Knowledge management: what is it, and why is it important?
By: Jill Huettich
The business world has changed immensely in the past few decades. Where once we used to feed documents into fax machines, respond to pagers, and file away reams of papers, today’s technological advancements have made those activities mostly unnecessary.
However, as wonderful as those technical advances are, they’ve created a new set of problems—how do we organize, manage, and disseminate all the information that technology makes it so easy to collect? This is the challenge that knowledge management aims to tackle.
In this article, we’ll examine the definition of knowledge management, explain why it’s important, and take a look at the benefits of knowledge management.
We’ll also review some knowledge management examples, so you get an overview of how knowledge management might transform the way information is managed at your workplace.
The definition of knowledge management
According to Knowledge Management Matters author, John P. Girard, knowledge management can be defined as “the process of creating, sharing, using, and managing the knowledge and information of an organization.”
In other words, knowledge management is defined as a way of creating value for an organization by making sure the right information is available to the right people at the right time.
The importance of this can’t be understated and is probably best illustrated by a quote from Lew Platt, former CEO of Hewlett-Packard, who once said, “If HP knew what HP knows, we would be three times as productive.”
How knowledge management came to be
To understand how knowledge management benefits organizations, it’s useful to look at the origins of the term. Interestingly enough, knowledge management was unheard of until the late 1980s.
However, once the management consulting community began using the Internet, they quickly realized that an intranet would be a great way to disseminate information to those employees located in other offices throughout the world.
So, they began building new dashboards, lessons learned databases, and expertise locators. Realizing they had a new product on their hand, they termed it “knowledge management.”
Why is knowledge management important?
The benefits of a good knowledge management system are extensive. In particular, organizations that have a well-defined knowledge management process benefit in the following ways:
- Knowledge management makes it easier to share expertise across dispersed locations.
- Knowledge management facilitates decision-making, since key information is readily available to stakeholders.
- Knowledge management makes project management easier, since teams can quickly review what other team members are working on.
- Knowledge management increases productivity. Because information is well-documented and easily accessible, organizations aren’t forced to reinvent the wheel when tackling new initiatives or facing challenges.
- Knowledge management makes companies more competitive, because they can recognize market trends earlier, gaining an advantage.
- Knowledge management results in better products and services, because it simplifies the process of gathering and analyzing relevant market trends.
- Knowledge management increases customer satisfaction. Because employees can easily find the information they need to satisfy customers’ problems and complaints, customers are happier and less likely to transfer their loyalties to a competitor.
- Knowledge management supports the development of employees, since they can readily access helpful information that promotes their career growth.
- Knowledge management improves overall processes and efficiency. With access to lessons learned databases, teams have the opportunity to learn from others’ mistakes, rather than repeating them.
Watch the video below for an in-depth summary of why knowledge management is important for businesses, and how it has contributed to long-term innovation throughout human history.
Examples of knowledge management
It’s clear that knowledge management can be extremely beneficial to companies for a number of different reasons, but how does knowledge management look in practice? What does it mean when we incorporate a knowledge management process into our work environment? And what are some challenges of knowledge management that you will need to overcome?
To answer those questions, let’s look at three knowledge management examples you might encounter at your own organization.
You work in a competitive industry where lightning-fast reaction times to market fluctuations are critical. Yet, rather than being able to react quickly to what’s going on, key stakeholders can’t find the information they need fast enough to make decisions.
In this scenario, knowledge management prevents the need to reinvent the wheel each time an organization faces a new challenge or threat. Because relevant information can be accessed quickly, not only is decision making improved, but productivity and efficiency are as well.
Recognizing that it’s much easier to retain an existing customer than it is to acquire a new one, you’ve been tasked by the executive team with reducing customer attrition or loss.
You know that satisfaction with customer service isn’t as high as it could be. Rather than quickly getting help with their problems, customers often wait for answers or are transferred to a number of people within the company before they get the assistance they need.
By making information readily available and easily searchable to your customer service team, you can use knowledge management to provide better customer service to customers, while improving operations overall.
For these reasons, knowledge management has been shown to reduce support costs by 25% or more, while increasing customer satisfaction by providing customers with help in 20-80% less time.
Your company is developing a new product, and you’re heading up the market research team. There are multiple team members conducting competitive research, and there are also a number of ongoing focus groups, as you and your team try to determine the best direction to go in.
By taking advantage of knowledge management, you can easily organize all of the disparate information being collected by your team. Going forward, this will make it easy for team members to find objective data on sales potential, trends, customer needs, and marketplace gaps.
These are just three examples of how an organization might implement a knowledge management process to improve performance. As you might imagine, there are many, many different applications, but businesses that use knowledge management all have two things in common … the desire to organize information in a way that helps them derive the biggest benefits from all the knowledge they’ve accumulated, and the knowledge management tools required to make that happen.