Knowledge management and business growth
Knowledge management is a systematic approach to creating, sharing, using and managing knowledge and information within an organisation.
All businesses have access to an extensive pool of knowledge. It can come from internal resources, documents, staff skills and expertise, or external sources such as market research and customers. Wherever it comes from, knowledge is a valuable asset.
What you do with your knowledge, and how you manage it, can be the difference between your business' success and failure.
This guide explains what is knowledge in business, tells you where to find it, and how to approach it strategically to make the best use of your assets. It also evaluates some common principles and the advantages and disadvantages of knowledge management.
What is knowledge in business?
Business knowledge is an important strategic asset. It is a sum of skills, experiences, capabilities and expert insight, which you collectively create and rely on in your business. As a shared resource, knowledge shapes and affects all the activities in and around your business.
Types of business knowledge
Knowledge can exist in many forms, but will usually fall under one of three main categories:
- Tacit knowledge - personal know-how or skills rooted in experience or practice (eg aesthetic sense or intuition). Tacit knowledge is difficult to write down, visualise or transfer.
- Explicit knowledge - articulated knowledge recorded in documents, memos, databases, etc. Explicit knowledge is easy to store, distribute and communicate.
- Embedded knowledge - skills and understanding locked in processes, products, rules or organisational culture (eg informal routines, codes of conduct, organisational ethics).
Knowledge can belong to individuals or groups within your business, or exist at the organisational level. You can also share it with different organisations.
You can apply business knowledge in many organisational areas and competencies, from financial management and organisational governance to market analysis, strategic planning, and human resources. See more on strategic planning for business growth.
Examples of business knowledge
Examples of knowledge that already exists in your business include:
- the skills, competencies and experiences of your workforce
- the designs and processes for your goods and services
- the industry or market data you've gained from research
- your files or documents (electronic or otherwise)
- your customer data or information on suppliers and stakeholders
- your plans for future activities, such as ideas for new products or services
Importance of business knowledge
Knowledge has great value since it is inherently unique to your organisation. It shapes and drives your business activity, your ability to sell or do more, and stand apart from your competitors.
Individual knowledge is easily lost, especially when key employees leave. Make sure that your employees share knowledge and skills, and pass them on to their successors wherever possible. For example, you can:
- hold brainstorming sessions
- organise training courses
- maintain up-to-date documentation about processes and procedures
See more on sharing knowledge in business.
What is knowledge management in business?
Your understanding of what customers want, combined with your workers' know-how, can be regarded as your knowledge base. Using this knowledge in the right way can help you run your business more efficiently, decrease business risks and exploit opportunities to the full. This is known as the knowledge advantage.
Effective knowledge management makes it possible to create, transfer and apply knowledge at different levels in a coherent and productive way. Read about the advantages and disadvantages of knowledge management.
Advantages and disadvantages of knowledge management
Knowledge management is a systematic approach to capturing and making use of a business' collective expertise to create value. The potential advantages of effective knowledge management are significant but, as with most processes, there are certain challenges to consider.
Advantages of knowledge management
Some of the common benefits of knowledge management include:
- improved organisational agility
- better and faster decision making
- quicker problem-solving
- increased rate of innovation
- supported employee growth and development
- sharing of specialist expertise
- better communication
- improved business processes
A good knowledge management system will make it easy to find and reuse relevant information and resources across your business. This, in turn, can help you to:
- create better products and services
- develop better strategies
- improve profitability
- reuse existing skills and expertise
- increase operational efficiency and staff productivity
- recognise market trends early and gain an advantage over your rivals
- benchmark against your competitors
- make the most of your collective intellectual capital
Resourceful collaboration will bring more views, diverse opinions and varied experiences to the process of decision-making, helping your business to make decisions based on collective knowledge and expertise.
