Knowledge Management (KM) has recently become one of the most valuable practices influencing quality of business. Interest in knowledge management is rapidly rising within organizations today. With realization of knowledge management significance, organizations view it as an important factor in today’s limitless and dynamic society. Knowledge supports the ability of every business organization to prosper. In an organization, every output and action that delivers value must be aligned with three stages that all organizations compete in: time, cost, and differentiation. Knowledge management helps an organization to shorten a cycle of all internal activities, cut operating costs, and perform more efficiently and effectively, upon implementation. Increased ability to manage knowledge in an organization, in turn, enables an organization to provide better quality services to consumers. It underscores the need for knowledge management in a business organization.
Benefits of Knowledge Management
Recent studies and data indicate that most organizations have incurred a substantial amount of resources in knowledge management. It means that knowledge management is being considered as an important aspect of business operations. In addition, organizations have gained immense benefits from application of knowledge management. For instance, Ernst & Young has spent 6% of its revenues on knowledge management. Buchman Laboratories, which is a chemical company specialist and an early adopter of knowledge repository, has already spent 2.5% of its total revenue on knowledge management. Other companies, such as McKinney & Co., also spend approximately 10% of their revenues on KM. In return, the above companies have improved service delivery to customers as well as benefited from a decline in business operating costs.
There are two main initiatives that are essential in knowledge management. The first and most important initiative is making a better use of already existing knowledge within an organization through knowledge sharing. Second initiative is, through knowledge creation, focusing on innovation and transformation of ideas into valuable services (Jawadekar, 2011). This initiative is the most complex but with the best potential to transform organizational performance. Organizations that have incorporated KM in their operations have realized a substantial growth in product and services delivery. For instance, knowledge management and commercialization of ideas have enabled companies such as Formula One and Netscape to become multi-million dollar organizations.
In knowledge management phase, an organization needs to have well-established client-server databases that are fast and user friendly. They provide technical resources and motivation required to capture, share, and synthesize knowledge in an organization. It also enhances organizational learning and the ability to traverse the knowledge web within entire organization. Management team in an organization also needs to involve people in knowledge management. It ensures all staff’s understanding of the most significant aspects and implications of knowledge management. Involvement of organizational staff also makes it easy to capture and share their expertise. In addition, it facilitates transformation of tacit knowledge into explicit knowledge.
It is evident that most organizations have spent a large amount of money on application of knowledge management in pursuit of competitive advantage in business. Implementation of knowledge management is essential since it improves product and service delivery to consumers. It also plays a crucial role in reduction of production cycles and overheads and shortens time used in product development. It also empowers employees with innovative ideas that equip them with managerial skills essential in overcoming business challenges. An organization needs to apply KM in its business operations. This is because the more an organization supports and integrates knowledge, the more it provides better and faster services to its customers. In addition, knowledge management enables an organization to prevent knowledge loss. Therefore, its decision-making processes improve as well as flexibility and adaptability enhance throughout entire organization. In return, it strengthens overall organizational competitive advantage.