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KNOWLEDGE MANAGEMENT IN THE CORPORATE SECTOR

A strategic weapon for gaining competitiveness

Riyaz Ali*

Dr. Vinod Kumar Singh**

Girish Garg***
* Assistant Professor, Swami Shraddhanand College,

University of Delhi

** Associate Professor,Delhi School of Professional Studies and Research, Delhi

*** Assistant Professor, PGDAV (E) College, University of Delhi

Abstract

_______________________________________________________________
Today, World is on the threshold of a new revolution namely knowledge revolution. Society has
undergone a paradigm shift and present shift is to knowledge society. Knowledge has emerged as the
most important ingredient for success of any individual and organization and become imperative to
survive and prosper. Knowledge is an intangible assets in an organizations and they must learn to
manage their intangible assets, that is knowledge, to compete and become successful in own market and
this practice is generally known as Knowledge Management (KM) or sometimes is referred to as business
intelligence. Knowledge Management is fast gaining significance worldwide across industries of all types
and banking. Indian corporate sector is undergoing a paradigm shift and adoption of concept of KM has
become a strategic imperative rather than choice. Corporate sector is changing at high speed and high
level of uncertainty and inability to predict future compel them to adopt KM to survive and prosper. Both
public sector and private sector are endowed with adequate intellectual capital but they are not yet to
adopt KM as strategic weapon for gaining competitiveness. KM is also viewed as a strategy of putting
knowledge into action as a mean to increase organizational efficiency. This paper has a theoretical
background and will explore historical perspective and concept of KM, Technical application and tools

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currently utilized within this discipline are also discussed. The topics presented includes: how can KM be
applied into cooperate sector for achieving strategic competence and what are the factors behind
adopting KM in today’s competitive market scenario.. Finally, conclusions are drawn regarding its effect
on productivity and quality in the corporate sector

Key Words: Knowledge, Data, Information, Process, Tacit, Implicit

Introduction

Knowledge has emerged as the most important ingredient for success of any individual
and organization and become imperative to survive and prosper. Knowledge is an intangible
assets in an organizations and they must learn to manage their intangible assets, that is
knowledge, to compete and become successful in own market and this practice is generally
known as Knowledge Management (KM) or sometimes is referred to as business intelligence.
Knowledge Management is not a new concept. For years, owners of family business have passed
on their learning and wisdom to their children and successors and master craftsmen have taught
the tricks of trade to their apprentices and so on. The phase KM entered the lexicon in earnest.
To provide a technological base for managing knowledge, a consortium of US companies started
the initiative for managing knowledge assets in 1989. KM related articles began appearing in
journals & magazines.

However, it was only in the year 1990 that organizations started talking of KM as a
science. By the mid 1990s KM initiatives were mentioning anything flourishing. The
international KM network begun in Europe in 1989 and was soon join by the US based KM
forum and other KM related groups and publications. The number of seminars and conferences is
growing in the organizations focusing on managing and leveraging explicit and tacit knowledge
resources to achieve competitive advantage.

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Knowledge management: A conceptual framework

Before about KM, the interpretation of Knowledge must be clarified because Knowledge is the
main element that inspired KM initiatives. In today‟s extremely competitive market scenario,
existence of any organization depends on how well it can manage and deploy its corporate assets.
These assets can be categorized into tangible and intangible assets.

Traditionally, tangible assets are considered the most important and fundamental
corporate assets and intangible assets are considered to play a very little role or vogue role in the
organizations. However, despite managing and giving prime focus to all tangible assets,
organizations are still finding it very hard to gain the advantage to beat their competitors.
Eventually, organizations have found out that tangible assets can only help them to certain
extent. To compete and become successful in present competitive market, organizations must
learn to manage their intangible asset that is “knowledge”.

There are researchers who define knowledge in the context of know-why, know-what,
know-how, know-who, know-where and know-when, in order to relate it with managing
knowledge concepts. For instance, Van den Bosch and Van Wijk (2001) present a conceptual
framework of managerial knowledge integration. Know-what can be defined as something
people carry around in their head and pass between each other but in contrast, know-how
embraces the ability to put know-what into practice .On the other hand, Japanese researchers like
Nonaka, Toyomo and Konno (2002) defines knowledge by emphasizing on the relative, dynamic
and humanistic dimension rather than traditional Western epistemology (the theory of
knowledge) that focus on absolute, static and non-human view of knowledge.

The term “Knowledge” is one of the more confusing aspects of KM. The terms
„Information‟ and „data‟ are often used interchangeably with the term „Knowledge‟. In fact they
have different meanings.

