Importance of knowledge management to a growing business

All businesses have access to an extensive pool of knowledge – whether this is their understanding of customers’ needs and the business environment or the skills and experience of staff.

The way a business gathers, shares and exploits this knowledge can be central to its ability to develop successfully. This doesn’t just apply to huge multinational companies. Knowledge management can benefit everyone from a local newsagent to a manufacturing firm.

This guide explains the basic sources of knowledge available to your business, how you can best harness and exploit this information and how to create a knowledge strategy for your business.

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What is knowledge in a business?

Using knowledge in your business isn’t necessarily about thinking up clever new products and services, or devising ingenious new ways of selling them. It’s much more straightforward.

Useful and important knowledge already exists in your business. It can be found in:

• the experience of your workforce
• the designs and processes for your goods and services
• your files or documents (whether held digitally, on paper or both)
• your plans for future activities, such as ideas for new products or services

The challenge is to harness these intangible assets in a coherent and productive way.

You can find out more about what intangible assets are in our guide on identifying, protecting and transferring your assets.

How a business creates, shares and applies knowledge in order to help it achieve its goals is known as knowledge management.

An effective knowledge management strategy will make it possible for knowledge to be shared at a variety of levels including:

• between individuals
• among a team
• among an entire organisation
• between different organisations

Existing forms of knowledge

You have probably done market research into the need for your business to exist in the first place. If nobody wanted what you’re selling, you wouldn’t be trading. You can tailor this market knowledge to target particular customers with specific types of product or service. See our guide on market research and market reports to find out how market research can improve your business.

Your files or documents from and about customers and suppliers hold a wealth of information which can be invaluable both in developing new products or services and improving existing ones.

Your workers are likely to have skills and experience that you can use as an asset. Having staff who are knowledgeable can be invaluable in setting you apart from competitors.

You should make sure that your employees’ knowledge and skills are passed on to their colleagues and successors wherever possible, eg by

• holding brainstorming sessions
• organising training courses
• maintaining up-to-date documentation about processes and procedures

See the page in this guide on how to create a knowledge strategy for your business.

Your understanding of what customers want, combined with your workers’ know-how, can be regarded as your knowledge base.

Using this knowledge in the right way can help you run your business more efficiently, decrease business risks and exploit opportunities to the full. This is known as the knowledge advantage.

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Basic sources of knowledge

Whatever the size of your business, there are many sources of business knowledge, including the following.

Customer knowledge

You should know your customers’ needs and what they think of you. You may be able to develop mutually beneficial knowledge-sharing relationships with customers by talking to them about their future requirements, and discussing how you might be able to develop your own products or services to ensure that you meet their needs. See our guide know your customers’ needs.

Employee and supplier relationships

Seek the opinions of your employees and your suppliers – they’ll have their own impressions of how you’re performing. You can use formal surveys to gather this knowledge or ask for their views on a more informal basis. See our guides on how to lead and motivate your staff and manage your suppliers.

Market knowledge

Watch developments in your sector. How are your competitors performing? How much are they charging? Are there any new entrants to the market? Have any significant new products been launched? See our guides on how to understand your competitors and market research and market reports.

Knowledge of the business environment

Developments in politics, the economy, technology, society and the environment could all affect your business’ development, so you need to keep yourself informed. You could consider setting up a team to monitor and report on changes in the business world. See our guide on how to inform and consult your employees.

Professional associations and trade bodies

Get information from publications, academic publications, government publications, reports from research bodies, trade and technical magazines. You can search for a trade association on the Trade Association Forum (TAF) website- Opens in a new window.

Trade exhibitions and conferences

These can provide an easy way of finding out what your competitors are doing and to see the latest innovations in your sector. See our guide on trade shows and exhibitions to find out how to get the most out of them.

Product research and development

Scientific and technical research and development can be a vital source of knowledge that can help you create innovative new products – retaining your competitive edge. See our guide on how to use innovation to start or grow your business.

Organisational memory

Be careful not to lose the skills or experience your business has built up. You need to find formal ways of sharing your employees’ knowledge about the best ways of doing things. For example, you might create procedural guidance based on your employees’ best practice. See the page in this guide: create a knowledge strategy for your business.

