Many would admit that knowledge is an important asset to a business, but how does businesses apply knowledge in their activities? Do they actually apply knowledge in their businesses? Or they just routinely do what they usually do or what others do? Do they really use knowledge in making their decisions? Or they just apply their intuitions?
We understand that knowledge create capabilities. But what is knowledge in the first place? There are so many definitions of knowledge. From Socrates, Plato, Aristotle, Descartes, Locke, Hume and Kant to the more recent definitions from Polanyi, Grant, Nonaka and many more; there are diverse concepts about knowledge.
In this posting, I will not delve into the meanings of knowledge. I have written about knowledge in my other blog. Here I will share how we should effectively use knowledge in our businesses.
Knowledge is justified true belief. Statements that we consider as knowledge have to be true and there should be people who have belief on the statements. The statements must be supported and justified in order to be acknowledged as knowledge. In the absence of these, the statements are mere opinions, not knowledge. These conditions are referred to as “tripartite analysis of knowledge“. In businesses, we ought to apply knowledge, not mere unsupported opinions.
Knowledge have roles in our organisations. It is manifested in our reflective practice and enables us to coordinate our actions. From knowledge, we could take actions to create value in our business practices. We also use knowledge to help us make good judgements and decisions. Knowledge is therefore actionable. Yet, knowledge involves our experience, insight and intuition. It is very personal and it is also context dependent. Nevertheless, it could be embedded in products and systems.
Businesses are entities that run commercial, industrial and professional activities to make gains or profits. Whether the entities are intended to make profit or not, they need to make gains in order to sustain. In running their activities, businesses need to perform their activities effectively and efficiently with their scarce resources. In order to be able to do so, the business entities need to make good judgements and decisions. It will therefore apply and utilise knowledge.
Sometimes businesses have knowledge, yet they do not use such knowledge in their practices and decision making. Schuppel et al. (1998) estimated that 60%-80% of knowledge held by organisations are wasted and unused. This is called the knowing-doing gap; i.e., the gap between what the entities know with what they actually do. Pfeffer and Sutton (2000) blamed the talkers for the rise of the knowing-doing gap. Some people are just talkers that are so much louder in their words but are not doers.
The knowing-doing gap are also caused by their memory substituting their thinking. People in businesses routinely do things the way it has always been done, without reflecting what they are doing and identifying rooms for improvement. Some people act differently from what they know due to fear. Fear of making mistakes and job insecurity constrains staff from acting differently from the norms. Short term measurements by the organisations is another cause for knowing-doing gap. Too focused on short term goals such as short-term financial performance (perhaps, due to short term contracts) could be costly to the business entities in the long run. Internal competitions within the organisations also turn friends to foes, creating inefficiencies and harming the future on the business entity.
The goal for business with regard to knowledge must be to fully utilise and act based on the knowledge held by the whole business teams in their practices and decision-making. Only by utilising the knowledge held by member of the business entity could strengthen them to actually do what they know. But, how can the business reduce the knowing-doing gap?
Pfeffer and Sutton (2000) gave a list how the knowing-doing gap could be reduced:
- To understand the ‘why’ before the ‘how’. Instead of just doing something, team members of the business entity first need to understand why they are doing something.
- Knowing should come from doing and also teaching others. A much deeper level of knowing will be achieved when the team member actually does what he/ she knows. In turn, the knowing-doing gap will eventually be reduced.
- Actions are more important than mere plans and concepts. Business team members should use their judgement and trust themselves in doing actions. Too much time spent on analysis and planning is not worth it if the actions are not carried out.
- Learn by mistakes, there is no learning without mistakes. Organisations should provide ‘soft-landings’ when things go wrong and not to punish their staff too harshly when they make mistakes.
- Drive out fear. Staff should be encouraged to think and also take risks. Business organisations should not punish their staff for trying new things.
Yet, business organisations should ready themselves in order to minimise the costs of actions. Among the knowledge that businesses need to have before-hand are as follows:
First, businesses should really understand their nature of business. They must have knowledge on their nature of business. Businesses deliver values to the people and market. Therefore, they should be clear about the nature of their business activities, the domains of their businesses, the value that they deliver, and how (or what form) do they deliver such value/s.
Next, business organisations should understand their surrounding environments; the resources they gather from their environment and the environment that they serve with their products and services. What is their contribution or impact to their surrounding environment. Businesses must have knowledge about their environments.
The business organisations should also be clear and have knowledge about the prevalent challenges that they are facing and the sort of changes that are affecting their businesses. The political, economics, social, technological, legal, and environmental impacts that they face from time to time.
Next, as businesses are meant to deliver values to the market, they should understand who, in particular, are to receive the values that they deliver. Therefore, businesses must have knowledge on who are their customers and the solutions that they deliver to their customers. The businesses should really have empathy on the problems and needs of the customers and their market in order to be able to serve them with values.
Besides that, businesses should also be aware of their competitors. Know who they are, what kind of solutions do they provide to the customers and community. It will help the business to assess their position in the market and industry.
Businesses should really understand their own business models and processes. Who are the potential business partners, suppliers, and how do they deal with the relevant parties.
Businesses should have strong control of their budget and cost elements. In order to be able to do so, businesses should have knowledge about cost elements, their revenue models and how to apply them in their budget and financial planning.
Only with the possession of these knowledge about their businesses would the business entity be able to apply them in their actions and be successful. Lacking these knowledge may cause the business to drift away from their true goals. Withal, they will be able to strategise their business activities effectively.
Bibliography
Massingham, P. (2019). Knowledge management: theory in practice. Sage Publishing, UK.
Schuppel, J., Muller-Stewens, G., & Gomez, P. (1998). The knowledge spiral. Knowing In Firms, Thousand Oaks, CA: Sage Publications.
Pfeffer, J., & Sutton, R. I. (2000). The knowing-doing gap: How smart companies turn knowledge into action. Harvard business press.