Earlier this year report produced by Waikato University claimed that very few small and medium sized enterprises (SMEs) thought the so-called knowledge wave would have any impact on their business. The outcome did not surprise people who know that most SMEs are busy dealing with the day-to-day issues of running their companies.
Perhaps the reason for the lack of appreciation stems from lack of understanding of what knowledge is. There are two schools of thoughts on the subject. The first is ancient, that knowledge is process and human characteristic. This concept of knowledge is seldom referred to but the idea has been advanced more often in recent years as people become more aware of how knowledge is applied in the organisational value-adding process. The second thought holds that knowledge is an object. The concept is relatively new and its popularity has grown rapidly, promoted mainly by the IT industry.
Ask group of people to define knowledge and you’ll get range of answers. Examine them and they all fall into two categories. One is relatively easy to decipher into digital form and so it can be put on disc, duplicated and distributed. This is called explicit knowledge.
The second category is harder to convert into some digital code and resides mainly in the human brain. This is called tacit knowledge. By far the largest part of knowledge in an organisation is tacit knowledge and belongs to the employees. Explicit knowledge can be documented or retained in the IT systems. Perhaps more than 95 percent of knowledge of an organisation is tacit knowledge and it goes down the elevator each evening and may not return in the morning.
Put simply, knowledge is “the ability to act in context”. This of course refers to the definition of knowledge as process and human characteristic. It also makes it blatantly obvious that explicit knowledge is limited and does not automatically enable person to act in context. It may describe what person is able to do but it does not enable other people to act in the same way. Explicit knowledge is information or data and for person to be able to act with this information he or she needs to turn it into his or her own tacit knowledge. This happens when people learn. Information and knowledge look the same but they have distinctly different characteristics.
Information * Static *Independent of individuals * Explicit * Digital * Easy to duplicate * Easy to broadcast
Knowledge *Dynamic * Dependent on individuals * Tacit * Analogue * Must be re-created *Face-to-face transfer
From the above it is obvious that there is no knowledge in written or digital form. Computer systems and the internet contain only information, not knowledge. The IT industry has confused the world by claiming the high ground in knowledge management when in fact, it deals only with information and data.
Available information is growing at spectacular rate. It is said to double in volume every 18 months. I am not sure how fast knowledge is growing. We seem to drown in information, but are constantly thirsty for knowledge.
What is lacking are effective learning methods. Learning is the process that turns information into knowledge. The traditional management style of command and control delivered instructions ie, information. People, however, only use their own knowledge. The success that results from sending out information or instructions is entirely dependent on the recipient turning this information into their own knowledge.
It seems logical, therefore, to suggest that when we communicate we should deliver information in the way in which people learn, not the way in which we prefer to teach. In other words, communicate in way that recipients can come to their own conclusions, rather than necessarily accept the conclusion reached by the sender.
This is “management by learning” as opposed to “management by instruction”. We are all experienced learners from early childhood but we are not necessarily au fait with how people learn. That may be why the following comments appeared in US magazine, Fast Company, back in October 1996.
“The knowledge of staff is crucial to business. However, knowledge, like everything else in business, is constantly changing. People need to learn more than just discrete skills. They need to be taught how to learn.”
We constantly hear about organisations promoting the concept of “becoming knowledge based”, but no organisations are knowledge based. No organisation would exist, function or produce anything without people being capable of acting in context. So what is so special about knowledge and why now?
• Pace of change – “Our accelerating world” with major breakthroughs and innovation happening more frequently.
• Nature of goods and services – “Smart products and service intensity”, ie, built-in chips in products making them programmable with memory.
• The scope of typical firm – “It is now small world after all” and thanks to technology you can reach large number of customers worldwide.
• The size of attrition rate of employees – “Here today gone tomorrow”. People stay as long as they learn new things and are being challenged with new experiences.
• The structure of organisations – “The coming virtuality”. Teams can be created with agents from around the world without getting together.
• Capabilities and cost of IT – “Multiplying connections” eg, IT investments are relatively low cost in relation to functionality.
Technology is fantastic enabler. It makes information available to everybody everywhere. It is the main force behind spectacular productivity growth everywhere, in particular in the US. But it is only an enabler. In the end, it comes down to how well people use it and how fast people learn by converting all available information into useful knowledge, ie, act appropriately in context.
Organisations should make full use of available information to tailor-make customers’ solutions. By definition knowledge organisation provides 100 percent bespoke solutions for customers – but this is rare. Most organisations rely on standard solutions from the past, usually in the form of templates.
On scale of 0-100 percent in the world of personalised service the fast food and self-service non-manufacturing companies occupy one end. Customers must learn how to behave and what to do to get service. These organisations work according to manual – such as McDonald’s – and operate like factory with the concept of the value-adding chain, with innovation, production and sales functions in the chain and the customer involved at the end of the chain.
At the other extremity the customer is involved in every step of innovation, production and selling. It is more like overlapping circles. Available technology and improved learning methods increasingly make it possible for people to work in close relationship with customers to provide the solutions they want.
What then, is knowledge management? Simply put it is the art of creating value by leveraging knowledge-rich assets. These assets fall into three categories called competence, external structure and internal structure.
Competence is the value of all knowledge that exists in individuals in the organisation to create solutions for customers.
External structure is the value of all the knowledge and information the organisation has access to outside the organisation and which may be held by customers, suppliers, competitors, institutions, alumni (ex employees) and potential employees (the talent market).
The internal structure is the value of all knowledge and information inside the organisation – in IT systems and in support people. This total value is in some organisations substantial amount and is referred to as the intellectual capital.
If SMEs took time out to consider the total value of the intellectual capital in their enterprise and thought about how to leverage this value into profitability and eventually cash, they would bette
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