Chapter three
Organizational Impacts of Knowledge Management
What various kinds of impact does knowledge
management have on organizations and
organizational performance?
At what levels does the impact occur?
•people
•Process
•Product
•Overall performance
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Organizational Impacts of Knowledge Management
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Impact on People
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Impact on People
•KM also causes employees to become more flexible, and enhances their
job satisfaction.
KM can facilitate employee learning
Impact on Employee Learning
This can be accomplished through.
Externalization
e g, writing a report on lessons learned from a project.
Internalization
e g, when employees preparing for a later project.
Socialization
e g, through joint activities such as meetings or informal chats.
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cont…
Communities of Practice
•an organic and self-organized group of individuals who are
dispersed geographically or organizationally, but
communicate regularly to discuss issues of mutual interest.
•It is about understanding where knowledge is and how it is
found.
•Focus on management of technology infrastructure.
•Top management deliberately established this COP,
typically COPs are voluntarily formed by individuals about
2/3 of the COP’s value resulted from face-to-face
networking at the group’s meetings
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Impact on Employee Adaptability
•Employees are likely to adapt when they
interact with each other.
•They are more likely to accept change.
•They are more prepared to respond to
change and less likely to be caught by
surprise. Increased employee adaptability
enabled the company to become a very fast
changing organization around the needs of
its customers
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Impact on Employee Job Satisfaction
•Employees feel better because of their
knowledge acquisition and skill enhancement
•Employees’ market value is enhanced relative
to other organizations’ employees
•Additional increases in employee job
satisfaction derive from KM practices:
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Impact on Processes
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Impact on Processes
•KM enables improvements in organizational
processes such as marketing, manufacturing,
accounting, engineering, and public relations.
these impacts can be seen along three major
dimensions
•Effectiveness
•Efficiency
•Degree of innovation
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Impact on Processes
Effectiveness: is performing the most suitable processes and
making the best possible decisions.
Efficiency: is performing the processes quickly and in a low-cost
fashion.
Innovation: is performing the processes in a creative and novel
fashion that improves effectiveness and efficiency— or at least
marketability.
Impact on Processes: Effectiveness
•KM can enable organizations to become more effective by helping
them to select and perform the most appropriate processes.
•KM enables organizations to quickly adapt their processes
according to the current circumstances, there by maintaining
process effectiveness in changing times.
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components in KM efforts
•Utilize learning opportunities that arise
during and after any major activity Involve key
participants to perform after-action reviews
describing lessons learned knowledge needs.
They participate in a structured, facilitated
process to identify key lessons learned, and
retrieve them again when next required.
•Create Cops to connect people with similar
roles, issues, challenges, and knowledge
needs. 11
Impact on Processes: Efficiency
• Managing knowledge effectively can also enable organizations to be
more productive and efficient.
•Motivate members to participate and openly share valuable
knowledge (while preventing undesirable spillovers to competitors)
•Prevent free riders (ie, individuals who learn from others without
helping others to learn)
•Reduce the costs associated with finding and accessing different
types of valuable knowledge
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Impact on Processes: Innovation
•KM has been found to enable brainstorming or idea thus
enhancing process innovation.
•Organizations can increasingly rely on knowledge shared
across individuals to produce innovative solutions to
problems as well as to develop more innovative
organizational processes.
•Ensured that new products were developed with
customers’ needs in mind, and that customers’ needs were
quickly and accurately communicated to the product
development group
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Impact on Products
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Impact on Products
Impact on products can be:
Value added products
Knowledge based products
Value added products
•KM processes can help organizations offer new products or improved
products that provide a significant additional value as compared with
earlier products.
•Value-added products also benefit from KM due to the effect the later has
on organizational process innovation.
•Innovative processes resulting from KM enable the sales and support staff
to feed customer problems into their computer network, to access
relevant expertise throughout the company in developing innovative
solutions for the customers.
•Uses information obtained through video ethnography from its customers
(the end users of office furniture) to understand how its products are used,
and then to redesign the products to make them more attractive to customers.15
Impact on Products
Knowledge-Based Products:
•KM can have a significant impact on products that are
knowledge based, eg: consulting, software development.
Consultants can quickly access and combine the best available
knowledge and bid on proposals that would otherwise it is
veryy costly or too time-consuming to put together In
knowledge-based industries, KM is often necessary just for
mere survival.
•Knowledge based products can sometimes play a significant
role in traditional manufacturing firms.
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Impacts on Organizational Performance
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Impacts on Organizational Performance
• “Ideas are capital. The rest is just money.”
•Reflects the belief that investments in KM should be
•viewed as capital investments –
to produce long-term benefits to the entire organization –
instead of assets providing value only at the present time.
There are two types of Impacts on Organizational Performance.
Direct Impacts :Knowledge is used to create innovative products
that generate revenue and profit.
Indirect Impacts: Use of KM to demonstrate intellectual leadership
within the industry, which, in turn, might enhance customer loyalty.
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Economy of Scale
•A company’s output is said to exhibit economy of scale
if the average cost of production per unit decreases with increase
in output.
Economy of Scope
•A company’s output is said to exhibit economy of scope
when the total cost of that same company producing two or more different
products is less than the sum of the costs that would be gained
if each product had been produced separately by a different company.
The Reasons of economy scope are:
Joint use of production facilities
Joint use of marketing
Joint use of administration
Joint use of distribution channels
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Indirect Impacts on Economy of Scale and Scope
KM can contribute to economies of scale and scope:
By improving the organization’s ability to create and
leverage knowledge related to products, customers, and
managerial resources across businesses.
By enabling sharing of products designs, components,
manufacturing processes, and expertise across businesses –
thus reducing development and manufacturing costs,
accelerating new product development, and supporting
quick response to new market opportunities
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Cont…
By enabling cross-selling of existing
products or development of new
products, by sharing knowledge of
customer preferences, needs, and buying
behaviors.
By enabling the deployment of general
marketing skills and sales forces across
businesses.
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Indirect Impacts on Sustainable Competitive Advantage
Knowledge can enable an organization to develop and exploit
other tangible and intangible resources better than the
competitors can Even when the resources might not be
unique.
Knowledge (especially context-specific tacit knowledge)
tends to be unique and therefore difficult to imitate.
Unlike most traditional resources, knowledge cannot easily
be purchased in a ready-to-use form.
•To obtain similar knowledge, competitors have to engage in
similar experiences
•But obtaining knowledge through experience takes time,So
competitors are limited in the extent to which they can
accelerate their learning through greater investment 22
The end
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