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Knowledge management: what it is, why it's important

Last updated on 
March 8, 2021

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Everything a business does is based on knowledge and data: product and service creation, internal processes, providing value to clients – these all hinge on the proper flow of knowledge and information. So, no matter what your company does, what services your offer, or who your audience is, knowledge management is one of your most important assets.

It sounds simple, but we live in a knowledge economy that bombards us with a constant stream of information – the equivalent of reading 174 newspapers every day. So managing all of that knowledge properly is essential for success. In recent years, this business need has crystallized into a discipline in its own right. But what exactly is knowledge management and how does it work in practice? Crucially, why do we need it and what will happen if we don’t do anything about it?

What is knowledge management?

Put simply, knowledge management is a system that helps a company share, access, and update business knowledge and information. Knowledge might be power, but knowledge by itself isn’t enough; we need to know how to handle and process that knowledge – how to enable it to flow freely and be useful and available to everyone. The problem is that company knowledge is so often unsubstantiated, hard to access, and at risk of being lost.

Imagine an organization has access to all the relevant information and helpful data they could ever want. This knowledge can enable their business to flourish and thrive – so essentially, they’re sitting on a gold mine. But without being able to pass that knowledge onto their teams, and without that knowledge being able to course through their organization (and trickle down to their clients and audience), their success will always be limited. This is where knowledge management comes in.

What does knowledge management look like in practice?

Knowledge management is any system of documenting, storing, communicating, and applying an organization’s knowledge in an attempt to improve different processes within the workplace. There are dozens of different ways knowledge can be managed, and some of the most common include cross-training programs, cloud-based document management systems, social networking tools like Slack, chat bots, and content management systems.

As the name suggests, knowledge management is an ongoing effort – not a one off exercise. While you may invest in software to help organize company information, that still needs to be governed, updated, integrated with new tools and potentially upgraded to keep knowledge transfer seamless. It’s a living system that needs ongoing curation and attention.

Why is knowledge management so important?

Without robust knowledge management, information simply can’t flow within a company. As Forbes argues, knowledge management facilitates decision-making capabilities, builds learning organizations by making learning routine, and stimulates cultural change and innovation. While there are different types of knowledge, there are two that specifically relate to knowledge management: explicit knowledge and tacit knowledge.

Explicit knowledge is easy to capture, to store and to share, and often includes information found in databases, memos and videos. Tacit knowledge is somewhat more problematic. It involves more intuitive knowledge and know-how, and is largely based upon a person’s experiences. Tacit knowledge also often resides in the mind and is hard to explain to others. Imagine, for example, thinking about how easy it is to breathe; then think about how hard it is to explain how to breathe to someone who isn’t familiar with the process.

The consequences of doing nothing

One big problem many companies face – particularly now when so many people are working remotely – is that knowledge is all-too-often lost. Since different teams often use totally different tools and fail to communicate with each other properly, company silos can quickly form – and when they do, any knowledge that isn’t written down and shared is at risk of being lost. Even when information is saved, hard drives fail and devices get misplaced.

Plus, when employees quit or retire, they take with them years of crucial company knowledge – and the cost of this can be colossal. According to research, 53% of executive-level managers said the knowledge-related costs of losing employees fell between $50K-$299K per employee; a further 11% percent guessed that the cost was over $1 million. Even if employees train their replacements before they go, they can’t pass on everything they know because much of their knowledge will be tacit.

What all this means is that employees waste huge amounts of time looking for knowledge that already exists, or trying to recreate it; according to research, this takes up 30% of their time. They make the same mistakes people made before, ask the same questions, recreate the same solutions. This is the reason that knowledge management can be so instrumental in improving employee productivity, engagement and collaboration, as well as preventing errors and reducing costs.

Why every company needs knowledge managers

To succeed in a digital world, companies need to ensure they implement a robust knowledge management system, one that entirely eliminates knowledge sharing barriers. But more than this, they also need their employees to embrace it. When you’re introducing new systems and processes, it’s normal for employees to worry that it will take up too much time – and in the case of knowledge management, they may even be concerned that sharing their own specialist knowledge will make them seem less valuable.

But for knowledge management systems to work, employees must be on board – and this is one of the reasons that knowledge management requires knowledge managers. Other vital business resources like labor and capital have extensive administrative functions dedicated to their management, and knowledge should be no different. Knowledge can’t be adequately managed until a group or person has taken responsibility for it, and that’s what knowledge managers do: they take responsibility for the creation, distribution and use of all knowledge within a company.

Knowledge management is in its very early days, and because technology is advancing so rapidly, knowledge management best practices are likely to be subject to many changes. Ultimately, though, any steps you take towards growing and improving your company’s knowledge will always be steps in the right direction.

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