‘The strategic importance of knowledge management and intellectual capital has become increasingly central to the development and sustainability of a business’s competitive advantage.’ Explain what is meant by this statement. Illustrate your answer with examples from one organisation with which you are familiar. “The only certainty is uncertainty” 1 with this in mind the knowledge and intellectual capital of an organisation is a critical factor in defining competitive advantage and a key strategic resource and the ability of any company to create a product or service. Customers now have more and more choice in where to purchase goods or procure services especially with the world becoming smaller due to the growth of the internet this means a company must focus on core competencies and create a unique offering to its customers current and potential. It is creating these core competencies that allow an organisation to create a competitive advantage, core competencies has led to outsourcing non core competencies. This creates a larger emphasis on sharing knowledge and compiles expertise from all areas of a business; this will help improve a business’s competitive advantage. A business must successfully integrate their knowledge, local expertise and all competencies to offer a comprehensive service or product. Intellectual capital is becoming one of the most important assets a business can have and by managing knowledge assets correctly and using the knowledge gained from one part of the business effectively in another a business can improve competitiveness. Knowledge Management has grown in recent years due to the development of technology which has made collating and sharing information quicker and simpler, allowing businesses to use knowledge and intellectual capital easily and develop a competitive advantage because of it. It is critical for an organisation to know what they know to allow them to build and sustain competitive advantage over their rivals current and potential. Knowledge management is the effective process of collecting, storing and accessing information and use it in day to day operation as well as long term strategies. Despite the growing awareness of Knowledge Management as a powerful toll in obtaining competitive advantage very few understand how to quantify this in terms of a return on investment or business performance. That does not detract from the point that businesses are accepting that the best way to create and maintain a competitive advantage is in collecting and effectively using new and existing knowledge. Businesses are looking for ways to use what they know about their products, customers and processes to deliver bespoke solutions to individuals. Knowledge Management in action July 1999 saw managers in Siemens' telecommunications division left at Lake Starnberger, to build rafts, with the raw materials and no talking allowed the managers, by only scribbling messages and diagrams on a paper they put together a small fleet of rafts to cross the lake. 2 This exercise highlighted how vital it is to share information to achieve a goal and how the simple principles of a raft build can be transferred to how a business communicates and what can be achieved if knowledge is shared and discussed.
Nonaka, I. (1991) ‘The knowledge creating company’, Harvard Business Review, Vol. 69, 2
No. 6, pp.96–104.
BW Online | March 19, 2001 | Sharing the Wealth. 2012. BW Online | March 19, 2001 | Sharing the Wealth. [ONLINE] Available at:http://www.businessweek.com/magazine/content/01_12/b3724638.htm. [Accessed 03 April 2012].
Joachim D created the exercise a Siemens VP whose aim was to...