Knowledge-based organization

Knowledge-based organization


Most organisations in one way or another have embraced the notion that to operate effectively in today’s economy, it is necessary to become a knowledge-based organization (Alvesson, 1993). But few truly understand what that means or how to carry out the changes required to bring it about. Perhaps the most common misunderstanding is the view that the more a company’s products or services have knowledge at their core, the more the organization is, by definition, knowledge based.

The knowledge-based society of the 21st century is characterized by knowledge generation as the primary source of wealth and social well-being. This economic development, facilitated by networked actions of a variety of global actors utilizing new information and communication technology (ICT) including Internet technologies, is fundamentally changing “the rules of the game” of performing in both private and public organisations. Accordingly, new concepts, frameworks, models and theories are required in order to increase our understanding of the principles of the creation and use of knowledge and information as a resource. This development both in theory and in practice is evident because, contrary to the traditional factors of production, knowledge and information are partly intangible in nature. It is therefore vital for organisations to provide a holistic view of contextual factors which have an impact on the creation, processing, storage, maintenance and use of information and knowledge as a resource. Moreover, organisations must know more about the means that affect processes related to knowledge and information.

Knowledge-Based Organisation in Malaysia

In the early 1980s, when the Japanese advances in the economy and began to make great impacts on the business state of affairs, knowledge work began to make headway to the workers’ levels. The Japanese enterprises show their way to knowledge work at the workers’ levels through such practices as QCC activities, 5S activities, “Kaizen” suggestion schemes and the like. These practices continue to contribute to improving productivity and competitiveness in production. By mid 1980s, Japan has overwhelmed other western companies and organisations with their low cost and high quality products by it techniques and quality tools.

Malaysia as any other countries in the world is moving towards improving their information technology facilities and services. After achieving independence on 31 August 1957, Malaysia was basically a resource-based country and depending on the extraction of natural resources. The need to provide jobs for the local population then was one of the primary foci of the economic development plans. In order to compete with Japanese organisation success Malaysian government in the Malaysian Context of Industrial Development has emphasis learning in every national agenda.

The Ministry of International Trade and Industry (MITI) Malaysia launched the First Industrial Master Plan, 1986-1995 (IMP1) in 1986 with the main focus is to rationalize the industrial growth process and the growth of manufacturing industry. The Malaysian Prime Minister first mooted Vision 2020 in 1991 and it is Malaysia national vision for the country’s continuing development into a developed nation (Ahmad Sarji Abdul Hamid, 1993). Even with the success of the IMP, the Total Factor Productivity (TFP) growth recorded over the period 1992-1997 was below the expected level. The manufacturing-based industrialization strategy will only take the country into an industrial society and this will not be sufficient to achieve the post-industrial/advanced industrial society and a civil society as envisaged in the Vision 2020 (NITC, 1998).

As Malaysia prepares to become a knowledge-based economy, new strategic focus calls for the nation to work towards the digital economy and a knowledge-based economy. The national response to this is the National IT Agenda (NITA) to direct the progress and the Multimedia Super Corridor (MDC, 1999) and its associated programs that aim to create the “IT waves” towards this new economy (NITC, 1998). Organisations will have to refocus their strategies to be globally competitive. The new competitive strategy will be knowledge-based, and organisations will have to be knowledge-focused. Even if production of tangible outputs is the core business, the competitive strategy will have to be knowledge-based. In other words, the competitiveness of an organisation will be its knowledge rather than is physical outputs. The proposition here is that managing and exploiting organisational knowledge or knowledge management is a strategic focus for organisation to achieve competitiveness, and the learning organisation is the outcome of this strategic process.

Knowledge Management initiatives are developing in a wide variety of government sectors in varying countries around the world and this conference will provide and intergovernmental forum for the discussion of best practice in public sector knowledge management.

A recent survey… reveals that 73% of governments feel they have made mistakes in setting up their online systems and 56% say that the work has taken longer than expected. Nonetheless, 89% are not yet tired of implementing e-government.

By placing individual services on-line, government departments could achieve cost savings of up to 25 percent. If departments collaborate to provide a one-stop shop for a handful of services-say, by creating a World Wide Web site where you apply for a driver’s license, pay a traffic ticket, and make an appointment for an emission inspection-the figure raises to 45 percent. Getting departments to collaborate is the tricky part.

