By the mid-1990s, it became widely acknowledged that the competitive advantage of some of the world's leading companies was being carved out from those companies' knowledge assets such as competencies, customer relationships, and innovations. Managing knowledge suddenly became a mainstream business objective as other companies sought to follow the market leaders (Ives, Torrey, and Gordon 1998).
This shows that when it emerged, knowledge management was important with its usefulness closely linked to the challenges in the business environment at the time. This leads to the next question, which is whether knowledge management is still applicable to the modern business environment.
Knowledge Management and its Relevance to the Modern Business Environment
According to Malhotra (1998, p.58), knowledge management caters to the critical issues of organisational adaptation, survival, and competence in the face of increasingly discontinuous environmental change. McCampbell, Clare & Gitters (1999, p.172) cite Arthur suggests that the new world of knowledge-based business is characterized by a continuous redefinition of organisational goals, purposes, and an organisation’s way of doing things. Considering that the current business environment is characterized by radical change, this suggests that knowledge management is an approach that is capable of providing the qualities that modern organisations need to survive and compete.
In the modern business environment, organisations are also seeking advantages that other companies cannot easily duplicate. Since knowledge is learned by experience rather than acquired, knowledge is a source of competitive advantage that meets this need. This is another reason that knowledge management appears to link well with what organisations are seeking.
Another factor in the modern business environment is that people factors are becoming more important. Talent and experience is seen as a major source of advantage and it is becoming rarer. In some organisations, thirty to forty percent of the workforce will be retiring in the next five years. Suddenly, organisations are discovering the value of communities of practice, mentoring, and knowledge networks for getting new hires up to speed and improving overall competence of the workforce (Nonaka 1991).
We are experiencing another shift in the value proposition as people realize that the workplace is evolving from organisations to networks of more autonomous business units or companies (Goles and Hirschheim 2000). Relationships are the hot new topic. But what fundamentally builds relationships are exchanges of knowledge and other intangibles, more transparency of information, and more collaboration. Relationships that are based only on business transactions are fragile. Those that are built on genuine knowledge exchanges and helpfulness are stronger and more resilient. This is yet another reason that knowledge management is relevant to the current business environment (Nonaka 1991).
Overall then, it can be said that knowledge management is relevant to the modern business environment. However, like all theories, its real effectiveness lies not in its theoretical value, but in the results it achieves. In turn, this depends on how well organisations are able to utilise it. This is where the issue of knowledge management becomes complex, because as will be shown, there are many factors that make applying knowledge management strategies a complex issue.
Implementing a Knowledge Management Culture
One of the first major complexities associated with knowledge management is that it is not something that can be implemented only at the higher levels of the organisation. Since every employee is a source of knowledge, knowledge management must be part of the organisation overall (Dearlove 2001).
One of the common problems that occurs in knowledge management implementation is that the organisation ignores the people and cultural issues (Walsham 2001, p.599). In an environment where the individual's knowledge is valued and rewarded, establishing a culture that recognizes tacit knowledge and encourages employees to share is critical. The need to sell the knowledge management concept to employees shouldn't be underestimated. After all, in many cases employees are being asked to surrender their knowledge and experience.
An organisation simply cannot expect to implement a knowledge management system and enjoy immediate benefits. Instead, an organisation will need to consider the organisation’s culture and adapt it so that the employers will accept knowledge management (Jashapara 2004). Certainly, this is not an easy task. However, if the benefits are to be achieved, it is a necessary one. The simple fact is that many organisations implement a knowledge management with the naive belief that the organisation will magically transform. When it comes to strategies involving all employees, this simplistic view only leads to disappointment and failure.
Implementation Difficulties
Many companies took the approach of implementing knowledge management solutions, focusing almost entirely on knowledge management technologies (Bhatt 2001, p.68). However, they met with limited success, and so questions began to be asked about whether knowledge management wasn't simply another fad that looked great on paper, but in reality did not deliver. In fact for a while, it looked as if knowledge management was destined to be confined to the management fad graveyard. However on closer inspection, companies realised that it wasn't the concept of knowledge management that was the problem as such, but rather the way that they had gone about approaching it (Dearlove 2001).
