Importance of knowledge management in business

Knowledge Management was defined as the process of applying a systematic approach to the capturing, structuring, management, and dissemination of knowledge throughout an organization to work faster, reuse best practices, and reduce costly rework (Nonaka and Takeuchi, 1995). it focuses on organizing and making available important knowledge, wherever viable important knowledge, wherever and whenever it is needed and is related to the concept of intellectual capital, composed of both human & structural capital.

Knowledge management is increasingly viewed as a core component of good business practice. More and more government agencies and large multinationals are requiring their contractors to demonstrate that they operate an effective knowledge management system.

Knowledge management is nothing new. For hundreds of years, owners of family businesses have passed their commercial wisdom on to their children, master craftsmen have painstakingly taught their trades to apprentices, and workers have exchanged ideas and know-how on the job. But it wasn’t until the 1990s that chief executives started talking about knowledge management. As the foundation of industrialized economies has shifted from natural resources to intellectual assets, executives have been compelled to examine the knowledge underlying their businesses and how that knowledge is used. At the same time, the rise of networked computers has made it possible to codify, store, and share certain kinds of knowledge more easily and cheaply than ever before. ( Morten T. Hansen, Nitin Nohria, and Thomas J. Tierney (2019) )

Knowledge is at the heart of much of today’s global economy, and managing knowledge has become vital to companies’ success.” – Kluge, et al (2001)

“This transformation from a world largely dominated by physical resources, to a world dominated by knowledge, implies a shift in the focus of economic power as profound as that which occurred at the time of the industrial revolution.” – Burton-Jones (1999)

Since knowledge management as a conscious practice is so young, executives have lacked successful models that they could use as guides. And we can help fill that gap.

In companies, institutions, articles and books we examined, managers had chosen a distinct knowledge management strategy. Although some approaches differed slightly, there was a common pattern and trend among them.

• Firms pursuing an assemble-to-order product or service strategy emphasized the codification and reuse of knowledge.
• Firms pursuing highly customized service offerings, or a product innovation strategy, invested mainly in person-to-person knowledge sharing.

A company’s strategy should reflect its competitive strategy: how it creates value for customers, how that value supports an economic model, and how the company’s people deliver on the value and the economics.