What is Knowledge?

Knowledge as we all know comes from a cycle that involves the transformation from data to information and to knowledge. Information if it is not interpreted accordingly will not be knowledge. Knowledge is an organised combination of data, assimilated with set of rules, procedures, and operations learnt through experience and practice and without meaning knowledge are just information or data (Bhatt, 2001). It is only through meaning that information finds life and becomes knowledge (Bhatt, 2000).

McDermott describes six characteristics of knowledge that distinguish it from information (McDermott, 1999):

1. Knowledge is a human act.

2. Knowledge is the residue of thinking.

3. Knowledge is created in the present moment.

4. Knowledge belongs to communities.

5. Knowledge circulates through communities in many ways.

6. New knowledge is created at the boundaries of old.

In today competitive environment, organisations are competing which each other to achieve a high competitive advantage. In this era information is now considered as the most important assets in organisation. Information comes from knowledge and knowledge comes from the mind and experience of an individuals. Davenport and Prusak (1998) have provided the following definition of knowledge:

Knowledge is a fluid mix of framed experiences, values, contextual information, and expert insight that provides a framework for evaluation and incorporating new experiences and information. If originates and is applied in the minds of knower. In organisations, it is often becomes embedded not only in documents of repositories but also in organizational routines, processes, practice, and norms.

Knowledge management emphasizes on the inter-personal communication over the mere capture and storage of knowledge. Organizational intellectual assets and capital are the most priority aspects of the knowledge management efforts. Knowledge is the important elements in a value-chain. This value chain includes data, information, knowledge, wisdom, and the conceptualisation of knowledge management as a process of refinement, leveraging data and information to the more valuable level. These value-added elements can help organisations in problem solving and decision-making to improve performance and increase innovations. Innovation is an ongoing process in which organisations create problems, define them, and then develop new knowledge for their solution (Beveren, 2002).

Knowledge Management

Knowledge management is an emerging trend. This is because organisations have started to realize the importance of knowledge in order to achieve competitive advantage. Recent years have seen an explosive increase of interest in knowledge management. As well as a massive outpouring of books and articles on KM, many organizations have embarked upon their own KM programmes. A recent KPMG survey (KPMG, 1998) of 100 leading UK firms found that a staggering 43% of respondents were undertaking some kind of KM initiative.

For an organisation to survive they must be able to move one step further from their competitors and would be able to differentiate themselves between other. Creating and sustaining a competitive advantage a one way of achieving goals. To coupe with these rapidly changing environments, organisations needs to know what are their corporate knowledge assets and manage these assets to sustain competitive advantage. Knowledge belongs to the family of progressively increasing corporate assets, like management systems, brand identity, customer information and corporate reputation (Pascarella, 1997). Knowledge is a person, highly personal asset and represents the collective expertise and efforts of networks and alliances.

Knowledge management has becoming the most critical aspect in organisation to achieve competitive advantage. Nonaka (1991) stated that in an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. According to McCampbell (1999), to have a successful knowledge management projects, knowledge management was at least partially responsible for a major transformation of one large consulting firm and the transformation was all-embracing in terms of a marked improvement in financial result for the firm while engaged in knowledge management practices.

Knowledge Management is multi-disciplinary approach and has now becoming very powerful concept. It is rapidly growing practice used as strategic tool for organisation to produce efficient and productive product and services. This concept helps organisations to seek and maximize value by helping people innovate and acclimatize in the face of change. As the world is moving towards a global “knowledge economy”, proper management and practice of knowledge can transform services and product and put value into it. As global competition based on knowledge intensive products or services swiftly increase, it is little wonder that organisations are seeking ways to harness knowledge through business strategies and knowledge management tools and techniques (Vandermerwe, 1997).

Many organisations are already thriving in our increasingly knowledge-intensive world, often referred to as the “new” or knowledge economy. These organisations are achieving success by focusing on how knowledge can be used to deliver value to the organisation and its stakeholders. Knowledge management helps people prepare for an environment of constantly shifting demographics, industries, economies, and customer needs by ensuring that people have the expertise and information they need in order to properly assess business problems and opportunities.

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Knowledge Management is a process that helps organisations to find, select, organize, disseminate, and transfer important information and expertise necessary for activities such as problem solving, dynamic learning, strategic learning and decision-making (Gupta, Iyer and Aronson, 2000). Knowledge management caters the critical issues of organizational adaptation, survival and competence in face of increasingly discontinuous environmental change. Essentially, it embodies organizational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings (Malhotra, 1998).