Disadvantages of knowledge management
The key to any successful knowledge management system is knowing its limitations. Some of the common challenges include:
- finding ways to efficiently capture and record business knowledge
- making information and resources easier to find
- motivating people to share, reuse and apply knowledge consistently
- aligning knowledge management with the overall goals and business strategy
- choosing and implementing knowledge management technology
- integrating knowledge management into existing processes and information systems
To overcome these challenges, you should:
- develop clear processes to capture, record and share business knowledge
- define the scope and objectives of any knowledge management initiatives
- create a corporate culture of knowledge sharing between employees and management
- set clear goals and strategies to help you utilise the collective knowledge (otherwise, it will be of no use to your business)
- consider budget, strategy and training needs for any new knowledge management system
- consider change management strategies for introducing new knowledge management practices
Identify business knowledge sources
Organisations gather their knowledge and information from many different sources, both inside and outside of the organisation. For example, you could capture knowledge from:
- performance assessments
- market research
- customer feedback
However, a primary source of knowledge in a business is the experience that develops within it.
It is important to preserve the skills or know-how you have built up in your business. You need to find formal ways of sharing your employees' knowledge about the best ways of doing things. For example, you might create procedural guidance based on your employees' best practice. See create a knowledge strategy for your business.
Employee and supplier relationships
You can capture knowledge by seeking the opinions of your employees and your suppliers - they'll have their own views on how your business is performing. You can use formal surveys to gather this knowledge or ask for their thoughts on an informal basis. See how to lead and motivate your staff and manage your suppliers.
You should understand your customers' needs and what they think of you. You may be able to develop knowledge sharing with customers that is mutually beneficial. Talk to them about their future requirements and see how this knowledge can help you research and develop ideas, new products and services.
Watch developments in your business sector. How are your competitors performing? How much are they charging? Are there any new entrants to the market? Have any significant new products been launched? Try to understand your competitors and use market research and market reports to develop your understanding of the industry you operate it.
Knowledge of the business environment
Developments in politics, the economy, technology, society and the environment could all affect your business' development, so you need to keep informed. Consider setting up a team to monitor and report on changes in the business world.
Professional associations and trade bodies
Get information from professional, academic and government publications, reports from research bodies, trade and technical magazines, etc. Search for a trade association.
Trade exhibitions and conferences
These may allow you to see what your competitors are doing and discover the latest innovations in your business sector. Read about trade shows and exhibitions.
Product research and development
Scientific and technical research and development can be a vital source of knowledge that can help you create innovative new products and retain your competitive edge. See how to use innovation to start or grow your business.
Recruiting non-executive directors can be a good way for you to bring on board specialised industry experience and benefit from ready-made contracts. See recruiting company directors.
Collaboration between businesses and associated institutions
Groups of businesses or associated institutions with common interests - known as clusters - sometimes join forces in order to share knowledge. Find out how to fuel business growth through collaboration.
Sharing knowledge in your business
If only a few people in your business hold important knowledge or skills, there is a danger that these will be lost if they leave or retire. Even a short period of unexpected absence, eg due to illness or bereavement, could cause problems if you do not share the knowledge.
Build a knowledge-sharing culture
You should try to build a culture in which knowledge is valued and shared across your business. Consider the best ways of sharing new ideas and information with your staff. You may already have regular meetings when you can brief employees and ask them to share ideas and best practice.
Consider holding innovation workshops or brainstorming sessions where you give staff the freedom and encouragement to think of ways in which the business could improve.
You could also create a knowledge bank containing useful information and instructions on how to carry out key tasks. Putting this on an intranet is ideal, as it will encourage staff to post news or suggestions. Read about the benefits of the intranet.
You may decide to appoint a senior manager as a knowledge champion to ensure that knowledge is managed and channelled properly in your business.
Protect and exploit your knowledge
As part of your knowledge management, you should also make sure that you protect any intellectual property (IP) that your business owns.
Registering IP rights may help you stop competitors from copying your intellectual assets. It may also allow you to profit by licensing your business' knowledge. Read more about protecting intellectual property.
Use IT to manage knowledge efficiently
Protecting and exploiting your knowledge will be more effective if you develop efficient systems for storing and retrieving information. Your files - whether stored digitally or on paper - contain knowledge that you can use to improve your business. Different technologies are available to help you manage information and knowledge in your organisation. Find tips to help you choose the right IT system for your business.
Keep knowledge confidential
Your employment policies play a central role in keeping your knowledge confidential.
For example, you might get staff to sign non-disclosure agreements when they join the business to ensure they understand the importance of confidentiality from day one.
