How Knowledge Management Is Central as a Competitive Advantage in the Resource Based View Theory

Introduction

“An enterprise is a creation of human knowledge” (Rastoji, P.2002), the following is presented in response to question number two as a final essay for this module, in an effort to highlight the critical significance of knowledge management being a critical resource  of organization in the light of the resource-based view of competitive advantage.

Knowledge evolved as one of the most competitive advantages of organizations as defined by Dasgupta, M. & Gupta, R. (2009) “Knowledge has emerged as the most strategically significant resource for the firm”, especially in today’s current  saturated, ever changing markets, excessive and unfettered fierce competition in all industries.

Halawi, L., Aronson, J. and McCarthy, R. (2005) stated that “We are not only in a new millennium, but also in a new era: the knowledge era”.

This essay will be organized as follow: a) Defining Knowledge and Knowledge management, b) Defining competitive strategy & competitive advantage c) Discussing  the assumption that competitive strategy concept was shifted from the traditional “differentiation through product and price” Porter, M. E. (1980) to a new approach which look inside the organization itself looking for resources as competitive advantages , d)Defining the resource based view strategy, e) Reviewing literature review and case studies showing how significance is the role of Knowledge management as a resource for competitive advantage .

Knowledge & Knowledge management definition

Knowledge is built out of information, as defined by Rstoji, P. ( 2002) “Information is the feedstock of knowledge, meaningfully organized information constitutes knowledge”, Where knowledge based on this information is the basis of decisions and plans, also “Decisions and actions in terms of what to do, why, when, where, and how; depend on an incessant acquisition, processing,  and use of relevant information and knowledge”.

According to Azam, M., Khilji, A., Zakariya, B. , Khan, W. (2016) Knowledge could be defined as “combination of data and information to which added expert opinion, skills and experience” which all provide a valued “Asset, that aids in decision making”, while  in business terms it could be defined as being the “know-how, applied information, information with judgment, or the capacity for effective action”, also “Knowledge is the result of learning and the process of identifying, creating, storing, sharing, and using it to enhance performance”.

Knowledge management defined by Perera, C. and Ranawaka, R. (2016) as “a process that transforms individual knowledge into organizational knowledge”, also defined this management as “Knowledge management refers to a range of practices and techniques used by organizations to identify, represent and distribute Knowledge, know – how, expertise, intellectual capital and other forms of knowledge for leverage, reuse and transfer of knowledge and learning across the organization”

Importance of Knowledge Management

Mullins, L. (2005) believes that “The only sustainable competitive advantage comes from the organization’s ability to learn and all activities should push people to the leading edge of learning”, also “People who are great at their profession or trade are always learning, questioning, tinkering, and taking the practice to a new level”.

According to Azam, M. , et al. (2016) a rigid acknowledgment is present among organization that “information and knowledge management” are such dynamic instruments in firms, “Knowledge management can be proven a competitive advantage of any organization.” where the most significant precedence is “customer satisfaction to evaluate organizational performance and success”.

In today’s environment each staff member in any firm could be considered as a “learner” and learning chance is given to every “employee” to improve his “learning” capability and “Knowledge”, consequently each employee should be considered as a “lifelong learner, critical Thinker and knowledge producer”, every firm must become  a “Knowledge centric” firm, and must deliver “Learning and development to employees” and implement “Knowledge management (KM) system for better performance”.

Knowledge Types

As per Azam, M., et al. (2016) Knowledge could be classified into two types “Tacit knowledge” which is “Non-verbalized, intuitive, and unarticulated knowledge” which individuals hold in their brain, and which is complex to be formalized and communicated because it is inhabited in “skills and experiences” but can be “shared in discussion, & storytelling”.

The other type is the “Explicit knowledge” which is able to be documented in notes, books, computer word processing etc., Azam, M., et al.(2016) also defined three components of Knowledge which are “1) people/culture, 2) process, and 3) technology, where most individuals concentrate on the technological solutions when they consider KM though knowledge management can ‘t be present without “people and processes”  and technology is just and enabler instrument, below figure shows these components.

Figure 1 KM Components – source: Azam,M., et al (2016)

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Turner, G and Minonne, C.(2010) explained that studies showed that there are “three interdependent and complementary pillars that support the concept of Knowledge Management”, Namely “Organizational Learning Management (OLM), Organizational Knowledge Management (OKM) and Intellectual Capital Management (ICM)”

OLM, deals with the problem of obtaining, arranging and recovering “explicit knowledge, or information”, ICM measures the “intangible assets of the organization”, to establish clear “strategy-structure-process parameters to ensure it accesses, creates and embeds the knowledge” ten this is the task of “OKM pillar” of knowledge management, the three elements are interrelated.

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Figure 2 the three pillars of knowledge source: Turner, G and Minonne, C.(2010)

Organization knowledge creation

Defined by Nonaka, I., Krogh, G. and Voelpel, S. (2006) as the procedures of “making available and amplifying knowledge created by individuals as well as crystallizing and connecting it to an organization’s knowledge system”, or in other definition to make what persons learned in their “work-life” useful for their coworkers and consequently the firm in general, it is a nonstop practice during which the individual “overcomes” barriers and gains a “new Knowledge”.