Abstract

The concept of knowledge management (KM) as a powerful competitive weapon has been strongly emphasized in the strategic management literature, yet the sustainability of the competitive advantage provided by KM capability is not well-explained. To fill this gap, this paper develops the concept of KM as an organizational capability and empirically examines the association between KM capabilities and competitive advantage. In order to provide a better presentation of significant relationships, through resource-based view of the firm explicitly recognizes important of KM resources and capabilities. Firm specific KM resources are classified as social KM resources, and technical KM resources. Surveys collected from 177 firms were analyzed and tested. The results confirmed the impact of social KM resource on competitive advantage. Technical KM resource is negatively related with competitive advantage, and KM capability is significantly related with competitive advantage.

Keywords: Knowledge management; Competitive advantage; KM resources; KM

capability, RBV of the firm..

Introduction:
What Is Knowledge Management?
Knowledge Management is one of the hottest topics today in both the industry world and information research world. In our daily life, we deal with huge amount of data and information. Data and information is not knowledge until we know how to dig the value out of it. This is the reason we need knowledge management. Unfortunately, there's no universal definition of knowledge management, just as there's no agreement as to what constitutes knowledge in the first place. We chose the following definition for knowledge management for its simplicity and broad context.

Definition: Knowledge Management (KM) refers to a multi-disciplined approach to achieving organizational objectives by making the best use of knowledge. KM focuses on processes such as acquiring, creating and sharing knowledge and the cultural and technical foundations that support them.

Knowledge Management may be viewed in terms of:

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People how do you increase the ability of an individual in the organization to influence others with their knowledge Processes Its approach varies from organization to organization. There is no limit on the number of processes Technology It needs to be chosen only after all the requirements of a knowledge management initiative have been established. Culture The biggest enabler of successful knowledge-driven organizations is the establishment of a knowledge-focused culture Structure the business processes and organisational structures that facilitate knowledge sharing Technology a crucial enabler rather than the solution.

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What Is Knowledge Management Related To? Knowledge management draws from a wide range of disciplines and technologies:

Cognitive science Expert systems, artificial intelligence and knowledge base management systems (KBMS) Computer-supported collaborative work (groupware) Library and information science Technical writing Document management Decision support systems Semantic networks Relational and object databases Simulation Organizational science object-oriented information modeling electronic publishing technology, hypertext, and the World Wide Web; help-desk technology full-text search and retrieval performance support systems

The History of Knowledge Management 1. 70's, A number of management theorists have contributed to the evolution of knowledge management

Peter Drucker: information and knowledge as organizational resources Peter Senge: "learning organization"

2. 80's,

Knowledge (and its expression in professional competence) as a competitive asset was apparent Managing knowledge that relied on work done in artificial intelligence and expert systems Knowledge management-related articles began appearing in journals and books

3. 90's until now,

A number of management consulting firms had begun in-house knowledge management programs Knowledge management was introduced in the popular press, the most widely read work to date is Ikujiro Nonakas and Hirotaka Takeuchis The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation (1995) The International Knowledge Management Network(IKMN) went online in 1994 Knowledge management has become big business for such major international consulting firms as Ernst & Young, Arthur Andersen, and Booz-Allen & Hamilton

The Value of Knowledge Management Some benefits of KM correlate directly to bottom-line savings, while others are more difficult to quantify. In today's information-driven economy, companies uncover the most opportunities and ultimately derive the most value from intellectual rather than physical assets. To get the most value from a company's intellectual assets, KM practitioners maintain that knowledge must be shared and serve as the foundation for collaboration. Yet better collaboration is not an end in itself; without an overarching business context, KM is meaningless at best and harmful at worst. Consequently, an effective KM program should help a company do one or more of the following:

Foster innovation by encouraging the free flow of ideas Improve decision making Improve customer service by streamlining response time Boost revenues by getting products and services to market faster Enhance employee retention rates by recognizing the value of employees' knowledge and rewarding them for it Streamline operations and reduce costs by eliminating redundant or unnecessary processes