You can also set up employment policies for your business, such as employment contracts, to reasonably limit your employees' freedom to leave and:
- go to work immediately for one of your rivals (restraint of trade clauses)
- set up a competing business to yours in the vicinity (restrictive covenants)
Incentives and training
Offering staff incentives to come up with suggestions for business improvements can be an effective way of getting them to use and share knowledge. Find out how to implement staff incentive schemes.
Don't forget the importance of training in spreading key knowledge, skills and best practice across your business.
Create a knowledge management strategy
If you want to get the most from your business' knowledge, you need to take a strategic approach to discovering, collating and sharing it. You can do this by applying a knowledge management strategy across the business.
Creating a knowledge management strategy
Gaining a good understanding of the current state of your knowledge management is essential for the strategy development process.
To begin drawing up your knowledge management strategy, you need to:
- consider how effective your business currently is at using its knowledge
- analyse your internal processes for gathering and sharing information - including ways of generating ideas and the staff's grasp of what is happening
- make sure that knowledge management, acquisition and distribution is a continuing process, so that it becomes central to your business' strategy
You should also identify the value of knowledge to your business and the ways you could exploit it for financial gain. Perhaps this may be:
- gaining a larger market share
- developing new products
- selling or licensing your protected intellectual property to others
Ensure that your knowledge management strategy fits in with your overall business plans. See more on strategic planning for business growth.
Buy-in for your knowledge strategy
For your knowledge management strategy to be effective, your senior managers should be supportive and committed, and aware of the benefits it can bring. Discuss with them the best ways of collecting and using knowledge.
You may also decide to appoint a senior manager as a knowledge champion for your business.
Remember to articulate to all staff and stakeholders the benefits of good knowledge management. See the advantages and disadvantages of knowledge management.
Knowledge management systems
Various knowledge management systems can help your business gain and make the best use of knowledge. Some of the systems can be complex to set up and time-consuming to maintain. You need to choose systems that fit with your business and that will improve it without becoming a burden. You may find it useful to consult an IT specialist.
At the very least, you should carry out a technology needs assessment before making any IT purchases. Your systems will deliver the greatest value for your business if you align them with your IT strategy. Read more about developing an IT strategy.
The main types of IT systems used in knowledge management are described below.
Databases organise information so it can be easily accessed, managed and updated. For instance, you might have a database of customers containing their contact information, their orders and preferences. See the benefits of databases.
A data warehouse is a central storage area you might use if you have a variety of business systems or a range of information in different digital formats. Many businesses now use digital asset management to store, manage and retrieve information, and this can be particularly helpful if you sell online. You may wish to seek specialist advice from an IT consultant.
Data mining is a process in which all the data you collect is sorted to determine patterns. For instance, data mining can tell you which products are most popular and if one type of customer is likely to buy a particular item.
Reporting and querying tools let you create reports interpreting data in a particular way. For example, it can tell you how many of your sales have been handled by one particular employee.
Business intelligence portals are websites that bring together all sorts of potentially useful information, such as legal issues or details of new research.
The internet and search engines can be a powerful source of knowledge, although be certain to check the credibility of your information source. Internet newsgroups can be specific sources of business information, but check the authors' other postings before deciding how to view their opinions and claimed facts.
Intranets and extranets can be powerful platforms for knowledge sharing and management. An intranet is a secure internal network for the sole use of your business. An extranet is similar to an intranet but you can extend it to customers and suppliers. Read about the benefits of intranets and extranets.
Social tools, such as social media channels and blogs can also be useful when it comes to sharing knowledge. Find an overview of social media in business.
Customer analysis tools
Customer relationship management software helps you build up a profile of your customers and enables you to target them through your website, email, telephone or other marketing activities. See customer relationship management.
Website analytics (eg Google Analytics) helps you to analyse how customers use your website so you can improve its effectiveness and work out better ways to target your customers.
If you decide to invest in a new information management system, it is essential that you consider the needs of your business, the different technology options and the implementation - each task is likely to present challenges and opportunities for your business.
See how to plan your business IT systems.
Knowledge management and your business (video)
Discover the importance of knowledge management for your business, and how to manage knowledge effectively to benefit your business.