Non-executive directors

Recruiting non-executive directors can be a good way for you to bring on board specialised industry experience and benefit from ready-made contracts. See our guide on recruiting directors.

Collaboration between businesses and associated institutions

Groups of businesses or associated institutions with common interests – known as clusters – sometimes join forces in order to share knowledge at an inter-organisational level. See our guide on manufacturing innovation.

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Exploiting your knowledge

Consider the measurable benefits of capturing and using knowledge more effectively. The following are all possible outcomes:

• An improvement in the goods or services you offer and the processes that you use to sell them. For example, identifying market trends before they happen might enable you to offer products and services to customers before your competitors.
• Increased customer satisfaction because you have a greater understanding of their requirements through feedback from customer communications.
• An increase in the quality of your suppliers, resulting from better awareness of what customers want and what your staff require.
• Improved staff productivity, because employees are able to benefit from colleagues’ knowledge and expertise to find out the best way to get things done. They’ll also feel more appreciated in a business where their ideas are listened to.
• Increased business efficiency, by making better use of in-house expertise.
• Better recruitment and staffing policies. For instance, if you have increased knowledge of what your customers are looking for, you’re better able to find the right staff to serve them.
• The ability to sell or license your knowledge to others. You may be able to use your knowledge and expertise in an advisory or consultancy capacity. In order to do so, though, make sure that you protect your intellectual property. See our guide on protecting intellectual property.

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Make knowledge central to your business

In order to manage the collection and exploitation of knowledge in your business, consider the following knowledge management methods.

Build a knowledge sharing culture

You should try to build a culture in which knowledge is valued across your business. One way to do this might be to offer incentives to staff who supply useful market news or suggest ways customers can be better served.

You can use these knowledge management practices throughout your organisation to build better processes. For more information, see the page in this guide on sharing knowledge across your business.

Protect and exploit your knowledge

As part of your knowledge management, you should also make sure that any intellectual property that your business holds is protected. This means that you have the right to stop competitors from copying it – and also allows you to profit by licensing your business’ knowledge. See our guide on protecting intellectual property.

Protecting and exploiting your knowledge base will be more effective if you develop efficient systems for storing and retrieving information. Your files – whether stored digitally or on paper – contain knowledge that you can use to make your products, services, systems and processes better and more customer-focused.

Keep knowledge confidential

Your employment policies play a central role in keeping your knowledge confidential. For example, you might get staff to sign non-disclosure agreements (also known as confidentiality agreements) when they join the business as this ensures that they understand the importance of confidentiality from day one.

Employment contracts can be written to reasonably limit your employees’ freedom to leave and go to work immediately for one of your rivals (restraint of trade clauses) or set up a competing business to yours in the vicinity (restrictive covenants).

See our guides on non-disclosure agreements and how to set up employment policies for your business.

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Sharing knowledge across your business

If only a few people in your business hold important knowledge or skills, there is a danger that these will be lost if they leave or retire.

Even a short period of unexpected absence, eg due to illness or bereavement, could cause problems if knowledge has not been shared. If you have efficient ways of sharing knowledge across the business, it will be more widely used and its value and effectiveness is likely to be maximised.

Knowledge sharing

Consider the best ways of sharing new ideas and information with your staff. You may already have regular meetings when you can brief employees and ask them to share ideas and best practice.

Consider holding innovation workshops or brainstorming sessions at which staff are given the freedom and encouragement to think of ways in which the business could improve.

It can also be a good idea to create a knowledge bank containing useful information and instructions on how to carry out key tasks. Putting this on an intranet is ideal as it will encourage staff to post news or suggestions.

Knowledge management

Technology alone isn’t the answer to sharing knowledge – it has to be managed carefully so that information is channelled properly. You may decide to appoint a senior manager as knowledge champion for your business. See the page in this guide on how to make knowledge central to your business.

Incentives and training

Remember that offering staff incentives to come up with suggestions for how the business can be improved is often an effective way of getting them to use and share knowledge. See our guide on how to implement staff incentive schemes.

Don’t forget the importance of training in spreading key knowledge, skills and best practice across your business.

