The Importance of Managing Organizational Knowledge

1 The Importance of Organisational Knowledge and its Management

I know. You know. But what do we know?

This is probably a question in mind of managers in more and more companies and it shows one important tendency - knowledge in organisations and especially its appropriate managing is a topic of increasing relevance.

The reason for this is that we live in a society with increasing international competition and accelerated technological change. In this dynamic environment companies must develop and especially maintain a competitive advantage. This requires a fast adaption and a constant reformation of the firms' offer (cf. Hauschildt, Salomo 2007: n.pag.). Therefore all knowledge resources in the organisation need to be mobilised. Traditional economisation and differentiation potential are almost exploited. The production factor knowledge in contrast implicates some unexpected potential. Globalisation shows that there can be sustainable competition only in case of better using the production factor knowledge (cf. North 2005: 1).

The basis therefore in turn is a good knowledge management. Merely with the help of knowledge management the long-term surviving in competition can be assured. In addition it is considered as strategical answer to the challenges of the future (cf. Al-Laham 2003: 1383). For example Kay found already in 1993, "that a firm's organisational knowledge plays a significant role in its firm's ability to innovate and survive in the long term" (Trott 2008: 191). So as you can see there is also a tight connection between knowledge and innovation because this brings new aspects that need to be handled.

The current job market situation shows how hard it is - today and even more in future - to find and keep adequate experts and management. Besides more and more older employees leave the company. Hence the risk arises that this knowledge - always linked to a certain person - gets lost irretrievable with leaving employees. So it gets more important to provide available knowledge to new employees in a fast and widespread way (cf. www.nordakademie.de: App. 1, p. 3).

Managers often even know that "inside their own organisation lies [...] a vast treasure of knowledge, know-how and best practices" (O'Dell, Grayson 1998: 154). This shows that a lot of managers are familiar with the importance of managing organisational knowledge, but they lack the appropriate operationalisation. So do 97 percent of the respondents rank (very) high the relevance of knowledge management for a future success of the company (cf. www.nordakademie.de: App. 1, p. 12), but less than 20 percent say that their current knowledge management system is (very) good (cf. www.nordakademie.de: App. 1, p. 13). Although recognised as potential the knowledge based management has to face significant problems in realisation. In spite of superior information technology, data bases and working groups many companies don't succeed in making knowledge transparent and using synergies (cf. North 2005: 9).

Because knowledge management is a really wide field there can be only given a superficial overview of this topic. There is no literary work that contains all important aspects about knowledge management, so this workpaper puts facts together in its own way illustrating the complexity. For a first understanding basic terms and definitions of knowledge management are presented. Furthermore it is pointed to some advantages of a good knowledge management as well as possible difficulties and appropriate approaches to solving these problems. To see how this theory can be transferred into practical relevance there is also added a best-practice from Volkswagen AG. In conclusion you find a summarising overview including a personal assessment of the topic.

2 Highlighting the Issue Knowledge Management

This chapter will take a closer look at what knowledge and knowledge management in general mean and which types of knowledge there must be managed. Therefore the terms and definitions organisational knowledge and learning organisation are introduced.

2.1 Definition of Knowledge and Knowledge Management

Knowledge is the process of a useful networking of information. Information can be seen as commodity from that knowledge is generated. Knowledge covers all skills and expertise a person can employ for problem solving - both theoretically and practically (cf. North 2005: 33).

The strategic knowledge management treats knowledge as the most important resource in the company (cf. Al-Laham 2003: 1383). As main activities you have to purposively develop new knowledge, make new and existent knowledge accessible to all employees in the organisation and make sure that knowledge is used for decision making. Finally a successful knowledge management is not characterized by how much it knows but rather how well this knowledge is transferred into its products and services. This implies a well prepared matching of these activities (cf. Pawlowsky, Reinhardt 2002: 227).

2.2 Organisational Knowledge and Knowledge Base

So what is then special about the knowledge in organisations? The knowledge base of an organisation - also called the collective knowledge base - is larger than the sum of individual knowledge bases, as you can see in the following figure (cf. Trott 2008: 190).

Figure 1: Individual versus organisational knowledge base (Trott 2008: 190)

In the left drawing you see the knowledge bases of the individuals a, b and c. The sum of the individual knowledge parts is a + b + c. The right sight shows the shared knowledge of the individuals in the context of the organisation. The sum here is amended by the new summands x and y embedded inside the circles, which represent the emerging relationships (cf. Trott 2008: 190). For a better understanding you can say that organisational knowledge means "each employee knows one digit of the code which opens the safe" (Trott 2008: 192). The knowledge an organisation possesses is very specific, meaning hard to replicate for competitors. Indeed technical knowledge like patents or commercial knowledge like channels of distribution can be used by other firms. But only an individual way of applying technology will lead to firm-specific knowledge, also called organisational heritage (cf. Trott 2008: 191).

In literature five dimensions of an organisation's knowledge base are proposed: the individual assets (individual skills and knowledge of an organisational member),