Meaning of Data, Information and Knowledge

 Data are a set of discrete facts. Data are unorganized and carry no interpretation. It is
like an event out of context, a letter out of context, a word out of context. When we

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encounter a piece of data, our first action is usually to attempt to find a way to attribute
meaning it by associating it with other things.

 Information is data that is organized, patterned, grouped. A collection of data for which
there is no relation between the pieces of data is not information. The piece of data may
represent information, yet whether or not it is information depends on the understanding
of the one perceiving the data. Information is quite simply an understanding of the
relationships between pieces of data, or between pieces of data and other information.
 Knowledge is derived from information. When a pattern relation exists amidst the data
and information, the pattern has a potential to represent knowledge. It only becomes
knowledge, when one is able to realize and understand the patterns and their
implications.

Figure showing distinction between Data, Information and Knowledge

Explicit knowledge Vs Tacit knowledge

Basically, knowledge can be differentiated into two types, which are explicit knowledge and tacit
knowledge.

 Explicit knowledge is that component of knowledge that can be codified and transmitted
in a systematic and formal language e.g. documents databases, webs, e-mails, charts etc.
 Tacit knowledge is personal, intuitive, contextual and difficult to formalize record or
articulate. It is built out of experience and stored in heads of people.
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It is estimated that tacit knowledge constitutes about 70 % of all organization knowledge and is
difficult to identify and convert into real value unless a structured approach is adopted to manage
knowledge through KM techniques involving intensive dialogues, discussions and sharing in
teams.

To managing the corporate intangible assets, that is “Knowledge”, is generally known as

Knowledge management. KM is now becoming an undeniably important component in
organizational intangible assets. The continuous change in market expectations and the demands
for the new products have been gradually replacing the capital and labors intensive firms by
Knowledge intensive firms. KM is the concept in which enterprise gathers, organizes shares and
analyzes its knowledge in term of sources, documents and people skills. It is the process of
increasing organizational intelligence through involvement and participation in the
organization‟s knowledge capital, for crating business value and generating a competitive
advantage. KM is also viewed as a conscious strategy of putting knowledge into action as a
means to increase organizational efficiency.

In practice, KM encompasses identifying and mapping intellectual assets within the

organization, generating new knowledge for competitive advantage within the organization,
making vast amount of corporate information accessible, sharing of best practices & technology
that enable all of the above including groupWise and intranets.

KM, basically, involves three components: - People, Process and Technology.

 People create, share and use knowledge and hence this is an important component of
KM.
 Processes acquire, create and organize, share and transfer knowledge.
 Technology is the enabler and facilitator to store and provide access to KM.

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People

KM
Process Technology

Figure showing KM as a synergy of People, Process and Technology

KM can be visualized as a 3 – legged stool, where the stool would cease to be functional
even if one or more legs are not developed properly. While technology and processes are the
important to KM but most important is, undoubtly is people because creating, sharing and
using knowledge are done by people. Process and Technology can help to enable and
facilitate KM, but at the end, it is people who either do it or don‟t do it. A number of
organizations have learned this through bitter experience. Of those companies that led the
way in the early days of Km, many focused primarily on process and technology to their cost.
Having made significant investment in the latest systems, they, then, found that people
simply did not use them .Since then, organizations have learned that it is people who „make
or break‟ KM initiatives.

Tools & Technology of Knowledge Management

A true KM tools supports the user in managing knowledge i.e. expressing, storing,
sharing, refining and retaining knowledge within an organizations. Some of the commonly used
tools and technologies are as under –

 Internet and Web intelligence

 Data warehousing
 Intellectual asset management.
 Personalities portal interface

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 Work flow management

 Online discussion forums, Conferencing & Collaboration
 Instant Messaging
 Expertise information management
 Communities of Practice

Process of Knowledge Management

The process of KM involves following steps;

 To identify the areas to which Knowledge

 To required desired knowledge by induction of desired quality of manpower
 To develop knowledge pool within the organization and update from time to time
 To make available the appropriate updated knowledge to employees anytime and
anywhere
 To refine knowledge pools by adding fresh knowledge
In the present era of competition, the enterprises have to acquire, develop, update and make
use of desired knowledge. In the process of KM, people and technology are the main players and
they are required to play a major role in a synergic way.

Application of KM in corporate sector

The world is experiencing a paradigm shift in applications of knowledge in every

dimension of development growth, revitalization and organization. With the knowledge wave
gathering momentum, KM as a discipline has taken roots throughout the corporate world.
Organisations are getting differentiated on the basis of the knowledge that each possesses.