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Create a knowledge strategy for your business

If you want to get the most from your business’ knowledge, you need to take a strategic approach to discovering, collating and sharing it. This is done via a knowledge strategy – a set of written guidelines to be applied across the business.

Getting managerial support for your knowledge strategy

If your strategy is to be effective, you must make sure your senior managers are committed to it and are fully aware of the benefits it can bring. Discuss with them the best ways of collecting and using knowledge.

You may decide to appoint a senior manager as knowledge champion for your business. For more information see the page in this guide on how to make knowledge central to your business.

What to consider when creating a knowledge strategy

When you’re drawing up the strategy, you need to:

• consider how effective your business currently is at using its knowledge
• analyse your internal processes for gathering and sharing information – including ways of generating ideas and the staff’s grasp of what is happening
• make sure that knowledge management, acquisition and distribution is a continuing process, so that it becomes central to your business’ strategy

Identify the value of knowledge to your business and ways you could exploit it for financial gain – perhaps by:

• Gaining a larger market share.
• Developing new products.
• Selling or licensing your protected intellectual property to others. Ensure this fits in with your overall business plan. See our guide on protecting intellectual property.

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Using information technology to gain and manage knowledge

Information technology offers powerful tools to help you gain and make the best use of knowledge. Some of the systems can be complex to set up and time-consuming to maintain. You need to choose systems that fit with your business and that will improve it without becoming a burden. You may find it useful to consult an IT specialist.

The main types of information technology used in knowledge management are described below.

Database tools

Databases organise information so it can be easily accessed, managed and updated. For instance, you might have a database of customers containing their contact information, their orders and preferences. For more information, see our guide on the benefits of databases.

A data warehouse is a central storage area you might use if you have a variety of business systems, or a range of information in different digital formats. Many businesses now use digital asset management to store, manage and retrieve information, and this can be particularly helpful if you sell online. It is, however, a complex area technically and in task management, so you may wish to seek specialist advice from an IT consultant. See our guide to ensure that you comply with data protection legislation.

Data mining is a process in which all the data you collect is sorted to determine patterns. For instance, it can tell you which products are most popular and whether one type of customer is likely to buy a particular item. Read an introduction to data mining on the About website- Opens in a new window.

Reporting and querying tools let you create reports interpreting data in a particular way. How many of your sales have been handled by one particular employee, for instance?

Web-based tools

Business intelligence portals are websites that bring together all sorts of potentially useful information, such as legal issues or details of new research.

The internet and search engines can be a powerful source of knowledge, although be certain to check the credibility of your information source. Internet newsgroups can be specific sources of business information, but check the authors’ other postings before deciding how to view their opinions and claimed facts.

An intranet is a secure internal network for the sole use of your business. Read about the benefits of intranets on the Intranet Journal website- Opens in a new window.

An extranet is similar to an intranet but can be extended to customers and suppliers. Read about the benefits of extranets on the National Computing Centre website- Opens in a new window.

Social software, such as wikis, blogs and social networking sites, can also be useful when it comes to sharing knowledge.

A wiki is a website that allows different users to publish and edit the same pages quickly, making it possible for teams to record their collective knowledge. A blog allows one individual to share knowledge with other people in a business and social networking sites are an easy way to communicate informally.

You can read more about these tools in our guide web 2.0: a guide for business. 

Customer analysis tools

Customer relationship management software helps you build up a profile of your customer database and enables you to target them through email, telephone or postal marketing campaigns. See our guide on customer relationship management.

Call-centre systems enable you to serve large numbers of customers if you sell by telephone.

Website log-file analysis helps you to analyse how customers use your website so you can improve its effectiveness.

Systems to analyse and file customer letters, suggestions, emails, and call-centre responses, which will enable you to spot trends, improve customer service and develop new products, services and systems.

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CASE STUDY

Here’s how I used knowledge management to make my business better

The Team is a design agency which specialises in communications. It was founded in 1984 and now employs 130 people.

Here, Programme Director Phil Whitehouse talks about the importance of knowledge management, and how it has helped improve the way the business operates.

