1. Chapter 12 Knowledge Management
Managing and Using Information Systems: A Strategic Approach
by Keri Pearlson & Carol Saunders
Copyright 2006 John Wiley & Sons, Inc.

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Introduction
What is the difference between data, information, and knowledge?
How does tacit knowledge differ from explicit knowledge?
Why is knowledge management so important?
How is must knowledge generated?
How is knowledge captured?
What is a knowledge map?
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Real World Examples
Ernst and Young implemented a state-of-the-art knowledge management system.
It was made available to 84,000 people in the companies global organization to share best practices and intelligence.
This system permits the user to search among more than 1,200 knowledge bases and external sources.
In 2002 E&Y was ranked as one of the top 10 Most Admired Knowledge Enterprises.
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Overview
Knowledge Management (KM) is defined as the processes needed to generate, capture, codify and transfer knowledge across the organization to achieve competitive advantage
Technology plays a significant role in managing knowledge.
Intellectual capital is a synonym of KM
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Overview (continued)
KM is related to IS in three ways:
IT makes up the infrastructure for KM systems
KM systems make up the data infrastructure for many IS applications
KM is often referred to as an application of IS
Recently a new position called “Coordinator for International Intellectual Property Enforcement” was created by the US Department of Commerce.
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6. DATA, INFORMATION, AND KNOWLEDGE
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Information
Data, information, and knowledge have significant and discreet meanings within KM (Figure 12.1 shows their differences).
Data are specific, objective facts or observations (inventory contains 45 units).
Information is defined as “data endowed with relevance and purpose”.
Data is turned into information by organizing the data into some unit of analysis (dollars, dates, customers, etc.).
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Figure The relationships between data, information, and knowledge.
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Knowledge
Knowledge is a mix of contextual information, experiences, rules, and values.
Richer, deeper, and more valuable.
Consider knowing –
What? - based upon assembling information and eventually applying it.
How? – applying knowledge leads to learning how to do something.
Why? – casual knowledge of why something occurs.
(Figure 12.2 graphically illustrates these types of knowing).
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10. Figure 12.2 Taxonomy of Knowledge
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11. Tacit vs. Explicit Knowledge
Tacit knowledge is personal, context-specific and hard to formalize and communicate
A [knowledge] developed and internalized by the knower over a long period of time incorporates so much accrued and embedded learning that its rules may be impossible to separate from how an individual acts. ‘knowing how’
Explicit knowledge can be easily collected, organized and transferred through digital means.
A theory of the world, conceived of as a set of all of the conceptual entities describing classes of objects, relationships, processes, and behavioral norms. Often referred to as ‘knowing that’, or declarative knowledge.
See Figure 12.3 for more examples.
Copyright 2006 John Wiley & Sons, Inc.

12. Tacit Knowledge Explicit Knowledge Procedures listed in a manual
Knowing how to identify the key issues necessary to solve a problem
Applying similar experiences from past situations
Estimating work required based on intuition & experience
Deciding on an appropriate course of action
Explicit Knowledge
Procedures listed in a manual
Books and articles
News reports and financial statements
Information left over from past projects
Figure Examples of explicit and tacit knowledge
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AN EVOLVING CONCEPT
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14. Applying Knowledge Management
KM is not a new concept, but one reinvigorated by IT such as collaborative systems, the Internet and intranets.
KM is still an emerging discipline
Ultimately, an organization’s only sustainable competitive advantage lies how its employees apply knowledge to business problems
KM is not a magic bullet and cannot solve all business problems.
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WHY MANAGE KNOWLEDGE?
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16. Factors to consider in Knowledge Management
Information and knowledge have become the fields in which businesses compete.
Several important factors include:
Sharing Best Practice
Globalization
Rapid Change
Downsizing
Managing Information and Communication Overload
Knowledge Embedded in Products
Sustainable Competitive Advantage
Copyright 2006 John Wiley & Sons, Inc.