Tacit and Explicit Knowledge

There are two types of knowledge. Knowledge that cannot be articulated is called tacit knowledge. In organisations, tacit knowledge is the personal knowledge used by members to perform their work and make sense of their worlds (Choo, 2000). Tacit knowledge is also as important as explicit knowledge. The only problem that occurs is that tacit knowledge is hard to be explained and communicate. As Michael Polanyi the chemist-turned-philosopher who coined the term, put it, “We know more than we can tell.” Polanyi used the example of being able to recognize a person’s face but being only vaguely able to describe how that is done.

Contrast to tacit knowledge, explicit knowledge is the knowledge that has been articulated, capture in the form of text, tables, diagrams, product specifications and so on (Cortada, 2000). Explicit knowledge is also knowledge that is expressed formally using a system of symbols and can therefore be easily communicated and diffuse (Choo, 2000). This type of knowledge is the most recognized and captured by organisations. Most organisations concentrate more on explicit knowledge because it is easy to understand and capture (Barlow, 2000). Both tacit and explicit knowledge are very important and critical to organizational information or knowledge management system development. It is just a matter of identify and captured it to make it as an valuable assets.




  • Personal Tacit
  • Self-Motivated Creativity
  • Know-How
  • Know-What
  • Know-Why


  • Cultural Tacit
  • Organisational Tacit (e.g. Causal Ambiguity)
  • Regulator Assets (Copyrights, Patents, Trademarks)

There are three types of explicit knowledge resident in any organisation

1. Cognitive knowledge,

2. Advanced systems skills, and

3. Systems understanding.

In Figure 1, Meso and Smith (2000) described cognitive knowledge, also termed “know-what” is the “basic mastery of a discipline that professionals achieve through extensive training and certification” (Quinn et al., 1996). Advanced skills or “know-how” refer to the “ability to apply rules of a discipline to complex real-world problems” (Quinn et al., 1996). Systems understanding, also termed “know-why” is the deep understanding of the web of cause-and-effect relationships underlying a discipline (Quinn et al., 1996; Nonaka, 1991).

The creation of new knowledge comes from the ongoing innovations form learning organisations. Therefore, organizational learning occurs at the intersection of tacit and explicit knowledge during the interaction of the various employees, departments or teams in an organisation (Nonaka, 1991). Sustainable competitive advantage results from innovation. Innovation in turn results from the creation of new knowledge (Meso and Smith, 2000).

Knowledge Creation

It is process how organisation gathers internal and external information in one system. Knowledge creation refers to the ability of an organisation to develop novel and useful idea and solution (Marakas, 1999). Nonaka (1994) identifies four mechanisms for knowledge creation:

1. Socialisation – whereby one individual shares tacit knowledge with other. Sharing of experiences through observation, imitation and practice;

2. Combination – whereby one pieces of explicit knowledge is combined with other;

3. Externalisation – whereby tacit knowledge is made explicit; and

4. Internalisation – process of experiencing knowledge through an explicit source, where explicit knowledge is converted into tacit.

Meanwhile Rovertson (2001) has identified four types of organisational knowledge:

1. Conscious, which is an individual’s explicit knowledge;

2. Automatic, which is an individuals implicit knowledge;

3. Objectified, which is explicit, social knowledge, and

4. Collective, which is implicit, social knowledge.

Knowledge Capture

Knowledge can be captured inside and outside organisation. The captured knowledge then
will be integrated within one system in organisation as a resource.

The purpose of knowledge management is to integrate internal and external knowledge at all time in order to cope with environmental changes both within and outside the organisation, to solve existing problem as well as to innovate for business expansion.

Beveren (2002) provides a model where information is acquired through the sensors and processed in the brain by using prior knowledge (see Figure 1). Where:

Knowledge is the stock of conceptual tools and categories used by humans to create, collect and share information.

During the processing of information, new knowledge can be acquired or created for future use, when more or new information is acquired and processed.

Knowledge Dissemination

Knowledge dissemination in corporate knowledge is involving with the activity to disseminate or distributes knowledge to members in organisation. Knowledge benefited to organisation if they can disseminate. Knowledge needs to distributed and shared if an organisation to leverage value from it (Bhatt, 2000).