Knowledge Management Today According to a recent IDC report, knowledge management is in a state of high growth, especially among the business and legal services industries. As the performance metrics of

early adopters are documenting the substantial benefits of knowledge management, more organizations are recognizing the value of leveraging organizational knowledge. As a result, knowledge management consulting services and technologies are in high demand, and knowledge management software is rapidly evolving. Knowledge Management Drivers The main drivers behind knowledge management efforts are:
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Knowledge Attrition: Despite the economic slowdown, voluntary employee turnover remains high. A recent survey by the global consulting firm Drake Beam Morin revealed an average voluntary employee turnover rate of 20 percent with 81 percent of organizations citing employee turnover as a critical issue. Estimated annual costs of employee turnover was a staggering $129 million per organization. Much of this cost is due to knowledge attrition, which can be effectively minimized using knowledge management techniques. Knowledge Merging: Since 1980, the annual value of mergers has risen 100 fold reaching a cumulative $15 trillion in 1999. Over 32,000 deals were announced, triple the number of 10 years earlier and more than 30 times as many as in 1981. The recent frenzy of corporate mergers coupled with the increased need to integrate global corporate communications requires the merging of disparate and often conflicting knowledge models. Content Management: The explosion of digitally stored business-critical data is widely documented. Forester Research estimates that online storage for Global 2,500 companies will grow from an average of 15,000 gigabytes per company in 1999 to 153,000 gigabytes by 2003, representing a compound annual growth rate of 78%. As the volume of digital information expands, the need for its logical organization is critical for purposes of information retrieval, sharing and reuse. E-Learning: As the economy becomes more global and the use of PCs more pervasive, there has been a dramatic increase in e-learning, also known as computer based training. E-learning is closely linked to and overlapping with, but not equal to knowledge management. E-learning can be an effective medium for knowledge management deliverables.

KM Objectives

The graph below shows the results of a recent IDC study in which corporations cited various objectives for knowledge management efforts:

Activities related to these objectives include: creating knowledge sharing networks that facilitate a corporate knowledge culture, developing knowledge leaders, optimizing intellectual capital by producing knowledge management solutions such as codification strategies and knowledge bases, and estimating revenue and efficiency gains resulting from knowledge management in terms of return on investment (ROI).

Technologies That Support Knowledge Management

The following diagram reflects the main technologies that currently support knowledge management systems.

These technologies roughly correlate to four main stages of the KM life cycle: 1. Knowledge is acquired or captured using intranets, extranets, groupware, web conferencing, and document management systems. 2. An organizational memory is formed by refining, organizing, and storing knowledge using structured repositories such as data warehouses. 3. Knowledge is distributed through education, training programs, automated knowledge based systems, expert networks. 4. Knowledge is Applied or leveraged for further learning and innovation via mining of the organizational memory and the application of expert systems such as decision support systems. All of these stages are enhanced by effective workflow and project management.

The Future of Knowledge Management

In the next several years ad-hoc software will develop into comprehensive, knowledge aware enterprise management systems. KM and E-learning will converge into knowledge collaboration portals that will efficiently transfer knowledge in an interdisciplinary and cross functional environment. Information systems will evolve into artificial intelligence systems that use intelligent agents to customize and filter relevant information. New methods and tools will be developed for KM driven E-intelligence and innovation.

The Implications of Knowledge Management For...

Database Users: From business class users to the general public, database users will enjoy a new level of interaction with the KM system including just-in-time knowledge that delivers precise relevant information on demand and in context. More complex, smart systems will translate to optimal usability and less time spent searching for relevant information. For example, data analysts will enjoy simplified access and more powerful tools for data exploitation. The use of knowledge bases can reduce customer service costs by providing customers with easy access to 24/7 self service via smart systems that reduce the need to contact customer service or technical support staff. Database users may even create customized views of knowledge bases that support their needs.