In today‟s fast changing economy, the key to faster and better growth is to bring the full
force of a company‟s knowledge. Knowledge is now life blood of a corporation. In today‟s
carpet world, KM has found a place in organizational thinking because knowledge is
increasingly becoming a source of competitive advantage in a globlised economy. The

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revolution in information and communication technologies has made knowledge the new
competitive weapon. The 21st century has ushered in the knowledge revolution. In the knowledge
based economy, every organisation is trying to focus on knowledge as a source of competitive
advantage.

KM as a discipline has struck roots throughout corporate sector in India to optimize their
resources in the best possible manner. In the recent past, KM has been accepted by the consulting
firms and others with their intangible assets which show that level of awareness has gone up
significantly. Corporate sector has shown a remarkable level of adoption of KM into its
mainstream operations to face challenges of globalization and economic liberalization. Many of
the world renowned companies have realized that knowledge is their life blood and have
organized to manage it in innovative way. The main reason behind it that knowledge is one of
the few resources that demonstrates increasing returns to scale. The more you share it, the more
it grows.

In a company, it is a physical and intellectual capital that creates all economic wealth and
value. Intellectual capital is made up of human and knowledge capital. Human capital comprises
of individual talents and knowledge that is acquired through education, training, experience and
cognition whereas knowledge capital is available in a variety of forms such as a research reports,
books, articles, manuscripts, journals, seminars and conferences, workshops and software etc.
The knowledge capital is assimilated with the human capital to generate the intellectual capital
through the process and structures of learning organizations.

In order to transform knowledge into valuable organizational assets, knowledge,

experience and expertise must be formalized, distributed, shared and applied. KM is a key part of
strategy to use expertise to create a sustainable competitive advantage in today‟s business
environment. In a present scenario of rapidly changing environment, updating of the knowledge
base must lie at the core of corporate strategy. To transfer the existing knowledge effectively and
creation of new knowledge have become two major management tasks for meeting the
challenges caused by hyper competition due to globalization and liberalization of the economy.

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Managing knowledge is becoming a business imperative for those corporations who want
to protect their present market share and stay ahead of competition. In order to survive in today‟s
knowledge based economy, enterprises need to manage knowledge efficiently and effectively.

KM is not a business problem for big, successful, performing companies alone, small
companies too need formal approaches to KM because they do not possesses resources and
market leverage comparatively big companies. According to Vishwesh Padmanabham, country
manager of IBM India Ltd. “Future of business success increasingly depends on the retention
and creative use of knowledge, ideas and experiences of an organization and its employees”

The rational of KM in organizations lies in an organisation‟s capacity to improve existing

skills and acquiring new ones. To make knowledge more manageable, deliberate and persistent
efforts are required to capture and share the knowledge that is residing in employee‟s heads,
diaries, personal computers and files. The prime reason behind adopting these efforts is that no
company has the time and money to reinvent knowledge in the fast changing industrial
environment. A continue focus should be given on the creation, updating and use of knowledge
by all employees to serve customers effectively and remain in business, shorten product
development time, improve customer service, empower employee, production of high quality
products, capture data and information, create knowledge, share and learn.

KM in corporate sector: As a strategic weapon

In the present extremely competitive market, enterprises can achieve strategic competence
through the application of knowledge and practice of Knowledge management. Km may be more
relevant in corporate sector because of the competitive pressures and advancements in
information and communication technology. How KM can be used as a strategic weapon for
gaining competitive advantage has been discussed in the following paragraphs.

 When an working employee of enterprises retires or leave the organization, his

experience and knowledge leaves with him too and it is necessary for the organization to
somehow store this knowledge and experience and retrieve it when required for decision

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making. Storing and sharing of knowledge can be done by proper implementation of

various tools and techniques of KM.
 Generally, enterprises are not able to access the information regarding the customer
reaction to their products and services provided. KM provides information about the
products behavior which enables organization to bring about suitable modifications and
improvements.
 In today‟s competitive market, customer-centricity has emerged as important concept for
all organizations .Industries are paying more concentration for enhancing their customer
service by putting latest management practices like customer relationship management
(KRM). Km can be used as a powerful enabler of CRM. By applying CRM concept in
creating life time value and long standing relationship with best customers of an
organization, an enterprise can know the customer‟s requirement and products to suit to
their needs and preferences.
 It is assumed that more than 90 percent of total organizational knowledge is possessed by
its employees. Having greater access to their employee‟s knowledge, organizations make
better decisions, reduce deficiency in work and increase innovation. This is only possible
by KM.
 Km contributes to bring about product and process innovation for a organizations. It is
well known that any business innovation can be achieved by deliberate and systematic
effort of organization after a careful analysis of the opportunities in the business
environment. KM act as an important enable for product innovation by providing the
latest and relevant information regarding the changing customer tastes, preferences etc. It
is only KM system that can make development of new products and processes very fast
as well as cost effective.
Concluding remarks

