The Importance of Knowledge Managment to Organisations in 21st Century - Essay Example

?The importance of Knowledge Management to organisations in 21st century In today’s world industrial economies have being transformed into knowledge and information-based service economies. These industrial economies like the United States, Japan and Germany all have transferred their manufacturing operations to less developed economies of the worlds. In such economies knowledge and information are the vital ingredients that generate wealth in the society. The knowledge an information revolution began at the dawn of the 21st century and since then it has accelerated in pace tremendously. This revolution raised the number of white collar workers employed in offices as compared to the number of farm workers, service workers and blue-collar workers employed in manufacturing. Today’s work force is heavily involved in work like sales, education, health care, banks, insurance firms, and law firms. They also provide business services such as coping, computer programming, or making deliveries. These jobs primarily entail working with, distributing, or creating new knowledge and information. In such knowledge and information oriented economies the market value of the firms is based largely on the value of intangible assets for instance proprietary knowledge, information, unique business methods, brands and other intellectual capital. In the current business scenario physical assets like building, machinery, tools and inventory account for just 20 percent of the market value of many public firms (Beijerse, 1999). Knowledge and information in today’s era provide the foundation to companies to come up with or produce new products and services. Such product innovations include the credit card, overnight package delivery, or world-wide reservation systems. Even certain products can be classified as knowledge and information intensive products, such products include computer games, requiring a great deal of knowledge to produce. Traditional products also are making use of knowledge for instance in the automobile industry both design phase and production phase rely heavily on knowledge and information technology (Sparrow, 2001). These changes which have been described above along with considerable amount of corporate restructuring have lead to the creation of a digital firm. A digital firm is one in which all of the organisation’s significant business relationships are digitally enables. In this kind of digitally enable business model an organisation is connected to its customers, suppliers and employees by means of digital networks. Core business activities are carried out through these networks spreading across the organisation and linking multiple organisations in a way that these networks create a value web (Valkokari and Helander, 2007). These digital firms are quick and nimble in sensing and responding to their environment. This capability is the fundamental difference between a digital firm and a traditional firm. This capability enhances the survival chances of a digital firm in turbulent times. Digital firms can be grown in to global organisations having global management practices in them. By restructuring their work to fit digital means of operating, a digital firm has raised its chances to achieve unprecedented levels of profitability and competitiveness. A digital firm makes use of internet and digital technology to integrate its key business processes with its channel partners. In this way vital information can be shared with important constituents of the business in a seamless way. In order to reap the potential benefits of becoming a digital firm, organisations are investing heavily on information technology, which enable them to integrate internal business processes and build close working ties with channel partners (Wong, 2005). Since knowledge is the key word over here for an organisation therefore it is important to highlight the distinction between data, information, knowledge and wisdom. Data is the flow of event or transactions captured by an organisation’s systems. Data is important for transacting but other than that it has little else significance. To turn data into useful piece of information an organisation needs to expand resources to organise data into categories of understandable format. To transform information into knowledge a firm has to expand additional resources which in turn help it to discover patterns, rules and contexts where this knowledge can be put use to. Finally come wisdom which is a collective and individual experience of applying knowledge to the solution of problems. Wisdom deals with where, when and how to apply knowledge. Knowledge can be defined as an individual attribute and a collective attribute of the firm. Knowledge is a cognitive or physiological event that takes place inside peoples’ heads. This knowledge is also stored in libraries and records, shared in lectures and stored by firms in their business processes and employee understanding. Knowledge residing in the mind of an employee and has not been documented is known as tacit knowledge whereas knowledge that has been documented is called explicit knowledge. Knowledge can be spread across e-mails, voice mail, graphics and unstructured documents as well as structured documents. For a 21st century firm knowledge either resides in the minds of its employees or its business processes or both. Knowledge acquired by one firm cannot be easily transferred to another firm nor is it applicable to another firm’s position. Thus knowledge is therefore situational and contextual. This makes it imperative upon a firm not only to know how to perform a procedure but also to know when to perform a procedure (Wong and Aspinwall, 2005). From the above description about knowledge it is clear that knowledge is a different kind of a firm’s asset. It is a very complex phenomenon and there are multiple aspects to the process of managing knowledge in a firm. Core competencies of the firm which are built around knowledge are key organisational assets. Knowledge that helps an organisation to avoid duplication is a primary source of profits and competitive advantage that cannot be easily replicated or imitated by a competitor in a marketplace. Vital operational knowledge makes a firm efficient and effective in the use of its resources. Without this kind of knowledge a firm becomes less efficient and less effective in the use