“As Managers, you will need to understand that knowledge – its management, optimisation and valuation – requires focus if it is to be the basis of market success or failure. It is already an area that is being measured in terms of its contribution to the existence of an organisation, and it is therefore a critical success factor, if not already an unrecognised core competence.”
Dada Adefolami.
Knowledge management (KM) is the process of capturing, developing, sharing, and effectively using organizational knowledge. It refers to a multi-disciplined approach to achieving organizational objectives by making the best use of knowledge. Capability Management” is the approach to the management of an organization, typically a business organization or firm, based on the “theory of the firm” as a collection of capabilities that may be exercised to earn revenues in the marketplace and compete with other firms in the industry.
“Capability Management” seeks to manage the stock of capabilities within the firm to ensure its position in the industry and its ongoing profitability and survival. Prior to the emergence of Capability Management, the dominant theory explaining the existence and competitive position of firms, based on Ricardian Economics, was the Resource-based view of the firm. The fundamental thesis of this theory is that firms derive their profitability from their control of resources – and are in competition to secure control of resources. Perhaps the best-known exposition of the Resource-based View of the Firm is that of one of its key originators, and Business Intelligence (BI) is the set of techniques and tools for the transformation of raw data into meaningful and useful information for business analysis purposes. BI technologies are capable of handling large amounts of unstructured data to help identify, develop and otherwise create new strategic business opportunities.
Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes, therefore talent is capability and knowledge is ability.’ Talent is intangible and embedded within people. Knowledge can be tangible and explicit if it is planned, controlled, facilitated and monitored, as is standard with other assets or processes in an organisation. The management of knowledge adds strategic value.
Knowledge is the tacit constituent that comes about when applying information to a decision-making process, focuses on the management of this knowledge. In any economy, the aim is to maximise the advantage from a source of competition. If knowledge is a basis for the economy, then this economy has to be formed around maximising the use and the management of knowledge in businesses.
The knowledge, as currently exists within an organisation, is already a major contributor to success, in conjunction with the obvious contributors of the 9 Ms, which include money, machinery, materials, manpower, makeup, MIS, management, machinery, methods and markets.
Organisation, Competitive Advantage
The basis of competition is shifting from having a unique raw material or production system in manufacturing, to differentiation through the building of knowledge. ‘Having knowledge can be regarded as even more important than possessing the other means of production – land, buildings, labour, and capital – because all the other sources are readily available in an advanced global society, while the right leading-edge knowledge is distinctly hard to obtain.
Companies have already moved from being labour intensive to process intensive, to carry out tasks most efficiently, effectively, economically and productively as possible while all the time introducing new techniques or elements to the process, product or service. A company’s success is dependent on adding value. This requires creativity based on the current knowledge position of the company. Organisations should not have to relearn on a regular basis but should be in a position to retain the knowledge they already have in their possession. They should then reinforce the use of this knowledge in processes and approach to the management of this knowledge. This is done by maintaining what is already known and then continue to maintain their position based on this unique knowledge, and finally renew and update the knowledge continuously.
This is a transparent approach to the handling of knowledge, which is the approach needed across the entire organisation so everyone can contribute. With reference to knowledge management, the challenge (in the context of adding value) is that organisations have to reorganise themselves around the scarce resource of talented human capital and manage the constraining elements and strategic resources of information, knowledge and expertise. Obtaining this talented human capital is another task that requires human resource management and the involvement of the wider organisation.
Knowledge Management
As organisations have changed, downsized or expanded, there has been an increase in technology and in redundancies. In knowledge management terms, a reduction in employee numbers implies that those remaining have to demonstrate their value. Employee turnover of, or the rise of the free agent implies that long-term contracts are on the way out. Loyalty is much reduced or, as suggested, ‘loyalty is dead – commitment and drive are lost, on the way out or gone’ both from the organisational and employee perspective, as neither can afford loyalty in rapid dynamic markets. Organisations affected by such changes, through the loss of people and then talent, can’t keep relearning all the knowledge lost when people leave the company.
One such approach, which considers the individual rather than the process, is social network analysis. This helps identify and manage the hidden networks within an organisation. According to Karen Stephenson, social network analysis is increasingly recognised as a means of leveraging organisational learning, retaining key workers, planning succession, harvesting innovative ideas, and managing both the rate and quality of change. This collective capability, Stephenson argues, depends on trusted relationships between individuals and has more power to influence the success or failure of an organisation than any managerial hierarchy.
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