Database Developers: The design and development of knowledge based systems will be considerably more complex than current database development methods. Developers must consider the overall technical architecture of the corporation to ensure seamless interoperability. The use of standardized metadata and methods will also facilitate both intra-corporate and inter-corporate interoperability. Making effective physical storage and platform choices will be equally more complex. Both knowledge base developers and administrators must understand the role of the knowledge base in the overall KM system. Database Administrators: Database Administrators will evolve into Knowledge Managers. The knowledge base will store and maintain corporate memory and Knowledge Managers will become the gatekeepers of corporate knowledge. The lines between technical roles such as Web Developer, Data Analyst or Systems Administrator will blur as these systems merge into and overlap with KM systems. DBAs will need to have some knowledge about each of these disciplines. General Public: Even if they are not interacting directly with a knowledge base, the general public will benefit from the secondary effects of improved customer service due to faster access to more accurate information by service providers.

Resource-Based View of Knowledge Management for Competitive Advantage

We are not only in a new millennium, but also in a new era: the knowledge era. Sustainable competitive advantage is dependent on building and exploiting core competencies. The resource-based view (RBV) of the firm defines a strategic asset as one that is rare, valuable, imperfectly imitable and non-substitutable. Knowledge is seen as a strategic asset with the potential to be a source of competitive advantage for an organization. In this paper, we provide a model that examines how and why knowledge management (KM) can be used to create competitive advantage from the RBV of the firm. We live the Knowledge Age, a new era which is likely to have a radically different outlook and which will entail a new business compass to traverse Quickness is crucial to the success of firms in the rapidly changing setting of the knowledge era. The development and practice of knowledge management (KM) is continuously and dramatically increasing in organizations. And due to improvements in KM, the race for seeking a competitive edge through knowledge increases at an even faster rate Businesses have long recognized the importance of managing their intangible assets. The development of brands, stakeholder relationships, reputation and the culture of the organization is readily viewed as providing sustainable sources of business advantage. KM has been mentioned for its possible role in creating sustained competitive advantages for firms KM is a conscious strategy of getting the right knowledge to the right people at the right time and helping people share and put information into action in ways that will improve organizational performance. KM can be

thought of as a deliberate design of processes, tools, structures, with the intent to increase, renew, share or improve the use of knowledge represented in any of the three elements (structural, human, and social) of intellectual capital. KM is about encouraging individuals to communicate their knowledge by creating environments and systems for capturing, organizing, and sharing knowledge throughout the company. KM has two main objectives: (1) to make the organization act as intelligently as possible in order to secure its viability and overall success, and (2) to otherwise realize the best value of its knowledge assets). Knowledge managements purpose, thus, is to leverage an organizations intellectual assets in sustaining competitive advantage.

Knowledge Management Systems (KMS)

KMS are predominant in both theory and practice. Broadly defined, knowledge based systems use extensive domain specific knowledge to solve problems and support decision processes. KMS refer to the use of modern information technologies (e.g. the Internet, intranets, extranets, collaborative computing/groupware, software filters, agents, data warehouses) to systematize, enhance and expedite intra and inter firm knowledge management KMS refer to a class of information systems applied to managing organizational knowledge. They are IT-based systems developed to support and enhance the organizational processes of knowledge creation. A firms resources consist of all assets both tangible and intangible, human and nonhuman that are possessed or controlled by the firm and that permit it to devise and apply valueenhancing strategies. Unique resources and capabilities are discussed under a variety of names, e.g. distinctive competences, core competences, invisible assets, core capabilities, internal capabilities, embedded knowledge, corporate Resources and capabilities that are valuable, uncommon, poorly imitable and non substitutable comprise the firms unique or core competencies and therefore present a lasting competitive advantage. Intangible resources are more likely than tangible resources to generate competitive advantage. KM can be viewed as a socio-technical system of tacit and explicit business policies and practices. It is enabled by the integration of information technology tools, business processes, human or social capital, continuous learning and innovations.

