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In the Know

The value of the enterprise and its operational performance will increasingly be measured by the way in which it creates knowledge, uses and reuses it to add value to its products and its processes, and to build better relationships with its customers.

Forget about the theory behind knowledge management. A new handbook details how organisations are putting KM into practice.

If it weren't for the sophisticated application of knowledge management, more than seven million men in the US, untold others in more than 90 other countries and all their significant others would be facing frustrating times. That's because Viagra, by far the most widely used treatment for erectile dysfunction, started its life as a drug to fight heart disease.

Happily for the millions of men who use it today to treat their difficulties in achieving or maintaining an erection, nurses involved in Pfizer's initial testing of Viagra noticed an unexpected side effect of the drug and recorded their observations on Pfizer's knowledge management system. Later, a clinician doing a meta-data analysis of their database discovered the trend, thereby recognising the drug's unique capacity to act as an innovative impotence treatment. The trialled heart disease drug was transformed into a breakthrough impotence cure capable of bringing in $US1 billion a year - and making many couples very happy indeed. With profit-making triumphs like this to its credit it's hardly surprising knowledge is becoming recognised as both the foundation of competitive advantage and the basis of market capitalisation of companies.

"The new economy of knowledge-based business has arrived, and Australia needs to capitalise on its knowledge assets too," says University of Technology Sydney's School of Management head, Professor Thomas Clarke. "The value of the enterprise and its operational performance will increasingly be measured by the way in which it creates knowledge, uses and reuses it to add value to its products and its processes, and to build better relationships with its customers."

The Pfizer story is just one of those detailed in what's been billed the most comprehensive survey of corporate examples yet published, the handbook titled International Best Practice - Case Studies in Knowledge Management. Incorporating cases on 40 companies from 13 industry sectors, the collaboration between Standards Australia and the University of Technology Sydney's School of Management details results of a survey completed in support of Standards Australia's Knowledge Management Framework . The case studies - which are to be followed by further empirical examination of KM initiatives inside selected companies - were co-authored by Professor Clarke and Faculty of Business research associate, Christine Rollo.

"In the knowledge economy the effective utilisation of knowledge resources is the very basis of competitive advantage," Clarke says. "Knowledge is becoming recognised as both the foundation of competitive advantage and the basis of market capitalisation of companies. The fusion of the emerging digital networks and rapidly developing knowledge tools and systems is creating the business knowledge revolution, but poor knowledge management can fatally slow an organisation," he says.

The report argues the case - backed by numerous case studies - for eschewing purely technical solutions to KM in favour of organisational and operational efforts designed to help the organisation capitalise on its knowledge assets.

"Knowledge management initiatives need to be closely integrated with business strategy, identifying and remedying critical knowledge gaps," the report's introduction says. "The strategic business drivers of knowledge management concern how to protect and develop the intellectual capital of the company, how to improve performance, and promote continual learning and innovation. Knowledge initiatives should support and enhance the core competencies of the organisation.

"The corporate interest in knowledge management has been fuelled by the remarkable increase in the market valuation of intangible assets. In this context it is assumed the purpose of knowledge management is to create the conditions in which people may integrate specialist knowledge to produce goods and services of increasingly higher value. Implicit in this is the belief knowledge can be stored, measured and moved around the enterprise. But most knowledge is tacit, and individuals and groups continually generate new knowledge.

"The reciprocity and trust required to generate the flow of knowledge requires recognition, encouragement and reward. Knowledge only reaches its full potential to create economic value when it becomes embedded in organisational routines and processes. Companies tend to invest in technology rather than attempting the organisational and cultural change needed to promote knowledge transmission and circulation. Information technology may be a necessary condition, but it is not a sufficient condition for knowledge management. As one authority puts it, Â'knowledge is a difficult thing to shrink-wrap'."

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