The concept of knowledge management is related to ERP solutions in at least two ways. First, the ERP system itself can serve as a knowledge management system, since its underlying technology is the relational database. In addition, however, organizations can benefit from a knowledge management system in selecting and implementing an ERP system.
Peter Drucker, considered by many to be the father of modern management, wrote that knowledge may be the only sustainable competitive advantage for organizations (1993). And, most business people would probably agree with that statement. Although “knowledge” will never show up on a corporate balance sheet as an asset, virtually no-one would deny its importance in today’s competitive environment.
Knowledge, therefore, is something that must be managed—just as we manage the other assets on the balance sheet. But, how many organizations have an explicit system available for that purpose? In this article, then, we’ll look at the idea of knowledge management, along with some of the tools and principles associated with it.
Srinivas (2010) gathered several definitions of knowledge management:
- the process through which organizations generate value from their intellectual and knowledge-based assets
- concerned with organizing knowledge repositories (data bases etc.) so as to allow for easy retrieval and exchange of the information stored therein
- the process of capturing value, knowledge and understanding of corporate information, using IT systems, in order to maintain, re-use and re-deploy that knowledge
- the systematic process of finding, selecting, organizing, distilling and presenting information in a way that improves an employee’s comprehension in a specific area of interest
Although all of those definitions have strong points, I believe the last one is the best. It conceives of knowledge management as something that can be used throughout the organization—not just by top management. In addition, it divorces knowledge management from information technology. Drucker first coined the term “knowledge worker” in 1959—long before most organizations had the IT capabilities we take for granted today. Finally, the last definition lays out a specific series of tasks involved in managing knowledge effectively:
- Finding: The first step in knowledge management is realizing that knowledge is needed, then finding it.
- Selecting: In a previous article in this series, we looked at the idea of information overload. Once a seeker finds the knowledge he / she needs, it must be winnowed down based on such factors as currency, authority and coverage.
- Organizing: After appropriate information has been selected, it must be organized in some meaningful way to be useful for decisions. It may be organized based on some predetermined taxonomy, or based on one developed by the knowledge worker.
- Distilling: Even after it is well organized, the decision maker will want to distill all the gathered, relevant information into a few salient points.
- Presenting: Finally, the distilled information can be presented and used as a basis for decisions.
The next section of this article looks at the purposes of knowledge management.
Now that we’ve defined knowledge management, let’s take a look at its broad purposes. In other words, what are the goals of knowledge management? What outcomes should managers and others expect when they manage organizational knowledge?
With a well-developed, properly-implemented knowledge management system, organizations can expect to:
- Avoid making the same mistakes repeatedly. Perhaps you’ve been fortunate enough in your career to work in organizations that actually learn from their mistakes. But, sadly, many organizations don’t seem to have that ability. They follow a predictable path, and then are surprised when they get the same results as in the past. I worked for an organization that decided to shortcut its quality control procedures in an effort to make the production process more efficient. The quality problems didn’t surface for several years because of stockpiled inventory. Eventually, however, management started receiving complaints about product quality and they wondered aloud how that could have happened. An effective knowledge management system might have helped avoid the problem in the first place.
- Compete more effectively in their markets. Porter suggested that organizations compete in two ways: cost leadership and product differentiation. Cooper stated that those techniques were ways to avoid competing, since (for example) only one company in a market can be the “lowest cost producer.” He advanced the idea of the survival triplet based on field research in Japanese companies. Either way, however, competition requires knowledge—knowledge about customers, suppliers, competitors and the economic, political and legal environments in which organizations operate. Developing an explicit strategy and system for managing knowledge therefore helps organizations compete more effectively.
- Enhance internal control. Recall from the article on internal control that one of its four purposes is promoting operating efficiency; a knowledge management system can aid in achieving that goal. In addition, knowledge management systems can indirectly help safeguard assets—provided an organization learns from any prior experience with asset loss.
- Maintain better relationships with customers. As I was writing this article today, I was having my Prius serviced where I bought it: John Elway Crown Toyota. When I show up there every 5,000 miles, I always talk to the same service advisor. He always has my contact information and the car’s maintenance history available through the dealership’s knowledge management system. While I can get good service for the car in any number of Toyota dealerships, I always go back to the same one for those reasons.
