searching for data, information, and knowledge that are developed by these niche activities. However, companies should also have people specialized in observing the general trends and planning the strategies inside the company. 

Innovation and Service Industries 

The topic of innovation was discussed in the last decades with enthusiasm by the stakeholders involved in the human-machine interaction. A company needs to know when to settle down for traditional methods. But it is even more important to know when and how to use the novelty.

Innovation means generating new ideas in the form of new and improved products, services, processes, business and professional models etc. When working and applying these ideas, the economic value is added.

The classical process of innovation required the focus of few experts on a particular product and an  incremental development. 

The current innovation process requires the focus of more employees and even a multidisciplinary team. Every task can generate knowledge for innovation. Nevertheless, the use of machines and software leads to innovative practices.

The transformation of the societies and economies enhanced the position of the services. In a material world, entrepreneurs discovered that services can bring even more profit than products.

The level of physical resources of the planet has decreased. The need for a greener economy calls for greener products and services. These green products and services are created by using advanced ideas, researches, models, techniques, and technologies. The ICT infrastructure develops more and more products from scratch. 

Superior Competitiveness

The superior competitiveness is based on elements that provide benefits for the customers:

  • ease of use of a product 
  • flexibility of the workers
  • expertise of the salesmen
  • high performance of the machines
  • fair pricing plans
  • reliability of the services of the company
  • brand of the company etc.

Take the example of the Lumeer software. One element that provides superior competitiveness for the software is its freemium model with all features available free forever (but limited to your project size). 

We collected data and knowledge inside the company regarding the following aspects: 

  • formation of the prices,
  • decisions to increase or decrease the price,
  • balance between quality and price,
  • current trends on the market,
  • usual prices for similar products,
  • features that cost the most etc.

Then, we represented the data and knowledge in an accessible format for the entire team. Finally, we decided what the future prices will look like.

Critical Knowledge is Linked to Key Performance Indicators

The knowledge management strategy has to be designed with a focus on: 

  • critical knowledge,
  • elements that bring profit,
  • superior competitiveness,
  • innovative initiatives,
  • great collaboration between employees.  

For each sector, there are various key performance indicators associated with it. Data built by the company is stored in accessible formats and used at the right time. Let’s take the example of an online book store. To obtain profit, the company must assess:

  • which books are sold most frequently,
  • which category of books has the biggest success in front of the audience,
  • how the user design and interface of the website impact the client behavior,
  • the customer satisfaction rate,
  • shipping methods,
  • and the number of unique visitors per week. 

The next step is to decide on how the data and knowledge given by these indicators will be used by the leaders and the employees of the book store.

The Knowledge Management Process

In order to understand the knowledge management process, let’s start by defining what data, information, and expertise mean. 

Data represents the crude forms and the building blocks of information: numbers, words, symbols, and signs.

Information represents the combination of data and semantics, which means that the data is associated with a specific meaning and context.

Expertise represents the experience of the human person and the creation of successful solutions for an organization.

Knowledge management is the management of the knowledge generated by a company. The knowledge management process is useful for understanding how the company works and what is its position on the market. 

There are 3 common phases of knowledge management inside companies: 

  1. Creation of Knowledge – Generate knowledge from multiple streams, from financial data to expertise in onboarding the new employees.
  2. Sharing of Knowledge – Distribute the knowledge existent in a company, from storage, access, control to editing or release to stakeholders.
  3. Exploitation of knowledge – Use the knowledge in the current and future activities of the company. 

Knowledge management is one of the duties of the 4th industrial revolution organization (see more on Digital Transformation: Why it is Important and How to Get Ready?).

The leaders are the ones that decide who can share and exploit the knowledge and in what conditions. Knowledge creation belongs to everyone. This is because anyone creates some type of knowledge when working for the company.

Knowledge-Based Systems

Companies in the 4th Industrial Revolution use software a lot for knowledge management. The knowledge-based systems provide reasoning-based smart decisions for a specific domain. 

Here, the term reasoning means that there is a cause-effect chain taken into consideration. The term smart means that predictions can be made by artificial intelligence and certain algorithms.

The common knowledge-based systems are used for the: 

  • identification,
  • acquisition,
  • representation of knowledge,
  • construction of decisions.

Knowledge-based systems are indispensable for solving critical problems. The data can no longer be owned by one person. The critical problems are solved through the cooperation between people and machines. Knowledge-based systems contain:

  • rules for introducing the data 
  • programs that create solutions
  • techniques and tools for helping deliver the right solutions etc. 

One example, straight from our yard. The Lumeer software, a project management software at its core, can also become a knowledge-based system at demand. This is because it helps the identification, acquisition, and representation of knowledge and the formation of decisions related to the management of the projects run by a company.

Create a Knowledge Management Strategy 

The knowledge management strategy represents the understanding of how the creation, distribution, and exploitation of knowledge can lead to profit and higher competitiveness.

The knowledge that generates profit is the number one priority for a CEO. There is data, information, experience, and expertise that help the sales process and the gaining of new customers. The knowledge that generates higher competitiveness is a “must-have” priority.

For example, the expertise of a developer that has worked for the biggest names in the industry in a new start-up. The developer knows the common solutions for solving the common issues in a company. By joining the start-up, he brings new perspectives to the usual activities of the organization. 

How to Create a Knowledge Management Strategy?

Here are the main steps when creating a knowledge management strategy: 

Steps for the knowledge management strategy Why? 
Step 1. Identify the calendar and the budget for implementing a knowledge management strategy inside the company.Start with a realistic budget to see what kind of activities can be made in a desirable timeline. 
Step 2. Identify the communication channels and practices used by people.In this way, you will understand how the company works in terms of social interaction, communicating ideas and sharing practices. 
Step 3. Identify what categories of knowledge are created and stored by each department of the company.In this way, you will understand the knowledge flow inside the organization. 
Step 4. Identify the objectives for each department in terms of knowledge creation, sharing, and usage.In this way, you will see what are the needs of each department. 
Step 5. Assess the methods for collecting data, information and knowledge for each department and the tools used to do this. When you collect the data and information with proper methods and tools, you can have better accuracy. Some methods and tools work better than others, so you should prioritize them. 
Step 6. Decide on the storage of data, information and knowledge. It is important to store the data, information and knowledge securely. Consider how to integrate the storage with the software resources used by the company. 
Step 7. Collect data, information and knowledge using methods and tools that the departments agreed on. A standard procedure for applying methods and tools that the people agreed on increases the stability and the predictability of the work. 
Step 8. Represent the data, information and knowledge in accessible formats and according to the needs of each department. Representation of knowledge is vital to make the company understand the internal and external environment in an intuitive way.
Step 9. Make the knowledge available for all stakeholders of the company. Multiple streams of knowledge will increase the learning and innovation process inside the company. 
Step 10. Update the data, information and knowledge from all the company departments and use it in the daily decision making process. Use the data, information and knowledge for the daily activities to improve the workflow and the productivity of the company. 

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