Beveren (2002) illustrates how knowledge is transformed into information within the brain to be communicated externally through language or demonstration (see Figure 2). Language in this model includes all forms of communication, such as written, verbal and body language. In this model, the prior knowledge contained in human brains is required for the creation of information, just as the creation of knowledge often requires the input of information through the sensors to the brain. The initial formation of prior knowledge has been a huge area of debate for many years and has been discussed from two opposed positions, the empiricists and the nativists.

Organizational Learning

2.5.3 Knowledge Sharing

The organisational creation of differential knowledge, at its central part, springs unpredictably and unknowingly from social interchanges between competent organisations. Thus the importance of organizational behaviour in adapting to change is self-evident. Unfortunately, our understanding of the processes of organizational change is quite limited. The basic facts of human cognition are that our brains have the capacity to establish an extremely large number of possible networks of connections, but only a small fraction of this potential can be realized. Indeed, the growth of knowledge and the possibility of innovation depend on the incompleteness of present connections (Loasby, 2000b).

Knowledge sharing only takes place on a significant scale where organisations have organized themselves into communities of practice. These communities need to be “integrated” to the company’s strategy and its organizational structure.The phenomenon of communities of practice is known under different names. The World Bank, for example, is leveraging global knowledge sharing to attain its goal of becoming a clearinghouse for expertise on sustainable development (Wah, 1999) and they are called thematic groups; in Hewlett Packard they are “learning communities” or “learning networks”; in Chevron they are called “best practice teams”, and in Xerox they are know as “family groups” (Denning, 2000).

Many practitioners pf knowledge managementincreasingly see “knowledge sharing” as a better description of what they are about than “knowledge management”. Advantages of “knowledge sharing” as a term include its commonsense comprehensibility, along with a certain degree of inter-activity implicit in any sharing.

Drawbacks of knowledge sharing include the possibility that even sharing is insufficiently interactive, and that it implies (falsely) that the existence of knowledge precedes the sharing process, thereby (wrongly) separating knowledge management from knowledge creation and innovation and research.

Knowledge Exploitation

Knowledge exploitation is one of the vital parts in corporate knowledge. Knowledge exploitation means making knowledge more active and relevant for the organisation in creating values. If an organisation did not find it easy to locate the right kind of knowledge, the organisation may find it difficult to sustain its competitive advantage (Ganesh 2001).

There are certain indicators for an organisation’s ability to create, disseminate and apply knowledge. Demarest (1997) identified six key questions an organisation has to answer to participate in knowledge management effectively:

1. The culture, actions and beliefs of managers about the value, purpose and role of knowledge;

2. The creation, dissemination and use of knowledge within the organisation;

3. The kind of strategic and commercial benefits a organisation can expect by the use of effective knowledge management;

4. The maturity of knowledge systems in the organisations;

5. How a organisation organise for knowledge management; and

6. The role of information technology in the knowledge management program.

Using Demarest’s model, McAdam (2000) in his research on ” A comparison of public and private sector perceptions and use of knowledge management” found that in terms of knowledge construction, organisations recognised the need for both a scientific and a social construction of knowledge if the benefits of knowledge management were to be realised. Knowledge embodiment was found to be highly dependent on employee interchange, which must be recognised as a source of knowledge and key to the success of knowledge embodiment in organisations’ dissemination and “use”. Approaches to knowledge dissemination as part of a KM system were found to be mainly ad hoc. There was little systematic use of the more sophisticated methods available. The use/benefits of knowledge management within the organisations studied was based mainly on reduced costs, and improved quality and efficiency.

Creating, managing and transferring knowledge is the top of agenda for a growing number of organisations in the Chase study. They believe knowledge management would improve performance and result such as improved decision making, increased responsiveness to customer, improved efficiency of people and processes, increased ability to innovate and improved products and services (Chase, 1997). Although organisations recognised the importance of creating, managing and transferring knowledge, the research findings also found that many of the organisations still have been unable to translate this competitive needs into strategies. Other conclusion from his study is that the best practice organisations are experiencing great difficulty in translating knowledge management theory into practice.