17. Sharing Best Practices
Sharing best practices means leveraging the knowledge gained by a subset of the organization.
Increasingly important in organizations who depend on applying their expertise such as accounting, consulting and training firms.
KM systems capture best practices to disseminate their experience within the firm.
Problems often arise from employees who may be reluctant to share their knowledge (managers must encourage and reward open sharing).
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Globalization
Historically three factors, land, labor and capital were the key to economic success
Knowledge has become a fourth factor.
Low international labor costs are driving globalization (as is telecom) and pushing companies that fail to take part out of business.
Knowledge has become the key resource for any organization (government, financial, production, etc.).
Lastly, knowledge is portable and must be managed carefully.
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Other factors
Rapid change: firms must be nimble and adaptive to compete
Downsizing: sometimes the wrong people get fired when creating a leaner organization
Managing Info Overload: data must be categorized in some manner if it is to be useful rather than overwhelming
Knowledge Embedded in Products: the intangibles that add the most value to goods and services are becoming increasingly knowledge-based
Sustainable Competitive Advantage: KM is the way to do this. Shorter innovation life cycles keep companies ahead of the competition.
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20. Figure 12.4 Reasons for Managing Knowledge. ©IBM Global Services
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21. KNOWLEDGE MANAGEMENT PROCESSES
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Knowledge Management
KM involves four main processes –
Generation – all activities that discover “new” knowledge.
Capture – all continuous processes of scanning, organizing, and packaging knowledge after it has been generated.
Codification – the representation of knowledge in a manner that can be easily accessed and transferred.
Transfer – transmitting knowledge from one person or group to another, and the absorption of that knowledge.
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Knowledge Generation
Generation concerns the intentional activities of an organization to acquire/create new knowledge.
Two primary ways are knowledge creation and knowledge sharing.
Methods include:
Research and Development
Adaptation
Buy or Rent
Shared Problem Solving
Communities of Practice
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Figure Knowledge Generation Strategies
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25. Research and Development
Knowledge generated by R&D efforts frequently arises from synthesis
Synthesis brings disparate pieces of knowledge together, often from extremely diverse sources, then seeks interesting and useful relationships among them
Realizing value from R&D depends largely on how effectively new knowledge is communicated and applied across the rest of the firm
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Adaptation
Adaptation is the ability to apply existing resources in new ways when external changes make old ways of doing business prohibitive
A firm’s ability to adapt is based on two factors: having sufficient internal resources to accomplish change and being open and willing to change
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Buy or Rent
Knowledge may be acquired by purchasing it or by hiring individuals, either as employees or consultants, who possess the desired knowledge.
Another technique is to support outside research in exchange for rights to the first commercial use of the results
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28. Shared Problem Solving
Also called “fusion,” shared problem solving brings together people with different backgrounds and cognitive styles to work on the same problem
The creative energy generated by problem-solving groups with diverse backgrounds has been termed “creative abrasion”
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Helping Fusion Work
Ideas that help fusion work effectively include:
(1) fostering awareness of the value of the knowledge sought and a willingness to invest in it;
(2) emphasizing the creative potential inherent in different styles of thinking and viewing the differences as positive;
(3) clearly specifying the parameters of the problem to focus the group on a common goal
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30. Communities of Practice
Achieved by groups of workers with common interests and objectives, but not necessarily employed in the same department or location, and who occupy different roles on the organization chart.
Workers communicate in person, by telephone or by to solve problems together.
Communities of practice are held together by a common sense of purpose and a need to know what other members of the network know
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31. Knowledge Codification
Knowledge must be used or shared to be of value.
Codification puts the knowledge into a form that makes it easy to find and use.
It is difficult to measure knowledge in discreet units (since it changes over time).
Knowledge has a shelf life.
Copyright 2006 John Wiley & Sons, Inc.

