Knowledge Management Strategy

Knowledge Management Strategy


KnowledgeManagement Strategy

Competitiveadvantage in today’s knowledge-rich and focused businessenvironment can be gained through the efficient KM strategies,whether creating new knowledge or transferring existing knowledgethroughout the organization (Vestal, 2002).Business values of anorganization can be attained by assessing different metrics like thedegree of customer contentment, the cost of saving, the productivityof the knowledge of employees and the organizations’ Return onInvestment (ROI). Leaders use ROI to define the significance oforganizational change. Due to the complexity of comprehending theimpacts that technology, content, process and people have onknowledge sharing and the business, the significance of RIO may takethe time to manifest. However, an extensive literature has beendocumented in the past two decades identifying a pragmatic and fairway of calculating the value of Knowledge. Martin (2000) stresses thesignificance of measuring knowledge and acknowledges the dangers andrisks involved in doing so. Vestal (2002) argues that companies haveevolved to “storytelling” and “anecdotal stories” todemonstrate the value of the investment prepared in knowledgemanagement initiative. While stories are assisting in personalizingthe impacts of the sharing of knowledge, many executives demandevidence, and that is where effective measures and metrics come in toprovide a more statistical, rather than personalized, effect.


Turner andJackson-Cox (2002) came up with a strategy to define the value of theorganizational knowledge, regardless of the nature or size of theorganization. Their model assessed the domain knowledge of anorganization consisting of three variables: formal training formaleducation and post-secondary education. The model considers theopportunity cost of capital invested in each educational level andthe capitalized cost value gained from a certain degree of education:

K = c

k=value of knowledge

c= the standard costof gaining knowledge on each time duration

r = ROI

n = education periodin years

Since the tactic knowledge of an organization is gained throughsocial interaction, or workers sharing their experience, the onlycost relevant to the firm is the cost of labour for the time spent byits workers on organizational tactic knowledge. For instance, if theorganization yearly cost for each worker is $39,824 and if 12.5% ofeach of the worker’s time is spent developing the organizationaltactic knowledge, the annual cost for the organization of attainingtactic knowledge is $4,978 per worker. Therefore, for each worker (ifthe employment period does not exceed 50 years) the highest value toan organizational tactic knowledge is similar to the current valuesof $4, 978 for each worker for 50 years. Therefore, the company mayincrease stock knowledge by providing more training or taking on moreemployees. The value of knowledge should not be merely based ontangible economic criteria, and a softer and more social-likeperspective (such as trust in people, ethical, professional conductand communication skills) should be imported. Development ofknowledge within a company is based on the significant assumptionthat individual knowledge is developed and magnified using socialinteraction. Social interaction is perceived to convert anindividual’s domain knowledge into a collective procedural andstructural (or tacit) knowledge within the company. From thebusiness’s perspective, this kind of knowledge has a more permanentdimension and the company may develop to it a sustainable competitiveadvantage.

It can be arguedthat to calculate the total value of knowledge, additional costs mustbe factored into the formula above. For instance, knowledge coststhat occur due to staff reduction or malfunctioning and inappropriateknowledge management practices could be subtracted from the total,whilst on the other hand, savings made due to successful knowledgemanagement projects could be added as suggested by the equationbelow:

K* = K-d+p

Where: K* is therevised value of knowledge, K is the initial value of knowledge, t isthe ratio of cumulative separations to the average number ofemployees (employee turnover rate), d is the number of dysfunctionalscenarios due to ignorant and ill-informed behaviors, and p is thenumber of successful projects delivered as the results of effectiveand efficient collaboration KM process.


The following tabledemonstrates the KM target values proposition in the variousorganization, their KM strategy and their results.


target values proposition



Dow Chemical

Enhanced information management, provides efficient information access, enhance sales leads

COPs, management of Content

Improved customer satisfaction score, a high number of sales leads, Cm investment of more than 3 million U.S dollar for startup, 8 million U.S dollars yearly.

