What is KM (Knowledge Management)?

A knowledge-based company builds its competitive strategy on the processing of intangible, often invisible nuggets of information that cannot always be quantified or recorded. Such knowledge may include information about competitors or the understanding of a crucial market segment. It also encompasses the expertise of individual employees that, when mined, can increase a company's competitive advantage. Are information and knowledge different? Yes. Information is data: hard numbers about a company's profits, losses or budgets; the phone number of someone at a competing company who can be coerced out of some secrets. Take that information and season it with context and understanding, and you get knowledge. Put that knowledge where other people can get to it, like in groupware—specialized software, such as Lotus Notes, that supports communication among groups—and you are now managing the knowledge.

Where does knowledge reside in my company?That's what makes KM such a difficult concept to put into practice. Knowledge is ubiquitous. While information can live inside myriad databases, true knowledge is more likely to lie hidden and undervalued in the minds of individual employees. And it may dwell in the relationships your colleagues have with people at other companies.

Aren't people reluctant to give up their knowledge? Yes, and that's one of the trickiest parts of knowledge management. Before you can manage knowledge, you have to get it out of people's brains and into a central repository. And that's not easy to do if people have proprietary feelings about what they know. After all, knowledge is power, and the impulse to hoard rather than share is strong. Real KM—getting, refining and sharing information across the business—requires enormous organizational change. Only companies willing to remake their cultures around the value of sharing knowledge and insight will see the benefits.

How do I know I'm doing it right?Quantifying a return on KM is hard to do definitively. Though a slew of companies are coming to market with software to help you try, it's still hard to put exact numbers on information organization. If careful attention to your intellectual assets has allowed you to abort a costly project before it failed, for example, you can count what you saved by not pursuing the project as KM ROI. And if there were a way to measure what you're losing by not undertaking knowledge management, then that would count as ROI, too. Companies that fail to exploit their knowledge tend to stumble on ideas and decisions with a haphazard approach rather than through a carefully organized method that takes full advantage of all available information. But happenstance is no longer enough. It's not what you have that's important; it's whether you can find it, and then what you do with it.