The Importance of Knowledge Management in Business

In our current era of ‘infobesity,’ we’ve come to realize that the human brain is a pretty amazing thing. Somehow we are able to process hundreds of pieces of social media content, boatloads of emails, news information, and work-related information in a single day without melting down. No one really knows how much information the brain can hold, but some neuroscientists have estimated its storage capacity to be anywhere between 10 and 100 terabytes. To conceptualize the numbers, 10 terabytes is approximately the equivalent of the amount of information in the printed collection of the U.S. Library of Congress. Now, just because our brains are processing this deep pool of data does not necessarily mean we are doing so efficiently and productively. For this reason, we must be aware of the concept of knowledge management.

The term ‘knowledge management’ was coined in the 1990s, presumably as a reaction to the exponential growth in technology and accessibility of information. Thomas Davenport, a professor at Babson College, defines knowledge management as “the process of capturing, distributing, and effectively using knowledge." In a business setting, knowledge management refers to managing knowledge within each company.

Why is it so important? KMWorld explained in a post how simple communication of knowledge from one sales representative changed the direction of the sales for one pharmaceutical company. When Wyeth Pharmaceuticals introduced a new drug to the market, its initial sales were strong but shortly after they experienced an unexpected decline. The key to reverse this downfall was one conversation that a sales rep had with his customer. In this conversation, the rep found out that the taste of the pill was deterring kids from taking it, and all it required was some orange juice for the medicine to go down. From then on, sales reps advised doctors to instruct their patients to take one pill every morning with a glass of orange juice, and sales were back up again.

The knowledge acquired and held by all employees can be a huge strategic asset to a company. When each sales team has tens and hundreds of field reps, all collecting different data from different sources and acquiring new knowledge from experience, improper management can lead to lost opportunities and reduction in productivity. Data overload can also harm a manager’s ability to focus and reduces creativity, according to the Economist. Lisa Quast of Forbes adds that improper knowledge management can have adverse effects on the quality of decision-making, culture of learning, and innovation in a company. In order to avoid these setbacks, we turn to origins of the data overload itself: technology.

When it comes to field activity, a simple easy-to-use software may be the answer. Some software allow reps and managers to collect and share not only data such as competitor prices and purchasing orders, but also notes on their clients. Other capabilities include photo taking/storing and automatic data analysis, which  saves managers time when looking for patterns in clients and ultimately assist in decision-making.

Technology alone will not lead to optimal knowledge management though. There is a second half to the equation that is people. Since the people in your company are the ones with the knowledge, aside from the data/analytics, as a manager you must be able to create a work environment in which they can share their expertise. Quast emphasizes the importance of cultivating a culture of learning as a norm in your company. Employees should be able to assess both themselves and their peers to better the company and increase efficiency. Set aside some time for your team to meet as a group and share their experiences with each other. Afterwards, distribute a self-assessment survey so employees can reflect on their own work.

Improper knowledge management can become a hindrance to your company. According to Shen Wang and Raymand Noe of the University of Denver, an estimated $35 million are lost in Fortune 500 companies due to unshared knowledge. With the thousands of pieces of information that you and your team see everyday, be sure to utilize the right technologies to simplify your knowledge management.