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Malhotra, Yogesh. (1997). Current Business Concerns and Knowledge Management [WWW document]. URL http://www.brint.com/interview/times.htm

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Current Business Concerns and Knowledge Management

In the current business scenario what do organizations need to stress or emphasize on most?

The current business scenario may be characterized by a shift from a world of predictable, incremental, and linear change to that of radical and discontinuous change which seems to have global implications. Therefore, most organizations would need to gear up for encountering this new world of business that would increasingly demand non-linear strategies for sustaining organizational competence. Unfortunately, most organizations, and their management, control and strategic planning systems seem relevant to the passing era which rewarded efficiency-driven optimization and prediction of future based on the past trends. Increasingly, the important question will not be about `doing things right,' but about doing `the right things.' As the traditional paradigms of concepts such as organizations, industry, and product / service definitions become increasingly blurred, one would see new models of business that defy traditional boundaries of organization structure, industry structure and product / service definitions. Characteristics such as innovation and creativity will be at a premium. There will be increasing realization that sustainable organizational competence depends upon the organization's capacity for creating new knowledge through an ongoing and continuos process of learning and unlearning.

What is the concept of knowledge management and how do companies put it to practical use?

There is not yet a common consensus on the concept of knowledge management, however, the shared theme is that increasingly, knowledge in the minds of organizational members is of greatest value as the organizational resource. This organizational wealth of knowledge is referred by various labels such as knowledge capital, knowledge assets, intangible assets, intellectual capital, and so on. The notion of the `organizational stock of knowledge' is often extended to also include intellectual property such as patents, trademarks, copyrights, etc. Couple of years ago, while in India, I observed that a major Indian business magazine cover story considered organizational knowledge assets primarily in terms of such intellectual property. However, in the western world, despite the recent boom in outsourcing and downsizing activities, we are observing that organizations are becoming more aware of the value of knowledge that resides in peoples' heads. On one hand, one observes greater thrust by the HR departments on creating and maintaining portfolios of organizational skill sets in terms of knowledge assets. On the other hand, one observes the beancounters trying to translate the organization's intangible assets into dollar figures on the company's balance sheets so that they may be used for determining the company's `real worth.'

I take a relatively strategic view of Knowledge Management and would define it in the following terms: "Knowledge Management caters to the critical issues of organizational adaption, survival and competence in face of increasingly discontinuous environmental change. Essentially, it embodies organizational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings." First, KM is increasingly important because of the shift from a predictable world paradigm to one governed by discontinuous change. Second, it is essential for organizational survival in the long run, given that knowledge creation is the core competence of any organization. This knowledge may relate -- among other issues -- to new products or services, to new product / service definitions, to new organization / industry definitions, or to new channels of distributions. Third, it is not a separate function characterized by a separate KM department or a KM process, but is embedded into all organization's business processes. Fourth, latest advances of information technology can facilitate the processes such as channeling, gathering, or dissemination of information, however, the final burden is on the humans to translate this information into actionable knowledge depending on an acute understanding of their business context. Having the best-of-breed technologies doesn't necessarily ensure creativity and innovation that is necessary for organizational competence. Effective utilization of technology is necessary -- synchronized with effective utilization of the creative and innovative capacity of the human components.

In this view, KM is not limited to collecting information from various domain experts and creating databases supported by organizational intranets. Nor is it defined in terms of determining the individual knowledge needs of every employee and then trying to parcel out quotas of knowledge that are considered relevant to each employee's needs. More on the above view of knowledge management is accessible in the following articles.

Related full-text research papers, published articles, keynotes, and interviews are accessible in www.KMBook.com and www.ITUse.com and research portals are available in www.KMNetwork.com.

The internet seems to be the focus of business organizations in the west, but the net is still to catch up in developing countries like India. In light of this do you think the concept of virtual organisations,webs,ecosystems etc making a truly 'global market' is actually possible?

