Working Knowledge
How Organizations Manage What They Know
Thomas H. Davenport
Laurence Prusak
Presented by Rimal Popat
Madhusudhana Sadagopan
What is Data?
• Data, Information, Knowledge—Not interchangeable
• Data: discrete, objective facts about events
– RM used to create information
– Important to data dependent organizations (i.e. banks, IRS,
etc.)
– Meaningless because doesn’t describe the context
• Myth: More data the better
– False: (1) Too much data can be confusing & harder to
identify
– (2) No inherent meaning of data; No judgment/ interpretation
What is Information?
• Information: “message in form of document or audible/visible
communication”
– Sender & Receiver; meant to have an impact on receiver’s
judgment and behavior
• How does info travel?
– Hard Network– visible, definite infrastructure
• i.e. wires, vans, post offices, addresses, inboxes
– Soft Network – less formal, visible; ad hoc
• i.e. “FYI”
Transformation of Data  Information
Impact of Computers
Medium is not the message
Having more technology will not increase the state of information
i.e. Having phone does not guarantee or even encourage brilliant
conversations
1.
2.
3.
4.
5.
Contextualized
Categorized
Calculated
Corrected
Condensed
What is Knowledge?
• Intuitively, deeper and richer than data and information
– Mixture of various elements
– Both process and stock
– Human element; Obtain knowledge from indivs or groups
• Delivered through structured media (i.e. books) and
human interaction (i.e. conversations)
1.
2.
3.
4.
Comparison (of situations)
Consequences (implications for decisions & actions)
Connections (how it relates to others)
Conversation (what other people think about this info)
Measurements
Type
Quantitative
Qualitative
Data
Cost
Speed
Capacity
Timeliness
Relevance
Clarity
Information
Connectivity
Transaction
Informativeness
Usefulness
Knowledge
?
?
Why Knowledge is Awesome/Useful
• Used to make wiser decisions about strategy, competitors,
customers, etc.
• Shortcomings: Hard to trace path b/w knowledge and action
since people generally think about this internally
• Knowledge moving up and down the value chain
– Data  Info  Knowledge
– Knowledge Info Data
Components of Knowledge
• Experience
– Latin root: to put to the test
– Related word: experts—people with deep knowledge of a
subject
– (+) provides historical perspective to see and grasp new
situations and events
– Connection b/w what is happening now vs. what is
happening in the past
Components of Knowledge
• Ground Truth
– Knowing what works and what doesn’t
• Real-life knowledge
• Rich truths of real situations experienced close up; on
grounds vs. theory or generalization
– Term derived from the Army Center for Army Lessons Learned
(CALL)
– “After Action Review” (AAR)
• Exercise involving what was supposed to happen vs. what
happened + why difference b/w two
– What can be learned from it
– Results  Doctrine
– Used to restore value
Components of Knowledge
• Ground Truth (cont’d)
– Correlation between business strategies (practical) vs.
business teachings (theory)
• Complexity
– Knowing more usually leads to better decisions vs.
knowing less
– Want both certainty and clarity
– What doesn’t know can and—in most cases—will hurt you
• Tomato Farmer example, pg. 10
Components of Knowledge
• Judgment
– Knowledge contains judgment
– i.e. Living system
• Growing and changing as it interacts with environment
• When knowledge stops evolving, turns into opinion or dogma
– Rules of Thumb & Intuition
• Flexible guides to action that developed through trial and error
• Shortcuts to solutions to new problems that resemble problems
once solved by experienced workers
– Thus, knowledge = speed
– Scripts—patterns of internalized experience; relying on
intuition (aka “compressed expertise”)
Components of Knowledge
• Values & Beliefs
– Organizations are not neutral; Instead, values and beliefs
have powerful impact on an organization’s knowledge
– Integral component to knowledge; serves as the “seeing”
aspect of organization
– “Knowledge, unlike information, is about beliefs and
commitment.” -- Nonaka & Takeuchi
Knowledge as a Corporate Asset
• Studies: Managers get 2/3 of info + knowledge from face-toface interaction than from documents (1/3). Expertise is
invaluable.