Knowledge alone can provide a sustainable advantage to an organization because

sustainable competitive advantage is no longer rooted in physical assets and financial capital but
in effective channeling of intellectual capital. An intellectual capital is the most significant asset
that will give a company a sustainable competitive edge. The requirements for wealth creation
and economic growth have shifted away from traditional assets such as land, capital and labour

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force towards intellectual assets. About ¾ of world‟ s corporate market value resides today in
assets such as intellectual property, customer data, financial records. These assets are all
knowledge based.

According to recent survey conducted by KPMG, large companies understand the value
of a fully implemented knowledge management programme but the complete benefits of such a
regime are being missed. The survey conducted across 423, large organizations in Europe, USA
showed that KM users tend to see immediate internal cost gains but don‟t equate them with
external, longer and more far reaching benefits such as intellectual capital growth. KPMG
concludes that companies view KM as a purely technological solution. For most companies, KM
is limited to the use of internet, data warehouse, document management systems and groupware.
A majority of companies are at the elementary stages in the KM journey.

KM is necessary for leveraging of knowledge and expertise to improve organizational

innovation, productivity, competence and responsiveness. People, firms and –countries use
technical knowledge to improve their efficiency in production of goods and services by creating
knowledge themselves or adopting knowledge created by others. According to World
development report (1998-99), developed countries invest much time and money in R & D to
expand their knowledge base whereas developing countries due to lack of resources invest less in
R & D. They expand their knowledge base by acquiring knowledge created by others according
to their needs.

In today‟s corporate world, KM has found a place in organizational thinking because

knowledge is increasingly becoming a source of competitive advantage in a globalised economy.
It can be said in the context of India that when firms in India are subject to competition from the
best companies in the world, adopting KM as a strategic weapon for gaining competitive
advantage is inescapable.

Indian corporate sector are compelled to adopt KM concept as a strategic weapon for
gaining competitiveness in the present competitive market. KM is fast gaining significance in
world wide and considered as a key part of the corporate strategy. This is evident from the fact
that a few years back, survey showed that 50 percent of managers worldwide treated KM as a fad
but an annual survey on KM conducted by KPMG revealed that the above percent has now

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declined to 5 percent. A well known survey agency Gartner group consultants predict that by the
end of 2003, half of the fortune 1000 companies will implement KM system. American
companies will spend $73 billion on knowledge management software this year and spending on
content, search, portal, and collaboration technologies is expected to increase 16% in 2008

According to an International Data Corporation‟s (IDC) survey conducted across more than 600
banks in Western Europe, only 20% of banks are currently apply a knowledge management
principles. With greater awareness of the importance of knowledge management, IDC expects
this situation to change in the near future, and knowledge management will become a priority for
the corporate sector.

Suggestions

In order to successfully implement knowledge management measures in the corporate

sector, the below mentioned suggestions may be recommended:-

 Managers of the organizations are required to develop a greater appreciation of their

intangible human assets captive in the minds and experiences of their knowledge
workers because success of business depends on the retention and creative use of
knowledge, ideas and experience of an organizations and its employees. Without these
assets, companies are simply not equipped with the vision to foresee the future.
 Organizations should view knowledge management as an implicit element of daily work
and create an environment and culture where knowledge sharing is encouraged.
 To build an organization for the future, there are strong need to systematically enhance
organization learning and manage the knowledge assets to benefit the company.
 Organisation will be required to leverage the intellectual capital of the company to
increase revenue and wealth of an organization and reduce cost by capturing learning
and sharing knowledge.
 The value of knowledge must be recognized, especially by top management. The
organizations currently emphasizes information technology and the dissemination of
information, but does not yet realize the value of knowledge management in creating a
competitive advantage by improving internal processes, customer services and products,
and by creating a good environment for employees. Without the recognition of the

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importance of knowledge management, an essential backbone of all business processes

would be missing. Most business activities, from important strategic decisions, to basic
investments, measuring performance, are based on knowledge. Hence, the combination
of different knowledge sources into one, strong, bank - wide knowledge base plays an
important role in the organisation‟s future success.

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