KM and Competitive Advantage

The relevance of knowledge management to organizational strategy is based on missed opportunities, operational inefficiencies and time lost which all show severe competitive disadvantage. Knowledge management is regarded as playing a key role in ensuring business edge or competitive advantage through the capturing and sharing of experience and information. People are an important element in managing knowledge, as individuals own knowledge. This therefore implies that people must be willing to share their knowledge, to learn from others and the culture of the enterprise must be conducive and encourage knowledge sharing. The importance of knowledge management is that it could be a source for sustainable competitive advantage or business edge. Knowledge plays an important role in the success of any enterprise. Knowing the economic value of an organization’s knowledge is a necessary precondition before any knowledge management leader can begin to manage the function strategically. Knowledge is now a crucial factor underpinning economic growth. Producing goods and services with high value added is at the core of improving economic performance and international competitiveness, increasing intangible investment, which is difficult to measure, has become the measure issue for organizations. This information is a necessary starting point for any knowledge management leader to act as a strategic partner.

A number of organizations rely heavily on innovation and product development hence their research and development scientists require relevant, up to date and accurate information as development of successful new products is the major factor that distinguishes these businesses from competitors. Service oriented enterprises require a lot of information about their clientele and new ideas on how to serve the customer better. Their competitive advantage can only come through an efficient, friendly service that makes their customers come around again. Similarly, while all knowledge management activities are important, some provide greater leverage for competitive advantage. Therefore, knowledge management leaders must first understand the role of knowledge management as a source of competitive advantage before being able to make decisions about how to position the deliverables of the function. This leads to the following questions for these executives:

•On what basis is the enterprise seeking to distinguish itself from competitors? .Is the organisation based on innovation, customer service or production efficiency?

•Where in the value chain is the greatest leverage for achieving this differentiation?

•Which knowledge management activities provide the greatest potential to differentiate an enterprise from its competitors?

Once the knowledge management leader understands the specific ways in which knowledge provides value, it is necessary to examine the value that knowledge management provides or can provide. There are two ways in which knowledge management can provide economic impact. Firstly, knowledge management practices are important levers by which the organisation develops the intellectual capital and employee efficiency and innovation. It is the knowledge management practices that can directly influence the effectiveness, allowing employees to perform their work smarter and thus providing value to the organisation. The knowledge management practices can also help to develop knowledge-enabled employees who are willing to make value-adding decisions and contributions towards meeting objectives of the enterprise. In other words, knowledge management practices play an important role in developing the knowledge assets that provide a competitive advantage.

Reference:
Barney, J., 1995. Looking inside for competitive advantage. Academy of Management Executive 9 4, pp. 49–61.
Campbell, A., & Luchs, K. S. (Eds). (1997). Core competency-based strategy. London:
International Thomson Business Press.