The resource-based model of KM for competitive advantage

Knowledge M anagement Infrastructure - Corporate Culture -Leadership - Information Technology infrastructure - -Comm unities of Practice - -Organization Structure --Comm Knowledge on -- Physical environment Knowledge M anagement System : Knowledge Properties - Rare - Valuable -Non substitutable - Imperfectly imitable

Sustainable Com petitive Advantage

Knowledge Quality -Barriers to KM implem entation -SW on KM -Threats & Opportunities OT - -KM Strategy - Innovation -- Learning

Competitive advantage can be created in numerous ways, for instance, by size, location, access to resources. Lasting advantage comes from using knowledge management systems to support what we do well and to add value to resources we possess that are not readily available to competitors. For organizational knowledge to offer sustainable competitive advantage, it should have the following four properties: 1:it should be valuable, 2: rare, 3: imperfectly imitable and 4:non-substitutable or imperfectly substitutable. The literature on KM highlights the importance of a sharing culture to support and foster a knowledge significant impact for organizations that implement it right and well. Finally, the RBV literature indicates that competitive advantages can be created and sustained via knowledge use. Therefore, we believe that the RBV is an appropriate theory to explain whether knowledge management systems indeed formally and empirically yield competitive advantage, and to formally and empirically explain the nature of the relationship between knowledge management and competitive advantage. The firms competitive advantage represents its raison detre. Therefore, the understanding of the basis for competitive advantage is of vital importance in todays economy. The RBV explains why and how firms achieve competitive advantage, and others have contributed to the subsequent development of the RBV of strategic management.

In an Information Week article, Jeff Angus and Jeetu Patel describe a four-process view of knowledge management that we have put into a table:

This major process...

Includes these activities.... Data entry OCR and scanning Voice input Pulling information from various sources Searching for information to include Cataloging Indexing Filtering Linking Contextualizing Collaborating Compacting Projecting Mining Flow Sharing Alert Push

Gathering

Organizing

Refining

Disseminating

Research into the resource-based view and dynamic capabilities perspective is increasingly seeing knowledge as a vital resource, so much so that a separate conceptualization of the firm has emerged in the form of the knowledge based view. It is argued that knowledge is a key reason for the existence of firms; what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization

Knowledge is seen as potentially the most strategically important resource, though also Potentially the most difficult to define. What makes knowledge particularly interesting is that it can be explicit, that being the knowledge that can be articulated to others, and tacit, that being the knowledge that is embedded in people that they are not able to articulate. In terms of strategy, both explicit and tacit knowledge can be very important. It is generally argued, however, that tacit knowledge is more strategically important as it is embedded in people and extremely difficult for competitors to replicate. In resource-based view terminology, it is inimitable. The valuable tacit knowledge of experts is also largely rare and non-movable therefore satisfying all the characteristics of a valuable resource in the resource-based view. organizations spend a large amount of time, effort and money to better understand their tacit knowledge, and in turn convert this tacit knowledge to explicit knowledge to share with other members of the firm. Nonaka (1994), one of the leading voices in the knowledge-based view of the firm, has popularised the focus of knowledge in the firm. He views converting between tacit and explicit knowledge as one of the key challenges for firms to remain competitive. He terms the four conversions in the table below:

tacit

socialization
FROM

externalization

internalization
explicit tacit

combination

TO

explicit

conclusion:

Knowledge management (KM) has emerged as a strategy to improve organizational competitiveness. Our purpose is to identify the relationship between KM and the firm's competitive advantage. We review the existing literature on KM and strategy formulation. We utilize the resource-based view approach as a lens for fitting KM with strategic planning. The concept of strategy and KM integration is introduced. Future research should investigate the circumstances under which KM can create a sustainable competitive advantage within the framework of the RBV.

Summary
Organizations are realizing that intellectual capital or corporate knowledge is a valuable asset that can be managed as effectively as physical assets in order to improve performance. The focus of knowledge management is connecting people, processes and technology for the purpose of leveraging corporate knowledge. The database professionals of today are the Knowledge Managers of the future, and they will play an integral role in making these connections possible.