Chevron Texaco

Progress safety reduces cost of operation’ expand excellence in operational

People Finder, CoPs, simplify transmission of best practices

A reduced operating cost of 2 billion dollars per year, 675 million dollars originated from refining top practices, assets of over 2 million dollars.


Develop single global firm. Decrease the time of the cycle. “Too Fast to Follow.”

Allowing the fresh employees into the “Old Boy” network, Community of Practice, Innovative working styles, best practices approach

200 million dollars per year cost savings, reduced planning and design errors, increased facility uptime, over four million dollar investment

Best Buy

Learning curve, developing creative ne solution to market faster, lower costs

Portal, CoPs, Employee Toolkit

1.5% increase in gross margin, reduced saving of nearly 250 thousand dollars per year, 3% drop of the damage claim.

Vestas 2002, p.2-4

PotentialBarriers to the Strategy

Fontain and Lesser (2002) have highlighted significant barriersthat companies encounter when implementing knowledge managementstrategies. The first roadblock is the failure to align knowledgemanagement effort with the business’s strategic objectives. Forexample, the effort (or lack of effort) that is executed by thebusiness can have a long-standing impact on the business’sstrategic goals for knowledge management. The second barrier is thedevelopment of repositories without addressing the management of thecontent. If the content is not appropriately managed, then anunsuccessful development of repositories may result, which couldpotentially hurt the business. The third roadblock is the failure tocomprehend and link KM into daily work activities of individuals. Forinstance, the daily work of an individual varies, so linkingappropriate knowledge to each individual’s workload can result insuccessful completion of their work. The last roadblock is the focusof KM initiatives only within the boundaries of the organization. Forexample, the KM initiatives would greatly benefit in knowledgemanagement if the focus was shifted now and then outside of theorganization.

Short-TermEvaluation of Success

The techniques thataim to increase the knowledge efficiency and effectiveness of theorganization are useful and have been helpful, but they need to bere-examined with a greater emphasis on identifying and resolving KMdysfunctions (i.e. shift towards a problem-oriented approach) withindifferent business units or department. Therefore, targetingsocio-technical issues that impact human performance andorganizational effectiveness is essential to increase productivityand motivation while at the same time facilitating day-to-daybusiness and setting the basis for efficient and effective workingpractices. There is also a need for an organization to addressdysfunctional scenarios rather than trying to identify ways ofimproving knowledge flows and access to general information. One wayto address this is for managers to perform a KM audit or a problemaudit so as to solve dysfunctional KM scenarios that could lead toineffective practices and thus KM failure.

The proposedevaluation method consists of four main elements: the reason thatlead to the KM dysfunction the dysfunction KM scenario per se therelevant actions to resolve the KM dysfunction a checklist to helpmanagers diagnose if they suffer from the particular KM dysfunction.The combination of the pieces above of organization advice can beviewed as a pragmatic technique for practitioners to manage knowledgemore effectively as well as improve their loss across differentbusiness units or corporate systems.


Darroch, J., &amp McNaughton, R. (2002). Examining the link betweenknowledge management practices and types of innovation. Journal ofintellectual capital, 3(3), 210-222.

Fontain, M., &amp Lesser, E. (2002). Challenges In ManagingOrganizational Knowledge. IBM Institute For Knowledge-BasedOrganization Publication. Management, 15(3), 497-512.

Martin, B. (2000). Knowledge management within the context ofmanagement: an evolving relationship. Singapore Management Review,22(2), 17.

Raub, S., &amp Von Wittich, D. (2004). Implementing KnowledgeManagement: Three Strategies for Effective CKOs. EuropeanManagement Journal, 22(6), 714-724.

Turner, G., &amp Jackson-Cox, J. (2002). If management requiresmeasurement how may we cope with knowledge?. Singapore ManagementReview, 24(3), 101.

Vestas, W. (2002). Measures knowledge management, APQC. Retrievedfrom