Communities of Practice

In today’s organisations community of practice seems very important for employees to contribute and share their tacit and explicit knowledge for the organisation development. Community of practice can be define as a group of practitioners who share a common interest or passion in an area of competence and are willing to share the experiences of their practice. Community of practice can play an important role in leveraging knowledge in organisation. Gamble and Blackwell (2001) defined community of practice as collections of individuals bound by informal relationship who share a similar work role in a common context. They are groups that:

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1. Come together voluntarily for a shared purpose;

2. Have members that identify themselves as part of the community;

3. Repeatedly engage in activities with other member s and communities;

4. Have interactions that last for an indeterminate period of time.

An essential ingredient of knowledge sharing programs in large organisations is the community of practice. In undertaking knowledge sharing programs, most organisations have found – sooner or later – that the nurturing of knowledge-based communities of practice is a sine qua non to enabling significant knowledge sharing to take place. Such communities are typically based on the affinity created by common interests or experience, where practitioners face a common set of problems in a particular knowledge area, and have an interest in finding, or improving the effectiveness of, solutions to those problems (Denning, 2000).

Launching and nurturing communities of practice for knowledge sharing programs can be accomplished in a variety of ways (Denning, 2000).

1. Endorsing informal communities that already exist.

2. Asking practitioners what issues they care about.

3. Instructing leaders to form communities.

4. Launching purely virtual communities.

5. Launching communities among the “incorrigibles”.

Communities of practice can add value into organisations in several important ways:

1. Community of practice can help to drive strategy.

2. They can start new lines of business.

3. They can solve problems quickly.

4. They transfer best practice.

5. They develop professional skills.

6. They help companies recruit and retain talent.

Organisational Culture

Organizational culture is a critically important aspect for facilitating sharing, learning, and knowledge creation. It is not homogeneous and sometimes has subcultures (McDermontt and O’dell, 2001). An open culture with incentives built around integrating individual skills and experiences into organizational knowledge will be more successful (Gupta, Iyer and Aronson, 2000). Goh (2002) argues that one cultural dimension critical to knowledge transfer is co-operation and collaboration. Recent research on co-operation in organisation may help increase organizational understanding of the dynamic knowledge transfer. Knowledge transfer requires the willingness of a group or individual to work with others and share knowledge to their mutual benefit. Without co-operations and collaboration culture knowledge transfer form individuals and groups will not be successful.

Culture plays significant function in the success of knowledge management implementations. McDermontt and O’dell (2001) used a definition of culture that helped to see its multiple levels (Figure3). Following Schein (1985), McDermontt and O’Dell defined culture as:

The shared values, beliefs and practices of the people in the organisation. Culture is reflected in the visible aspects of the organisation, like its mission and espoused values. But culture exists on a deeper level as well, embedded in the way people act, what they expect of each other and how they make sense of each other’s actions. Finally, culture is rooted in the organisation’s core values and assumptions. Often these are not only unarticulated, but so taken-for granted that they are hard to articulate, invisible to organizational members. Because of these layers of culture, people can often act in ways inconsistent with the organisation’s articulated mission and values, but consistent with its underlying or core values. Following this definition, in an organisation with a knowledge sharing culture, people would share ideas and insights because they see it as natural, rather than something they are forced to do. They would expect it of each other and assume that sharing ideas is the right thing to do.

In order to achieve high level of collaborations and co-operations, there is a fundamental variable needed. It is a matter of trust. A high level of trust is therefore an essential condition for a willingness to cooperate. Trust belongs to the area of human factors in knowledge management. It is defined as expectations and acts that the members of the community direct to each other. In organisations trust supports and enables collaboration and knowledge sharing which are processes related to knowledge management. Collaboration and knowledge sharing are based on organizational culture and climate, which can either support or prevent them (Yoon, 2000).

In order to overcome ”cultural barriers” to sharing knowledge has more to do with how organisations design and implement their knowledge management effort than with changing the existing organizational culture (McDermontt and O’Dell, 2001). It involves balancing the visible and invisible dimensions of culture; visibly demonstrating the importance of sharing knowledge and building on the invisible core values. The companies we studied felt they are still learning how to do this effectively. McDermontt and O’Dell (2001) derive five critical aspects about aligning knowledge sharing with the organisation culture.

1. To create a knowledge sharing culture, make a visible connection between sharing knowledge and practical business goals, problems or results.

2. Match the overall style of your organisation rather than to directly copy the practices developed by other organisations.