- Promote employee satisfaction and productivity. In the same way that knowledge management systems can help organizations maintain strong customer relationships, they can also help maintain good relationships with employees. Often, line employees have great ideas for improving business processes and product quality; if an organization captures those ideas in a knowledge management system, employees are likely to be more satisfied and productive.
Next, let’s take a detailed look at how you can create a knowledge management system.
Call (2002) outlined seven steps for creating an effective knowledge management system.
- Create an organizational culture that supports the ideas of knowledge sharing and development.
- Define the business goals the knowledge management system will address.
- Perform a knowledge audit to identify any duplication, gaps, and overlaps in an organization’s knowledge base.
- Create a visual map that describes units of knowledge and the relationships between them.
- Develop a knowledge management strategy based on the content management, integration, search mechanisms, information delivery and collaboration.
- Purchase or build appropriate tools for capturing, analyzing, categorizing, and distributing knowledge.
- Periodically reassess the value of the knowledge management system and make necessary adjustments.
You may notice some similarities between Call’s seven steps and the COSO frameworks we looked at previously. All of them start by talking about building the “right environment,” otherwise known as organizational culture. And, all of them end with a monitoring function, in which the system is periodically and systematically evaluated for effectiveness and ongoing relevance.
What tools, then, can you use to create a knowledge management system in your organization? The fourth of Call’s steps talks about a “visual map,” also known as a “knowledge map.” A visual map is a simple diagram that shows the relationships between various elements. Consider the example below (Hurt, 2010):
The number of “bubbles” isn’t necessarily fixed at four, although information overload and complexity can become problematic if the knowledge map includes too many areas. In addition, the four areas identified above are illustrative—not definitive.
Relational databases are also great tools for knowledge management. In a previous article in this series, we looked at the principles of database design and management. You’ll probably recall that the basic organizational unit of a relational database is a table, which is made up of various fields and records. Most relational database software can incorporate a variety of field types, many of which can help organizations manage knowledge more effectively. Memo fields, for example, can accommodate almost any kind of text, allowing knowledge workers to keep notes on relationships with customers for future reference. A well-designed, normalized database can also allow users to access information quickly through queries and reports.
Finally, various forms of systems documentation can be important in a knowledge management system. Choices include flowcharts, data flow diagrams, entity-relationship models, decision tables and risk / control matrices.
The concept of knowledge management is related to ERP systems in at least two ways. First, the ERP system itself can serve as a knowledge management system, since its underlying technology is the relational database. In addition, however, organizations can benefit from a knowledge management system in selecting and implementing an ERP system.
Chan et al. (2009) completed a case study analysis of a Hong Kong firm using an ERP system for knowledge management. They concluded:
If adopted thoughtfully, [an ERP system] can be used as a [knowledge management tool] to improve knowledge transfer and reduce knowledge stickiness. An effectively deployed ERP tool provides not only valuable information processing capability to better control costs but it can also help identify ways to be more effective in dealing with its supply chain partners as well as improve its internal cost management reporting and decision making. This improvement in communication and decision making can improve the quality of its knowledge assets.
Palanisamy (2007) broke the broad concept of knowledge management into four distinct, interrelated elements: knowledge creation, knowledge storage, knowledge transfer and knowledge usage / application. He studied the relationships between the four components of knowledge management and organizational culture within the context of an ERP system implementation. The diagram below shows those relationships:
Not surprisingly, Palanisamy concluded that all five areas are significantly related to one another within the context of an ERP system. Stated more plainly, study results showed that organizational culture influences, and is influenced by, knowledge management.
- Call, D. “Knowledge Management—Not Rocket Science.” Journal of Knowledge Management. 2005.
- Chan, E., D. Walker and A. Mills. “Using a KM framework to evaluate an ERP system implementation.” Journal of Knowledge Management. 2009.
- Drucker, P. Post-Capitalist Society. Harper Row Publishing. 1993.
- Hurt, R. L. Accounting Information Systems: Basic Concepts and Current Issues (2nd edition). McGraw-Hill / Irwin, 2010. www.mhhe.com/hurt2e.
- Palanisamy, R. “Organizational Culture and Knowledge Management in ERP Implementation: An Empirical Study.” The Journal of Computer Information Systems. Winter 2007 / 2008.
- Srinivas, H. “What Is Knowledge Management?” Retrieved 7 December 2010 from http://www.gdrc.org/kmgmt/what-is-km.html.