32. Four Basic Principles of Knowledge Codification*
Decide what business goals the codified knowledge will serve (define strategic intent).
Identify existing knowledge necessary to achieve strategic intent.
Evaluate existing knowledge for usefulness and the ability to be codified.
Determine the appropriate medium for codification and distribution.
*Davenport and Prusak (1998)
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Knowledge Capture
Knowledge capture takes into account the media to be used in the codification process.
The 3 main knowledge capture activities are:
Scanning (gather “raw” information) – can be electronic or human.
Organizing (move it into an acceptable form) – must be easy for all types of users to access.
Designing knowledge maps (providing a guide for navigating the knowledge base)
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Organizing Knowledge
One scheme for categorizing knowledge uses four broad classifications (Ruggles 1997):
Process knowledge – best practices, useful for increasing efficiency.
Factual knowledge – easy to document; basic information about people/things.
Catalog knowledge – know where things are; like directories of expertise.
Cultural knowledge – knowing how things get done politically and culturally.
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Knowledge Maps
A knowledge map (see figure 12.6) serves as both a guide to where knowledge exists in an organization and an inventory of the knowledge assets available.
Although it may be graphically represented, a knowledge map can consist of nothing more than a list of people, documents, and databases telling employees where to go when they need help.
A good knowledge map gives access to resources that would otherwise be difficult or impossible to find
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36. Figure 12.6 Contents of knowledge maps
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Knowledge Transfer
Nonaka and Takeuchi’s Knowledge Transfer describe four different modes of knowledge conversion (transfer):
Socialization: from tacit knowledge to tacit knowledge
Externalization: from tacit knowledge to explicit knowledge
Combination: from explicit knowledge to explicit knowledge
Internalization: from explicit knowledge to tacit knowledge
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38. TYPES OF KNOWLEDGE MANAGEMENT PROJECTS
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KM Projects
KM projects differ widely from traditional IT projects.
According to Davenport and Prusak if more than one-third of the time and money spent on a project is spent on technology it becomes an IT project.
Figure 12.8 summarizes the differences.
Examples include:
Knowledge repositories – data warehouses.
Knowledge access, environment, and assets
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40. Emphasis on value added information
KM Projects
Emphasis on value added information
Supports org. improvement and innovation
Adds value to content
Requires on-going user contributions
Balanced focus on both technology and culture
Variety of inputs often precludes automated capture of knowledge
IT Projects
Emphasis on accessing information
Supports existing ops
Delivers content only
Emphasis on one-way transfer of info
Primary focus on tech
Assumes all info inputs can be automated
Figure Contrast between KM and IT Projects
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41. Knowledge Repositories
Three fundamental types of repositories have been identified:
Externally focused knowledge, sometimes called competitive intelligence
Structured internal knowledge such as research reports, marketing materials, and production processes
Informal internal knowledge such as discussion databases for “lessons learned” and internal best practices
Data warehouses sometimes serve as repositories of organizational knowledge
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42. MEASURING THE VALUE OF KNOWLEDGE ANAGEMENT
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43. Project-Based Measures
Measuring the success of KM projects is often done by measuring the specific benefits of the project examples include:
Enhanced effectiveness
Revenue generated from extant knowledge assets
Increased value of extant products and services
Increased organizational adaptability
More efficient re-use of knowledge assets
Reduced costs
Reduced cycle time
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44. Intellectual Capital Report
Widely known approach to measuring intellectual capital.
Developed by Skandia (see Figure 12.9).
Attempts to define the market value of a company by differentiating between traditional balance-sheet measures.
Copyright 2006 John Wiley & Sons, Inc.

45. Organizational Capital
Market Value
Shareholder’s Equity
Intellectual Capital
Human Capital
Structural Capital
Organizational Capital
Customer Capital
Figure Skandia Intellectual Capital Framework
(cf. Edvinson & Malone, 1997)
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46. Valuation of Knowledge Capital
Strassmann: “Knowledge capital” is the value a customer places on goods or services over the cost of sales and cost of capital
It is the amount an investor is willing to pay for intangible assets, in excess of the cost of capital, for a risk-adjusted interest in the future earnings of the company
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47. CAVEATS FOR MANAGING KNOWLEDGE
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48. Caveats for Managing Knowledge
KM an emerging discipline
Competitive advantage increasingly depends on knowledge assets that are hard to reproduce, so it is sometimes in the best interests of the firm to keep knowledge tacit, hidden, and nontransferable
Knowledge can create a shared context for thinking about the future, not to know the future, but rather to know what projections influence long-term strategy and short-term tactics
The success of KM ultimately depends on a personal and organizational willingness to learn
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49. FOOD FOR THOUGHT: DIGITAL MILLENNIUM COPYRIGHT ACT
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50. The Digital Millennium Copyright Act
The DCMA, passed in 1998, makes it a crime to circumvent copy protection, even if that impairs rights established by the earlier Audio Home Recording Act
2001: Dmitry Sklyarov, of the Russian firm ElcomSoft, was charged in the U.S. for selling ‘cracked’ software
DCMA Critics argue that fair use of digital products includes rights to make back-ups, translate files into other formats, “time-shift” audio or video for later playback, or “space-shift” audios, videos or software.
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Summary
KM is related to information systems in three ways: IT makes up its infrastructure, KM makes up the data infrastructure for many IS and apps, and KM is often referred to as an app of IS.
Data, information, and knowledge should not be seen as interchangeable.
The 2 kinds of knowledge are tacit and explicit.
Manage knowledge carefully, there are many valid and of course legal reasons.
KM projects can be measured using project-based measures.
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