Knowledge Management Value Chain

Knowledge management refers to the set of business processes developed in an organization to create, store, transfer, and apply knowledge. Knowledge management increases the ability of the organization to learn from its environment and to incorporate knowledge into its business processes. Following figure illustrates the five value-adding steps in the knowledge management value chain. Each stage in the value chain adds value to raw data and information as they are transformed into usable knowledge. In the figure, information systems activities are separated from related  management and organizational activities, with information systems activities on the top of the graphic and organizational and management activities below. One apt slogan of the knowledge management field is, “Effective knowledge management is 80 percent managerial and organizational, and 20 percent technology.”  In the case of knowledge management, as with other information systems investments, supportive values, structures, and behavior patterns must be built to maximize the return on investment in knowledge management projects. In the figure, the management and organizational activities in the lower half of the diagram represent the investment in organizational capital required to obtain substantial returns on the information technology (IT) investments and systems shown in the top half of the diagram.

Knowledge Management Value Chain

1. Knowledge Acquisition

Organizations acquire knowledge in a number of ways, depending on the type of knowledge they seek. The first knowledge management systems sought to build corporate repositories of documents, reports, presentations, and best practices. These efforts have been extended to include unstructured documents (such as e-mail). In other cases, organizations acquire knowledge by developing online expert networks so that employees can “find the expert” in the company who is personally knowledgeable. In still other cases, firms must create new knowledge by discovering patterns in corporate data or by using knowledge workstations where engineers can discover new knowledge. A coherent and organized knowledge system also requires systematic data from the firm’s transaction processing systems that track sales, payments, inventory, customers, and other vital data, as well as data from external sources such as news feeds, industry reports, legal opinions, scientific research, and government statistics.

2. Knowledge Storage

Once they are discovered, documents, patterns, and expert rules must be stored so they can be retrieved and used by employees. Knowledge storage generally involves the creation of a database. Document management systems that digitize, index, and tag documents according to a coherent framework are large databases adept at storing collections of documents. Expert systems also help corporations preserve the knowledge that is acquired by incorporating that knowledge into organizational processes and culture. Management must support the development of planned knowledge storage systems, encourage the development of corporate-wide schemas for indexing documents, and reward employees for taking the time to update and store documents properly. For instance, it would reward the sales force for submitting names of prospects to a shared corporate database of prospects where all sales personnel can identify each prospect and review the stored knowledge.

3. Knowledge Dissemination

Portals, e-mail, instant messaging, wikis, social business tools, and search engines technology have added to an existing array of collaboration tools for sharing calendars, documents, data, and graphics. Contemporary technology seems to have created a deluge of information and knowledge. How can managers and employees discover, in a sea of information and knowledge, that which is really important for their decisions and their work? Here, training programs, informal networks, and shared management experience communicated through a supportive culture help managers focus their attention on the important knowledge and information.

4. Knowledge Application

Regardless of what type of knowledge management system is involved, knowledge that is not shared and applied to the practical problems facing firms and managers does not add business value. To provide a return on investment, organizational knowledge must become a systematic part of management decision making and become situated in systems for decision support. Ultimately, new knowledge must be built into a firm’s business processes and key application systems, including enterprise applications for managing key internal business processes and relationships with customers and suppliers. Management supports this process by creating—based on new knowledge – new business practices, new products and services, and new markets for the firm.

5. Building Organizational and Management Capital: Collaboration, Communities of Practice, and Office Environments

In addition to the activities we have just described, managers can help by developing new organizational roles and responsibilities for the acquisition of knowledge, including the creation of chief knowledge officer executive positions, dedicated staff positions (knowledge managers), and communities of practice. Communities of practice (COPs) are informal social networks of professionals and employees within and outside the firm who have similar work-related activities and interests. The activities of these communities include self-education and group education, conferences, online newsletters, and day to- day sharing of experiences and techniques to solve specific work problems. Many organizations, such as IBM, the U.S. Federal Highway Administration, and the World Bank have encouraged the development of thousands of online communities of practice. These communities of practice depend greatly on software environments that enable collaboration and communication.

COPs can make it easier for people to reuse knowledge by pointing community members to useful documents, creating document repositories, and filtering information for newcomers. COPs members act as facilitators, encouraging contributions and discussion. COPs can also reduce the learning curve for new employees by providing contacts with subject matter experts   and access to a community’s established methods and tools. Finally, COPs can act as a spawning ground for new ideas, techniques, and decision- making behavior.

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