There has been a shift from the emphasis on what people called the “information value chain” to “knowledge value chain” for quite some time. The environments are shrewd and unpredictable in this world of growing competition and rapid technological progress. The information value chain just served as a database of “best practices” whereas “knowledge value chain” emphasizes on the active sense making of human beings handling business.

This is what Brian Arthur calls a world of “re-everything”. The focus has to be shifted from not just finding right answers but also finding out right questions, from “doing things right” to “doing right things”. The best practices should and can be implemented only after an active and constructive interference of human factors. A continuous assessment of policies, strategies and practices is required in this world of growing surprises. There is a paradigm shift from the business model of “anticipation of problems” to “anticipation of surprises”. The predictability of the environment has significantly reduced in the face of increasingly fierce competition.

While re-engineering infers to a one shot change to achieve maximum increase in efficiency, knowledge management implies a continuous and ongoing review of schemas to achieve not only short term, but also long term, sustained growth in productivity with efficiency. Re-engineering is in a way reframing the mechanics of business and knowledge management is giving it a living organic touch. Dynamically changing and improving organizations like an evolving self adapting species, gives a more intelligent corporate mind then an electric shock of re-engineering.

In knowledge management, we talk about knowledge workers, knowledge entrepreneurs and knowledge engineers. They are not necessarily separated; they are the same workers, same technicians working for a company. It is just that they have to be driven to a knowledge sharing paradigm. Organization has to be transformed not just to a learning organization but to a learning community. The workers should understand their value addition to the overall product being produced.

We also talk about total quality management (TQM). If each worker knows exactly what he is doing, where he is going and how much value he is adding to the overall product coming out, he will be more quality conscious for his part. In this way knowledge management can be instrumental in achieving TQM by imbibing a thought process in the mechanized psyche of factory production also and not just knowledge run industries. Workers should have an overall understanding of their business. Such understanding is very important for their organizations’ learning and unlearning processes.

Knowledge management is not just IT. Many technology and academic scholars have observed that there is no direct correlation between IT investments and business performance or knowledge management. For e.g. Erik Bryjolfsson, a professor of information systems at MIT Sloan School says: “The same dollar spent on the same system may give a competitive advantage to one company but only expensive paper weights to other.” Hence, a very important factor for good returns to IT dollar is effective utilization of information as it relates to organization.

This conclusion is also supported by industry wide analysis of IT investments by technology economist Paul Strassmann, in his book, The Squandered. Strassmann explains there is no relation between computer expenditures and company performance. Similarly John Seely Brown, director of Xerox Park Research Center in Palo Alto, California underscores that in the last 20 years US industry has invested more than $1 trillion in technology, but has realized little improvement in the efficiency or effectiveness of its knowledge workers. Brown attributes this failure to organizations’ ignorance to the poor efficiency of knowledge channels for knowledge workers to communicate effectively and henceforth collaborating and sharing knowledge and building on each other’s ideas.

This era is making an economic translation of competitive advantage based on information to one based on knowledge creation. For any organisation to innovate – it is important that they embrace knowledge management in a structured way but true to its spirit.

About the author

Gunjan Bhardwaj, advisor, senior editor and member of the editorial board. Gunjan is the leader of the Global Business Performance Think-tank of Ernst&Young. He is also the solution champion for Pricing strategy and effectiveness as well as Innovation management in the advisory services of Ernst & Young with a focus on Pharmaceutical and FMCG sector. Gunjan is also a guest professor for Growth and Innovation management at European Business School (EBS) in Germany and a member of the scientific advisory board of Plexus Institute in the US which researches on complexity in health sciences. Gunjan has published a number of papers and articles in various Journals and magazines and has been a frequent speaker in conferences on marketing and innovation related topics. He is also the chief editor of the quarterly journal of Ernst & Young’s advisory practice called Performance.