• The Changing Global Economy
– Companies and countries are fiercely competitive
• Thus, will differentiate themselves on basis of
knowledge
• “In a global economy, knowledge may be a company’s
greatest competitive advantage.”
– i.e. Outsourcing
Knowledge as a Corporate Asset
• Product & Service Convergence
– Products mean more than just tangibles
• Intangibles: product design, marketing presentation,
understanding the consumer, personal creativity,
innovation
– Fortune 500
• Industrial + Service
– I.E. Software companies – often sell ideas vs. products
• IBM : Business Solutions
Knowledge as a Corporate Asset
• Sustainable Competitive Advantage
– Past: the importance of corporate secrets; government
regulations
• i.e. Coca-Cola formula, Zildjian cymbals
– Present: the contrary
• Difficult to keep secrets in knowledge-driven industry
“Self canceling technological advantage” –Alan Webber
• Same tech available to everyone  can’t be LT
advantage to anyone
– Knowledge = Sustainable Competitive Advantage
• Increasing returns and continuing advantages
Knowledge as a Corporate Asset
• Knowledge Assets vs. Material Assets
– Knowledge increases over time
• Ideas generate and multiply
• Stay with the sender & enriches the receiver
“Ideas are the instructions that let us combine limited
physical resources in arrangements that are ever more
valuable.”
–Paul Romer, expert, knowledge economics
– Material Assets decreases over time
Knowledge as a Corporate Asset
• Corporate Size and Knowledge Management
– How big is too big for the manager to know his resources?
• Studies show 200-300 is optimal
– Thus, Chrysler “Engineering Books of Knowledge”
resource
• For reference  hence, efficiency
• Computer Networks & Knowledge Exchange
– Technology helps facilitate knowledge but is not
knowledge itself
Theory into Practice: BP
• British Petrol’s Virtual Teamwork Program
– 1993 | BP Exploration: 42 separate business assets
• Each should have its own ability for DM
– Goal: Agility of small company w/ resources of a large one
• Planning
– Create federations
• VTP (Virtual Teamwork Program)– to develop effective ways for
members of teams to collaborate across different locations
• Goal: NT of people; not store information—telephone, basically
– Emphasis—richness of communication
– Emulating face-to-face communication
Theory into Practice: BP
• Implementation
– Allowing other groups aside from IT to construct structure
• Stressed corporate behavior vs. technology
• Coaches and teams
• Chain Management Teams  Knowledge Management
Teams
• Emphasis: person-to-person interaction and
understanding vs. system requirements
• Coaches helped team members link business objectives
to system capabilities; challenged individuals
Theory into Practice: BP
• Results
– Good News
• Groups of 4 or 5  SUCCESS!!!
– Enthusiasm, savings in time + money, volume of use
• Instance when part failed –outstanding use of on-site
resource
– Savings: $150, 000 p/day 
Brief Summary Chapter 1
KM Principles
BP’s Virtual Teamwork Program
Knowledge originates in people’s minds
Members identified and put into teams, linked
by technology
Sharing knowledge asks for trust
Relationships built via actual and face 2 face
interactions
Tech allows new knowledge behaviors
Tech used for collaboration and communication
Sharing knowledge must be encouraged and
rewarded
Coaching and training was essential
Management support plus resources are
essential
Upper management encouraged project and
supported funds
Knowledge initiatives should begin w/ pilot
program
5 test groups allowed for variety and clear,
limited goals
Quant + Qual measurements needed to evaluate
initiative
Savings & productivity increases quantified;
expanding VT needs –qualitative
Knowledge = creative; should be encouraged to
develop in unexpected ways
Project left room for unexpected
Promise & Challenge of Knowledge
Markets, Ch. 2
• Key Points of Chapter
– A market exists for knowledge
– Knowledge moves throughout an organization
• Knowledge Market
– Buyers and sellers who reach price for goods exchanged
– Brokers: pairs buyers and sellers together
– Knowledge most sought after remedy to uncertainty
• Still exists form of payment/compensation
Political Economy of Knowledge
Markets
• Social, economic, and political climate needed to evaluate
knowledge markets
• Some cultural norms may inhibit the knowledge market
– i.e. HP VP in Australia –discourages calling attn to
individual
The Knowledge Management Market Dream Team
•Buyers
•Sellers
•Brokers
The Players
• Buyers
– Looking for solutions to a problem
• Insights | Judgments | Understanding
• Answers to sense-making questions
• Will make them more successful at work
– Important
• 15 – 20 percent of managerial time spent specifically in
knowledge search and responding to requests for
knowledge
The Players
• Sellers
– Other end; giving end
• Sell either in “bundles” or piece by piece
• Exchange for salary
– Must be skilled in their field
• Able to articulate knowledge
– Should all sellers sell?