of its organisational resources and as a result squanders away vital resources. Organisations also differ in their ability to apply knowledge, and therefore those firms which are good at applying their knowledge than their competitors will be more successful. Organisations also create new knowledge and information. The new knowledge is created on the basis of the experience obtained by the organisation by operating in the industry. Organisational experience is reflected in the ways organisation undergoes data collection, planning and managing its various organisational tasks. Organisations are able to learn and improve their level of knowledge from different experiments. Also t he feedback that the organisation receives from its stakeholders including customers are also another important way for organisations to improve their level of knowledge. All of these help in improving the level of knowledge of the organisation. After creating new knowledge an organisation indulge in the process of gathering this knowledge and for dissemination of this knowledge. Such system should be built by the organisation that the employees are able to develop new organisational behaviours which would be helpful in improving overall efficiency of the business and improve the quality of decision making. In addition to this, it would also be helpful in improving the ability of the organisation to analyse and take actions to the external factors and thus it would improve the probability of the organisation to survive in tough conditions (Beijerse, 2000). With effective system of knowledge management, the organisation would also be able to adapt to the changes that occur in the external environment and therefore it would allow the company to remain flexible in its approach. In this way the process of knowledge management will promote organisational learning from its business environment and also it will encourage the organisation to incorporate this acquired knowledge into its business processes and its structure (Desouza and Awazu, 2006). If looking at the value chain of knowledge, the knowledge management value chain is divided into four different steps or elements which are presented below: Knowledge Acquisition: Organisations can work on the acquisition of knowledge in different ways. The method of technique of collecting data is dependent on the type of knowledge which is required by the organisation. Organisations can use different sources and tools for gathering and acquiring the relevant information and knowledge. Moreover, an organisation can acquire new knowledge by encouraging its employees who are major stakeholders of its industry to add new knowledge by sharing their experiences with newcomers in the industry or by pointing their experience on paper and documenting it for future referencing. This kind of internal network bring an employee closer to the person who has actually experienced a similar problem, thereby enabling the employee to gain from the experience of his fellow employee. Organisations can also gather or create new knowledge with the help of different trends and patters in the data collected from its transaction processing systems and management information system or in other cases it can create new knowledge by using knowledge workstations (McAdam and Reid, 2001). Knowledge Storage: the organisations should work on the effective and efficient storage of data with the help of different data repositories. This data should be accessible to the organisations employees, however sensitive data should be given access to only on a need to know basis. This will help ensure that vital company data does not fall into wrong hands or the hands of competitors. Knowledge Dissemination: a company can go on to build company portals, internal e-mail networks, and company instant messaging systems along with company’s internal database that could be accessed through the company’s searching technology systems. These systems can thereby bring about the dissemination of desired knowledge. With the help of these information technology tools and techniques, organisations can easily work on communicating and disseminating the information and knowledge in appropriate manner. Knowledge Application: in cases when gathered knowledge that is not utilised and applied according to the prevalent situation, the organisation is not able to create value addition and survive in the highly competitive industry. Hence, the chances of survival of the company will diminish and the company will have to face severe implications of not learning from the previous experiences and not applying the knowledge under required circumstances. Hence, it is highly important for the organisations to not only acquire the knowledge but also apply it in efficient and effective manner. Thus the importance of knowledge in today’s competitive environment cannot be stressed more. Not only is it important that an organisation makes effort to nurture new knowledge but also it is of utmost importance that it apply this knowledge to its business processes. List of References Beijerse, R. (1999). ‘Questions in knowledge management: defining and conceptualizing a phenomenon.’ Journal of Knowledge Management, vol. 3, no. 2, pp. 94-110. Beijerse, R. (2000). ‘Knowledge management in small and medium-sized companies: knowledge management for entrepreneurs.’ Journal of Knowledge Management, vol. 4, no. 2, pp. 162-179. Desouza, K., and Awazu, Y. (2006). ‘Knowledge management at SMEs: five peculiarities.’ Journal of Knowledge Management, vol. 10, no. 1, pp. 32-43. McAdam, R., and Reid, R. (2001). ‘SME and Large Organization perceptions of knowledge management: comparisons and contrasts.’ Journal of Knowledge Management, vol. 5, no. 3, pp. 231-241. Sparrow, J. (2001). ‘Knowledge management in small firms.’ Knowledge and Process Management, vol. 8, no. 1, pp. 3-16. Valkokari, K., and Helander, N. (2007). ‘Knowledge Management in different types of strategic SME networks.’ Management Research News, vol. 30, no. 8, pp. 597-608. Wong, K. (2005). ‘Critical Success Factors for implementing knowledge management in small and medium enterprises.’ Industrial Management and Data Systems, vol. 105, no. 3, pp. 261-279. Wong, K., and Aspinwall, E. (2005). ‘An empirical study of the important factors for knowledge management adoption in the SME sector.’ Journal of Knowledge Management, vol. 9, no. 3, pp. 64-82. 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