Listen to the audio, or read the transcript below;

Transcript

Phil Whitehouse: “My name’s Phil Whitehouse, I’m a Programme Director at The Team. We’re a design agency that specialises in communications, and part of my role is establishing and maintaining the knowledge management framework.

“Knowledge management is really important because it’s about making the most of your most precious resource – your people, and the experience and expertise that they’ve brought into the business.

“We use quite a wide variety of knowledge management tools both online and offline. In terms of online we use an online CRM system, which helps us track the relationship with our customers. We use an internal messaging system as well, which tells each other what kind of new work we’re putting together. We also have developed our own tool called a people finder, which helps us find the right person to do a particular job. (Close-up of the people finder tool being used on a computer) We use a variety of offline tools as well, so predominantly meetings, and it’s about trying to make sure we have the right meetings – not too many, not too few – and that those meetings include the right people and that they also have a proper agenda so people know what to prepare for the meeting, what to bring and what they can expect to get out of it.

“In trying to figure out how best to put together a knowledge management framework I think the most important thing by far is to make sure that it’s effectively tied into business goals. (Footage of Phil Whitehouse at his computer and close-ups of a digital wiki) It’s very tempting to think of knowledge management in terms of a series of tools whether it’s a wiki or a blog or some other tool, but really if you force that kind of stuff onto your employees there’s a good chance that it won’t be used or at least it won’t be used in the way that you really need it to be used.

“There are some other factors as well such as budget, available time, not just my time but in terms of the people that I’m looking to share their knowledge, as well as things like, what tools people are already using? Is there a predisposition to using new tools?
So knowledge management plays a very important part in our market research process as well. Everybody that joins the team is encouraged to stay up to date in terms of learning about their craft after they’ve joined, and also encourage them to share that information internally. So from my perspective I help manage the digital team – I’m frequently coming across information that might be of use to other people in the organisation – digital and non-digital. (Footage of books on bookshelves and The Team employees in a meeting) So I produce a weekly tech digest, just an email saying, these are the things that I found over the week that I think you might find interesting, and by doing that of course it also demonstrates to people the kind of information we might like to receive in return.

“We also have an initiative here at The Team called the Creative Council, which is led by one of our creative directors and he will bring people into a space where he will try and encourage everybody to think about a particular challenge. So for instance, kick-off meetings are a very, very important part of our creative process and rather than thinking about that as the domain of, say a project manager or account manager, our creative people are encouraged to think about how they might actually make that process work better for themselves.

“Sourcing information from our clients is really about building relationships and this isn’t so much a knowledge management issue, it’s more just a good business issue. We built a culture of sharing knowledge predominantly by leading by example. We try and make sure that all of the senior people in particular are contributing to the various knowledge management platforms that we have.

“In terms of the trickle-down effect, in terms of less senior people getting involved, there’s this notion of self-selection. What happens is when you introduce these knowledge management frameworks into a company some people will self-select – they will say yes, I’m definitely interested, and those are the people that you really want to get behind and encourage, and actually there are rewards there, you know, when it comes to your personal development plan you do get credibility for sharing information in that way.

“The main hurdle in terms of establishing a knowledge management framework at The Team has been time. Not just my time but the time of the people who we’re trying to get to contribute to the knowledge management framework and we’ve all got other jobs that we need to do, primary tasks that we should be focusing on so trying to make sure that whatever we produce in terms of a framework naturally complements that workflow, it’s been of the utmost importance.

“The number one piece of advice I’d give to a friend who’s trying establish a knowledge management framework is don’t try and boil the ocean. (Close-ups of notes saying ‘Eclectic’ and ‘Diversity’ on some artwork) It’s very temping to try and apply lots and lots of tools at once, to make assumptions about how they’re going to be used, but actually if you try and introduce them gradually there’s far greater chance that they’ll be adopted, that people won’t feel inundated with too many new things to do. So introduce things gradually, look for the quick wins. Yes, don’t try and do it all at once.”

Disclaimer: The material in this audio/video may include the views or recommendations of third parties, which do not necessarily reflect the views of Kraken, or indicate its commitment to a particular course of action. We assume no responsibility or liability arising in respect of any such third party material.

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