• Some “hoard” the information
• Knowledge is Power
The Players
• Brokers
– Aka Gatekeepers, Boundary Spanners
• Intermediaries (people-to-people; people-to-text)
– Role
• Finding out what people do, how, etc.
• Understand the big picture, therefore linking people
– Importance
• 10 percent of managers
– Example
• Librarians
The Price System
• How do they get paid?
– $$$
• i.e. Lawyers, Consultants, etc
– Other means
• i.e. Internally
Three Factors of Payment
• Reciprocity
• Repute
• Altruism
+
TRUST
Payment Factors
• Reciprocity
– I’ll help you now if you’ll help me in the future
– Time, energy, knowledge—finite resources
• Use sparingly and keep self-interest in mind
• Repute
– Having the “street cred”
– Getting acknowledged as intelligent and reliable
• Yield tangible benefits (i.e. job security, promotion, etc)
– Increasingly important in today’s industry where ethics are
compromised; loyalty hard to find
Payment Factor
• Altruism
– People who enjoy helping for sake of helping
• i.e. Mentoring
– Generative stage
– Often hard to give credit to older mentors, as hard to
determine what he/she knows
– Real and can be encouraged
– Chrysler “Engineering Books of Knowledge”
• Type of mentoring tool
– Contributing to program = altruism
The “T” Word
• Trust
– Purpose
• Glue to hold knowledge components together
– Means to be established (mandatory)
• 1. Visible
– Members should physically see trust in the
workplace
• 2. Ubiquitous
– All around; otherwise, not optimal efficiency
• 3. Start at the top
– Monkey see, monkey do
Knowledge Market Signals
• Market Signals
– Where is knowledge located in an organization?
• How can I get a piece of it?
– Informal & Formal
• Position & Education
– Commonsense organizational approach (+/-)
– Education/Credential (+/-)
• Informal Networks
– Ask one person who asks another (+/-)
• Communities of Practice
– Complimentary knowledge  formal organization
Knowledge Market Inefficiencies
• Efficient market generates the most good at the least cost
– i.e. Market for car
• Various sources of information (Consumer Info,
Classifieds, etc)
• Knowledge Market
– Not always efficient
• Harder to find the right seller, let alone quality
– None
3 Factors to Cause Inefficient Knowledge Markets
•Incompleteness of Info
•Asymmetry of Knowledge
•Localness of Knowledge
Factors for Inefficient Knowledge
Markets
• Incompleteness of Info
– Absence of resources (i.e. Yellow Pages, etc).