I do agree that developing countries like India have yet to develop sophisticated telecommunication networks to bring concepts such as virtual organizations into the mainstream. However, based on various trends that I have been observing over the last couple of years, I am optimistic about the transition. First, there has been an increasing awareness in selected segments of the Indian business about the importance and relevance of the Internet and WWW. Second, some efforts facilitated by the Indian government have come to attention that have been trying to provide a springboard for creating the virtual counterparts of domestic Indian enterprises at very nominal costs. Third, the strong presence of multinationals such as Texas Instruments have already started the inception of such concepts a few years ago, for instance by using satellite links for `virtual' software development in Indian export zones. Many such multinationals also have their own captive high-bandwidth networks that are being used for supporting such virtual organizations and webs of corporate relationships. Fourth, one is observing increased traffic from India -- particularly from individuals in the academic, university, and research sectors -- on various listserv discussion groups focusing on contemporary business and technology issues such as learning organizations. One cannot neglect the significance of `simple' technologies such as e-mail in supporting global virtual networks. Fifth, one is also observing a number of organizations and individuals residing in India who are establishing their web presence by either using free-of-charge web presence providers (such as www.geocities.com) and e-mail providers, or using low cost web hosting services available in the USA. Sixth, one is also observing various Indian individuals and companies attempting to drum up business from US and other worldwide countries. Common examples in this area includes, free-lance journalists, web developers, and programmers based in India soliciting work from companies in other countries via the Internet. This type of virtual work is not yet bounded by the stringent regulations that characterize the traditional notion of work. Many companies, including small businesses, on the Indian subcontinent are already showing awareness of the `global market' and have already established their web presence and are actively soliciting businesses through the medium of e-mail.

One factor in favor of developing countries like India is that they don't have to go through the turmoil of massive national level upgrades from the traditional copper wire systems to the latest fiberoptics based systems, sattelite systems, or wireless systems. Since they have not tied up significant investments in the intermediate levels of technologies, hence they can directly leapfrog to the more sophisticated and less expensive technologies that are gradually becoming commonly available. Many such countries can now avail of such technologies as they become available at relatively cheaper prices and move directly into the next era of high band-width and [relatively] fault-tolerant communication. However, one cannot yet disregard that the mainstream arrival of the Internet and web would not occur in India until regulatory reforms have enough teeth to facilitate the development of these high-bandwidth low-cost networks based on alternative technologies. As evident from reports from some persons who are actively championing such reforms in India, this process yet seems to be slow and arduous given the presence of bureaucratic red tape.

Could you please explain this new radical concept of intellectual capital as propounded by Brian Arthur, Thomas Stewart etc.

To some extent, I have answered this question in answers to your earlier questions. However, I would like to add briefly on a couple of issues.

Brian Arthur is known for his notion of "increasing returns" that challenges the traditional economical notion of "diminishing returns." In economics, it is generally argued that after a certain threshold, any additional unit of land, labor or capital, would yield lesser marginal return than the last unit. However, Arthur argues that businesses based on information would reap "increasing returns" from creation of every additional unit of information product. For example, once the original software package is developed, its marginal cost of production is minimal compared with the potential revenue added by its sale [of course not considering software piracy, however one cannot ignore the `beneficial' effects of this phenomena in seeding the market for upgrades and newer products]. Arthur argues that "increasing returns" exist side-by-side with "diminishing returns" in many organizations: while the former is based on innovation, creativity and a `world of re-everything,' the latter is driven by the post-industrial focus on optimization based efficiency.

Tom Stewart defines intellectual capital as the sum of everything everybody in a company knows that gives it a competitive edge: "It is the knowledge of a workforce: The training and intuition of a team of chemists who discover a billion-dollar new drug or the know-how of workmen who come up with a thousand different ways to improve the efficiency of a factory. It is the electronic network that transports information at warp speed through a company, so that it can react to the market faster than its rivals. It is the collaboration--the shared learning--between a company and its customers, which forges a bond between them that brings the customer back again and again." He considers intellectual capital as collective brainpower: a composite of knowledge, information, intellectual property, and experience. He, too, has argued that knowledge and information are the primary raw materials of today's economy.