The greatest failing was the mechanistic thinking that pervades a lot of the actual practice. The default business model is the value chain and the most common analysis tool is still the process diagram. These are linear, mechanistic approaches based on the industrial age production line. Business and economic models are also based on old thinking.
Many companies do fine on the technology needs for knowledge sharing but do nothing to support the social innovations of collaboration and communities of practice. In other cases, people focus only on communities of practice and don’t budget for the supporting technology and business infrastructure that is required (Bhatt 2001).
One recurring theme of much of the literature referred to in this paper is that knowledge and information services can no longer afford to be situated or operated as discrete or autonomous or semi-autonomous units simply servicing the rest of the organisation, but must increasingly participate in and contribute to the wider decision making and strategy-formulation activities of the organisation (Zack 2002).
Other notable themes include the need to encourage and develop the sharing of information in organisations, to emphasise the value of teamwork, groupwork and intranets, and activities related to the elicitation and creation of knowledge within organisations (Newell et al. 2002).
Clearly, knowledge management is not something that can be lumped on top of how the organisation operates. Instead, is has to be carefully integrated with other systems. This requires time, energy, and consideration. Put simply, many companies have not taken this approach and have tried simply to add a knowledge management approach on top of other systems. It is this approach that has led to failures.
Linking Knowledge Management to Organisational Goals
Every initiative is a response to a particular goal or objective. Sometimes the goals are simply to improve access to knowledge resources around the company. That would probably require an information management approach. In the case of a product development group, however, collaborative tools and processes and knowledge-sharing activities with research partners might be more appropriate. One must always begin with the business question and objectives first. That is what shapes the initiative(Rao 2005).
Given that there is no generic initiative, there are clearly a lot of elements that come into play when a company decides to get serious about organisational knowledge. The problem is that many organisations do not take into account these factors. Without doing so, knowledge management is not linked effectively to what the organisation is trying to achieve and so cannot result in positive outcomes (Gorelick, Milton, and April 2004).
Knowledge management is one of many components of good management. Sound planning, savvy marketing, high-quality products and services, attention to customers, efficient structuring of work and thoughtful management of an organisation's resources are all critical to compete in today's marketplace. Knowledge management may help create the competitive edge in today's global environment, but it is not the only answer(McCampbell, Clare & Gitters 1999).
Measuring the Success of Knowledge Management
Another complexity associated with a knowledge management system is determining success levels. Khoshsima, Lucas, and Mohaghan (2004, p.425) note that knowledge is an intangible asset, which makes it difficult to measure the success of knowledge management.
The issue is complicated because despite this, knowledge management systems are often sold as a technology solution or a suite of technology tools that will realise a financial or traditional Return On Investment (ROI) return (Allee 2002). In other words, the knowledge management initiative is sold as a way to reduce costs, increase revenue or improve productivity, all of which can be calculated in financial terms. But when you think about it, that is an incomplete picture of the value return for something as complex as a knowledge initiative.
Financial measures only tell you about past performance - they say nothing about your ability to be successful five years from now. The bigger story about focusing on knowledge is how it can improve the underlying intangibles asset base of the organisation, where you are building capacity for the future. This improves human competence, supports innovation in infrastructure and operations, and builds trusting relationships with stakeholders. However, as long as an organisation is measuring its success based on old models and traditional return on investment measures, it may be completing missing the benefits and successes it is achieving (National Electronic Library for Health 2005).
Conclusion
With this analysis completed, several points have been made. The first important point is that knowledge management does have important benefits and does achieve the kind of outcomes that organisations are seeking in the current business environment. The second important point is that knowledge management is not simple and easy to implement. It is complex and has significant potential for success, but it does require thorough consideration and effective implementation. Whether knowledge management becomes a fad or an effective approach will depend on whether or not organisations are willing to take the time to make the knowledge management work.
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