February 26, 2009

Knowledge Management in a Business Environment..?

A knowledge organisation is been defined as "…an entity that realizes the importance of its knowledge, internal and external, to the organisation, and applies techniques to maximize the use of this knowledge to its employees, shareholders and customers." [Liebowitz and Beckman, 1998]

In today's modern world organisations mainly depends on decision makers to make "mission-critical" decisions based on the inputs from multiple sources. In an ideal scenario where decision makers are making decision on the basis of either others conclusions or from its own lengthy experience which allow them to act quickly and decisively on the information. Further going in depth of organisation the most vital resource is Collective Knowledge which resides in the minds of an organisation's employees, customers and vendors. If the organisation knows how to manage this knowledge they can have many benefits in terms of business competencies, accelerating innovation and time to market, improving cycle times and decision making, strengthening organisational commitment and building sustainable competitive advantage [Davenport and Prusak, 1998]

An organisation contains widespread hierarchy structure. There are several departments which may be interlinked with each others, where knowledge sharing is taking place. In my view organisational structure is underpinned by knowledge management. According to Becerra- Fernandez, et al., (2004), Organisation impacts of Knowledge Management are categorized with four P's i.e. People, Processes, Products and Performance which is shown in Fig 1.0 and classified in the following points.

Impacts on People –

KM can help develop employees to learn and give exposure to upgrade their knowledge with the updating market, In addition with upgrading knowledge or adopting shared information, if employees are well aware of ongoing and future changes they are less likely to get surprised or in other words employees would be better prepared for change. Job Satisfaction impacts on people where knowledge acquisition and skill enhancement and also enhance the market value compare to the other organisation. KM also provides employees with solution to problems they face in case somebody else would have faced and would have solution to it, which can be shared to consume valuable time and effective piece of work.

Impacts on Processes –

Processes are the step by step guide for performing a task or action, where KM enables improvements in organisational process in all the departments by providing suitable effective process for decision making with fewer errors. It also enables process to complete early with low cost and generate efficient values which directly links to Cost Savings and Improved Productivity, Innovating new process for either improving the existing process or creating a new step for a certain process which would result in better use of new ideas and improved brainstorming.

Impacts on Products –

Organisation Products are also impacted by KM where the impact is seen in two ways value-added products and knowledge-based products, The Value-added products are the products which are already exist in the market but added offers, it's either a new products or improved product which add value as compared with earlier products. Due to organisational process innovation value added products get benefited from KM. Knowledge Based products are basically gained by naturally or with lengthy experienced knowledge for example Consulting and Software Development Industries, Lets consider an auto consultant who goes for a car bid and quickly access and combine the best knowledge and bid on proposal. In such industries, knowledge management is necessary for survivals.

Impacts on Organisational Performance –

KM in an organisation could also cause either direct or indirect impact on organisational performance. Direct impact of KM on organisational performance occurs when knowledge is properly used in an organisation where revenue is generated from the implemented KM and where KM strategy is aligned with Business strategy. Indirect KM on organisational performance would impact on the activities which are not linked with strategy, revenue and cost. For example, by using KM if the bank customer executives convince the customer who would in turn gives the customer loyalty, therefore these activities cannot be measured easily.


The above diagram explains about the knowledge management in an organisation which is directly linked to People, Process, Products and Performance which is interlinked in some or the other form where knowledge gain by the people is result in good products and efficient process results in high performance.

The process of sharing knowledge or transfer of knowledge within the organisation brings the self development within the employees as well increase the capital of the company in term of Intellectual Wealth. Organisational knowledge assets are a major component of these intangible assets which is also known as intellectual capital. In one of the magazine a collective view of many CEOs who agree that their most competitive advantage is their "Brainware" or their "Human Capital". According to Liebowitz, j. (1999)

"Knowledge Management deals with the process of creating value from an organisation's intangible assets….."

Some companies, like Caterpillar, got a problem where one third of their employees will retire in the next five years. Caterpillar is looking at knowledge management strategies to best collect their knowledge and make it available in an interactive mode to those at Caterpillar who could benefit from their knowledge.


Liebowitz, J. and Beckman, T. 1998. Knowledge Organizations: What Every Manager Should Know. Boca Raton, Florida: St. Lucie Press.

Davenport, T.H., and Prusak, L. 1998. Working Knowledge: How Organisations Manage What They Know. Boston: Harvard Business School Press.

Becerra-Fernandez, I., Gonzalez, A., and Sabherwal, R. 2004. Knowledge Management – Challenges, Solutions and Technologies. Pearson/Prentice Hall.

Liebowitz, j. (Ed.) (1999), The Knowledge Management Handbook, CRC Press, Boca Raton, FL.


  1. hahaha... u taken my construction team...

    pay them well

  2. Dilip,
    I really liked your take on the impact of KM on people, products and processes. Although you try to illustrate your views, it would be helpful if you could have provided real life examples. Also you need to work more on your grammatical skills because i found a lot of grammatical mistakes.