– Uncertainty of price
• Asymmetry of Knowledge
– Access to knowledge at different levels
– (-) Prevents knowledge from getting where it is needed
• “knowledge famine”
• Localness of Knowledge
– Mechanisms for getting access to distant knowledge
– “Satisficing”
• Human tendency to settle for info that’s good enough for
their purposes
Knowledge Market Pathologies
• Deep Flaws: distortions that inhibit the flow of knowledge
– Knowledge Monopolies
• Hoarding info
– Artificial scarcity
• Hard to get  expensive
• Downsizing  scarcity ; losing expertise in desig. area
– Trade Barriers
• Knowledge hoarding + not-invented-here mentality
• Also, simple lack of technology
Developing Effective Knowledge
Markets
• Using Information Technology wisely
– i.e. Electronic Yellow Pages
• Building Marketplaces
– Physical and virtual to buy/sell knowledge
• i.e. Online forums | Note: People must have time to do this
• Creating & Defining Knowledge Market Value
– Appreciate and promote knowledge circulation
• Promotions, vacations, etc
Benefits of Knowledge Markets
• Internal
– Productivity increases
– Buyers, Sellers, Brokers interact
• Peripheral / Non-Market Benefits
– Higher workforce morale
• Less employee cynicism
– Greater Corporate Coherence
– Richer Knowledge Stock
– Stronger Meritocracy of Ideas
Knowledge Generation, Ch. 3
• Organizations generate and use knowledge
• Why ?
– Without knowledge, an organization could not organize
itself
• What is ‘Knowledge Generation’ ?
– The specific activities and initiatives firms undertake to
increase their stock of corporate knowledge
Modes of knowledge generation
• Acquisition
• Dedicated resources
• Fusion
• Adaptation
• Knowledge networking
Acquisition
• Well stolen is half done
• Buy it  buy an organization or hire individuals
• A company that acquires another firm for its knowledge is
buying
– People
– Structured knowledge in documents
• Formal measures to guide knowledge purchases have so far
been imperfect and incomplete
• Knowledge is hard to quantify
Acquisition
• Rental
– Firm’s financial support of university or institutional
research in exchange for the right to first commercial use of
promising results
– Certain amount of control in exchange for reduced financial
and organizational burdens
– Firms that hire for a day or a week might be expected to
squeeze as much knowledge as possible from the
knowledge provider
Acquisition
• Problems
– Knowledge is hard to quantify
– Difficult to determine where the knowledge resides
– Organic connection of knowledge to a particular people and
a particular environment
– Reluctance  to view purchaser and acquisition as
conqueror and conquered
– Smooth meshing of existing and newly acquired knowledge
Dedicated Resources
• A customary way to generate knowledge in an organization is
to establish units or groups specifically for that purpose
– Research and development departments
• Separating R&D from other parts of the firm
– Freedom to explore without the constraints imposed by a
preoccupation with profits and deadlines
• Problems
– Financial returns take time to materialize
– May be difficult to measure when they do come
– May create pressure to cut costs
Fusion
• Purposely introduces complexity and even conflict to create
new synergy
– Combining people with different skills , ideas, and values
can generate create solutions
• Creative chaos
• Differences among individuals prevents the group from falling
into routine solutions to problems
– New ideas, “spillover” effects
• A significant commitment of time and effort is required to give
group members to share knowledge and work together
Fusion
• Problems
– Creative abrasion should generate “light rather than heat”
– Creative chaos  Total chaos
• 5 principles
– Awareness
– Identify key knowledge workers
– Emphasize the latent creative potential
– Direct it toward a common goal
– Introduce measures and milestone of success
Adaptation
• Adapt or die
• Lulled by past success, companies sometimes fail to see that change is
happening or acknowledge that it can affect them
• Reasons to adapt
– Spur of a crisis
– Period of great stress
• Ability to Adapt
– Existing internal resources
– Open to change or “absorptive capacity”
– Employees who are willing to and able to learn new things
• Creating a sense of artificial crisis might help to head off the real one
Adaptation
• Problems
– History matters – ability to change is developed over time
– Neither firms nor the people in them are chameleons, able
to adapt to any changes
– A firm may make significant changes, but it cannot
transform itself into a different animal
Networks
• Communities of knowers, brought together by common
interests..
– E-mail, in person, on the telephone
• In the absence of formal knowledge policies and processes,
networks act as critical conduits for much innovative thinking
Common factors
• Adequate time and space
– Time is the scarcest of all resources, the one impossible to
replicate
• Knowledge generation is an important activity for business
success
• Knowledge generation is a process that can be nurtured
• Knowledge generation is difficult to measure
• A firm that fails to generate knowledge will cease to exist
Knowledge Codification, Ch. 4
• Aim: to put organizational knowledge into a form that makes
it accessible to those who need it
• Users categorize knowledge, describe it, map and model it,
simulate it, and embed it in rules.