3. Link sharing knowledge to widely held core values. By linking with core values of the organisation values, you make sharing knowledge consistent with peers’ expectations and managers’ considerations.

4. Human networks are one of the key vehicles for sharing knowledge. To build a sharing culture, enhance the networks that already exist. Enable them with tools, resources and legitimisation.

5. Recruit the support of people in your organisation who already share ideas and insights. Managers need to encourage and even pressure people to share their knowledge. Build sharing knowledge into routine performance appraisal.

There must be a well-built culture of continuous improvement and learning, linked to problem seeking and problem solving and focused on specific values such as product quality and customer service. Employees are encouraged to gather relevant information and to use and share that information in problem solving and implementing innovative solutions and practices (Goh, 2002).

Organisational Knowledge Structures

Organisational knowledge structure is different than organisational culture and climate in at least two significant ways. The concept of knowledge structures deals with goals, cause-and-effect perspective, and other cognitive essentials. Furthermore knowledge structure is more clearly linked to an organisation’s plan for survival and more subject to change than an organisation’s culture, neither of which changes readily of provides specific strategies for action for an organisation (Lyles, 1992). In developing knowledge structures, there are three stages that individuals go through to reach agreement (Weick and Bougon, 1986):

1. Agreement on which concepts capture and abstract their joint experience;

2. Consensus on relations among these concepts, and;

3. Similarity of view on how these related concepts affects each party.

Human resource is an important asset and within these resources lays the knowledge useful for organisations. In order to develop organizational knowledge the role of individual knowledge is very important.

Organizational Change

The organisation’s creation of differential knowledge, at its core, springs unpredictably and unknowingly from social interchanges between competent organisations. Thus the importance of organizational behaviour in adapting to change is self-evident. According to Mort (2001) the understanding of organizational change is inadequate. The basic facts of human cognition are that our brains have the capacity to establish an extremely large number of possible networks of connections, but only a small fraction of this potential can be realized. Indeed, the growth of knowledge and the possibility of innovation depend on the incompleteness of present connections (Loasby, 2000b).

Mort (2001) also suggests a number of issues that organisations could re-evaluate as they face questions concerning the reliability of corporate knowledge, its nature, value and pursuit.

1) Reliable technical knowledge:

a) Are technical data in co sensible form and are there incentives to do this?

b) Is technical knowledge consensually accepted by organizational review (internal/external)?

c) By what process is this done?

d) Whose responsibility?

e) Is this technical knowledge captured as documented, archived, organizational knowledge?

f) Using intranets, how is the reliability of data, information, and knowledge warranted?

g) Are idiosyncratic and organizational reliable knowledge differentiated (different archives)?

h) Presentations do not meet the criteria of co sensibility and co sensuality – without text, they are ambiguous and result in real-time, not reflective, critique.

2) Reliable non-technical knowledge:

a) Are non-technical ”facts” co sensibly documented to create consensual corporate knowledge?

b) By what process is this done?

c) Is intra-firm connectivity seen as the way to create a firm’s differential knowledge? – a collective product synthesized from idiosyncratic inputs.

d) What processes exist for increased connectivity within the firm?

e) Is there firm-wide consensus that agreement on ”facts” is more important than their ”correctness”?

f) Is there a firm-wide shared view that a firm’s strategy is one containing – exactly those actions which form the data for the idiosyncratic plans of all its members?

Knowledge Management and Information Technologies

As the world changes, new knowledge management tools, technologies, and capabilities are being created and developed. Increased sophistication will play a major role in furthering the growth of KM. Other technology advances include software called knowledge exchange platforms, which is used for buying and selling knowledge, software to manage corporate learning, knowledge workflow management software, and knowledge profiling technologies. These applications will advance structured and unstructured data access capabilities, enhance information retrieval, and improve subject matter expert identification (Duffy, 2001).

Information Technology is an indispensable tool for the promotion of knowledge management. Information technology has made it imperative for knowledge management. The speed with which information and data is coming at workers is superseding their ability to assimilate and categories the information into relevant components. Thus, companies whose people have access to the information and skills necessary to spot trends and manage opportunities will have a distinct competitive advantage in exploiting market shifts. Furthermore, technology has allowed today’s market leaders to build a new breed of solutions that dissolve the boundaries of time and distance to enable global value propositions to customers.

