Importance of knowledge

From CEOpedia | Management online

Importance of knowledge results from its influence of the company effectiveness and financial results. Knowledge is a very important strategic resource in business. The business environment is constantly changing. New trends and technologies are emerging. Companies are implementing new ventures, so competition is increasing. That is why companies should adapt to changes and introduce new strategic solutions. All businesses have access to an extensive pool of knowledge, but the most important is the way the company uses this knowledge. Knowledge in every area of economic processes is important because:

  • it enables performing complex processes,
  • knowledge gives power to resolve problems and challenges,
  • knowledge gives authority to persons who posses it,
  • knowledge is power to create and innovate in new areas of business,
  • knowledge enables progress and development,
  • knowledge is result of efficient learning and training on the workplace,
  • tacit knowledge recorded in knowledge bases is key success factor for the company,
  • knowledge spurs critical thinking,
  • knowledge is present in organizational processes and organizational design.

Models of knowledge

Over the years many models of knowledge management were created. They show the big impact of collecting and using knowledge in the enterprise. Of these, we distinguish the most poular:

Resource model - At the end of the 1990s, Dorothy Leonard created the "resource model" of knowledge management. This model treats knowledge as the most important resource of the company. According to this model the source of knowledge can be the enterprise or environment. The condition for effective knowledge management is the interaction of 5 elements(Leonard-Barton D., 1995):

  • importing knowledge from the environment,
  • integration of new tools and technologies,
  • experiments,
  • solving the common problems,
  • key skills, include: physical and technical systems, management systems, employees knowledge (Leonard-Barton D., 1995)

Japanese model - created by Ikujiro Nonaka and Hirotaka Takeuchi. They related success of Japanese companies to their ability to create new knowledge, which can be used to produce new products and technologies. According to them there are 2 types of knowledge:

  • explicit knowledge
  • tacit knowledge(Nonaka & Takeuchi, 1995)

This information pointed out that: knowledge consists not only of information collected but also values, emotions and premonitions and leadership in the company plays a large role in creating knowledge. This points to the fact that knowledge in the enterprise has a huge role. It has an impact on the efficiency and results of the company. It is important in every area of economic process. Knowledge is important due to the development of the employee, the company and the entire market. Efficient use of knowledge allows:

  • use employees' knowledge in order to achieve optimal results,
  • creation new ventures and innovation,
  • creation expert systems,
  • development of intellectual capital and competences of all members,
  • acquiring knowledge from the market environment and using it to improve quality,
  • improve productivity,
  • encourage cooperation and increase employee involvement,
  • etc.

Advantages of Importance of knowledge

  • Improved Decision Making: Knowledge is an essential tool for making decisions. It helps to identify opportunities, assess risks, and make informed decisions. Access to the right information and insights can help to make better decisions that can result in improved outcomes.
  • Innovative Solutions: Knowledge can be used to create innovative solutions to complex problems. Companies that are able to access and use the right knowledge can develop unique solutions that are tailored to their specific needs.
  • Competitive Advantage: Access to the right knowledge can give a company a competitive advantage. By using knowledge to anticipate customer needs and develop innovative products and services, a company can stand out from its competitors.
  • Improved Efficiency: Knowledge can be used to increase the efficiency of operations and processes. By understanding the latest trends and technologies, companies can optimize their processes and increase their efficiency.
  • Cost Savings: Knowledge can help to reduce costs. By leveraging knowledge, companies can identify ways to reduce costs and increase efficiency. This can result in significant cost savings.

Limitations of Importance of knowledge

The importance of knowledge can be limited in various ways. The following are some of the limitations:

  • Time: Acquiring knowledge requires a certain amount of time and effort, which can be difficult for a business to invest in.
  • Cost: Depending on the type of knowledge, acquiring it can be very costly.
  • Relevance: Knowledge must be relevant to the current business context in order to be useful.
  • Competitiveness: Knowledge can be used as a competitive advantage, so businesses may be reluctant to share it.
  • Accuracy: Knowledge must be accurate and up-to-date in order to be useful.
  • Exclusivity: Knowledge may be restricted to certain individuals or departments, which can limit its usefulness.

Other approaches related to Importance of knowledge

The importance of knowledge in business is undeniable. It is the key to successful operations, growth and profitability. Here are a few ways how businesses can leverage knowledge for success:

  • Knowledge helps to identify new opportunities and markets. Companies can use knowledge to uncover and assess new opportunities and develop strategies for expanding into new markets.
  • Knowledge can also be used to create innovative products and services. Companies can use their knowledge to develop new products, services, and processes that are better tailored to customers’ needs and preferences.
  • Knowledge can also be used to improve processes and operations. Companies can use knowledge to identify inefficiencies and develop strategies to reduce costs and improve operational performance.
  • Knowledge can also help companies to develop better customer relationships. Companies can use knowledge to gain insights into customer preferences, preferences and behaviour to develop better customer experiences.

Overall, knowledge is an invaluable asset that can help companies to identify new opportunities, create innovative products and services, improve processes and operations, and develop better relationships with customers. By leveraging knowledge, companies can gain a competitive advantage and remain successful in the long run.

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Author: Ewa Wójcik