• New technology plays an important role in knowledge
codification
Principles of Knowledge Codification
• How to codify knowledge without losing its distinctive
properties and turning it into less vibrant information or data
– Must decide what business goals the codified knowledge
will serve (Relevance is far more important than
completeness)
– Must be able to identify appropriate knowledge existing in
various forms
– Must evaluate knowledge for usefulness and
appropriateness for codification –is it rich, tacit, intuitive
knowledge of an expert of explicit knowledge
– Must identify an appropriate medium for codification and
distribution
Codifying different types of
Knowledge
•
•
•
•
•
•
•
Tacit
Not teachable
Not articulated
Not observable in use
Rich
Complex
Undocumented
Articulable
Teachable
Articulated
Observable in use
Schematic
Simple
Documented
Codifying Tacit Knowledge
• Internalized by the knower over a long period of time
– almost impossible to reproduce in a document or database
– they just can’t be expressed in words that can be put to
much use
• If it were possible to extract knowledge from the knower, it
would radically change our compensation and education
policies
• To address this issue
– Point the seeker to the knower
– Or build a system to connect people who have problems
with those who can solve them
Mapping and Modeling Knowledge
• Knowledge Map
– Promotes the idea that corporate knowledge belongs to the corporation
as a whole, not to a particular group or individual
– It is a guide, not a repository
– Where to go when anyone needs expertise
– Is a picture of what exists in the company as well as where it is located
– A firm’s organization chart is a poor substitute for a knowledge map
– A good knowledge map goes beyond conventional departmental
boundaries
– Greatest value of modeling is in identifying the variables in the model
that can be affected by management action
Assembling the Map
• Information needed to create a knowledge map often already
exists in organizations
• Creating a knowledge map is a matter of combining these
individual mini-maps
• Mapmakers may also follow a trial of recommendations
• Employees should have better idea of what knowledge is
required of them
– Then they will be better consumers of educational offerings
within and outside of the company
– So the map gets richer and richer…
The Technology of Mapping
Knowledge
• 33 1/3 percent rule
• The value of the map is the quality and depth of information
much more than the sophisticated technology
• Electronic map can be revised more frequently
• Improves the search speed
• Can be personalized to a great extent (brief video clip, images)
The politics of Mapping knowledge
• Most maps have a political dimension
• If knowledge is genuinely important to an organization and
those who have it are recognized and rewarded
– The map will be a picture of status and success as well as a
knowledge locator
• In one sense political wrangling over a corporate knowledge
map is a good sign
– How to keep politics from distorting a map ?
Capturing Tacit Knowledge
• As difficult as its is to codify tacit knowledge, its substantial
value makes it worth the effort.
• Transfer as much knowledge as possible to someone through
mentoring or apprenticeship
• Human beings learn best from stories
– A good story is often the best way to convey meaningful
knowledge
• Encode the stories themselves so as to convey meaning
without losing much of its value
• It is difficult to locate the dividing line between knowledge
that is fully embedded in a process and the tacit, human
knowledge that keeps the process going
Codifying Knowledge in Systems
• An expert system represents an explicit attempt to capture or
imitate human knowledge using “rules”
• It easier to model a closed system of unchanging and
codifiable rules
• Evaluating codified knowledge and then making it available is
an integral part of the entire process (patents)
• Evaluation of existing knowledge and information –
classification based on
– Quantitative content
– Structured and qualitative content
– Relatively unstructured content
Codifying Knowledge in Systems
• Knowledge Management Architecture provides different tools
for capturing, representing and retrieving
– Structured content – fits comfortable into database
– Unstructured content – web
• Codification gives permanence to knowledge that may
otherwise exist only inside an individual’s mind
• The challenge is to codify knowledge and still leave its
distinctive attributes
THE TRUTH – vital to knowledge codification is still a
human one
Thank You
• Questions
• Discussants