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Information technology has helped information and knowledge to flow fluently within or outside organisations. Knowledge management is a complex process for organisation to master. First they must be able to identify the critical knowledge and determine what their knowledge creation processes are. Organisations also must capture the valuable knowledge and disseminate it to appropriate users. Finally these users will exploit this knowledge for the organisation development. In order to developed or create knowledge, organisations must identify types of knowledge that needs to be put into priority. More recently, electronic databases, audio and video recordings, interactive tools and multimedia presentations have become available to extend the techniques for capturing and disseminating content (Denning 2000). Karl Erik Sveiby contends that the confusion between knowledge and information has caused managers to sink billions of dollars in information technology ventures that have yielded marginal results. Sveiby asserts that business managers need to realise that unlike information, knowledge is embedded in people, and knowledge creation occurs in the process of social interaction (Sveiby, 1997).

Knowledge Management as Competitive Advantage

The important factor that defines the competitiveness of an organization is its ability to acquire, evaluate, store, use and discard knowledge and information. It is also vitally important that the organization spreads information to the market in order to survive and thrive. These are activities in which information technology has played, and will continue playing, a very important role (Kock Jr. McQueen and Baker, 1996). With proper process of knowledge creating, capture, dissemination and exploitation organisations can better understand its competitive position and can be more effective in selecting their business strategies. Organisations also can shape their markets in which their competes. As a result one particular organisation can achieve competitive advantage between their competitors.

In the socio-technical perspective described by Meso and Smith (2000), recognizes that there is more to organizational knowledge management system than mere technology. Organisational knowledge management system is seen as being complex combinations of technology infrastructure, organizational infrastructure, corporate culture, knowledge, and people (Figure 4). The author added that technology infrastructure comprises the hardware, software, middle-ware and protocols that allow for the encoding and electronic exchange of knowledge. Three types of technology infrastructure are found in an OKMS: knowledge oriented technologies, function oriented technologies, and specialty oriented technologies.

Knowledge Management has become fundamental concept for those interested in the ever-changing events of the business world. Organisation invests heavily in building KM systems. They must strategically assess their knowledge resources and capabilities, and need to establish their knowledge strategy to sustain competitive advantages (Civi E., 2001).

Knowledge management can be seen as a way to improve performance, productivity and competitiveness, a way to improve effective acquisition, sharing and usage of information within organisations, a tool for improved decision-making, a way to capture best practices, a way to reduce research costs and delays, and a way to become a more innovative organisation (Martensson M., 2000). It is said that knowledge management can facilitate companies to face the complexities accompanying the emergence of the knowledge-based economy. By managing knowledge, organizations can (Beijerse, 1999):

1. Improve efficiency;

2. Improve the market position by operating more intelligently on the market;

3. Enhance the continuity of the company;

4. Enhance the profitability of the company;

5. Optimize the interaction between product development and marketing;

6. Improve the relevant (group) competencies;

7. Make professionals learn more efficiently and more effectively;

8. Provide a better foundation for making decisions like make-or-buy of new knowledge and technology, alliances and merges;

9. Improve communication between knowledge-workers;

10. Enhance synergy between knowledge workers;

11. Ensure that knowledge-workers stay with the company;

12. Make the company focus on the core business and on critical company knowledge.

Knowledge management encourages employees to create, share and benefit from knowledge. Organisation captures knowledge from inside and outside organisation then documented and stored the knowledge in knowledge repository system as a reference in future. This knowledge is the organisation intellectual capital portfolio. Organisation used this knowledge to identify their weakness and strength, and to identify their rival strength and to get new innovation. To be competitive and success, organisation must create and balance intellectual capital portfolio. They also need to set broad priorities and integrates the goal of managing intellectual capital and corresponding effective knowledge processes (Wiig K. M., 1997).

In the Damodaran and Olphert (2000) article, they concluded that there is considerable explanation of the relationship between a knowledge-sharing culture, knowledge management systems and change management processes and mechanisms. The findings of this study reveal both the robust resilience and persistence of organisational culture in the face of technological change and suggest important implications for the change management process and model. In a hierarchy of change activity individuals at all levels need to address the rewards, dangers, priorities and constraints perceived by individuals. At top levels in the organizational hierarchy a key behavioural change is required. Individuals need to change from simply issuing exhortations to work in new ways to actively facilitating a transition from current to desired patterns of behaviour.


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