In Brief: Knowledge is considered intellectual capital; however it is valuable only when an organization is able to turn it into action. Knowledge can be a valuable driver of business strategy.
Establishing the link between knowledge and strategy is essential for competitive advantage. External forces acting upon the organization have traditionally guided business strategy. However, assessing—and adjusting to—the external environment does not always create competitive advantage.
Knowledge Management (KM) is the practice of finding, collecting, packaging, and disseminating knowledge in support of more effective and productive work. Knowledge creates a sustainable advantage when it generates increasing returns and continuing benefits. Knowledge management processes should not be viewed as separate administrative functions, but as enabling the most important elements of business strategy.
Linking knowledge to strategy does not happen by accident. Traditional strategic management models define strategy in terms of market position and/or products. This approach doesn't explicitly take into account the unique capabilities of an organization in relation to its competitive advantage.
While there are many methods to link knowledge and strategy, the simplest way to start may be to take a different approach to strategy than the norm—one that focuses on what the organization can do that is unique and valuable. This shift to an internally informed view of strategy becomes a guide to anchor a knowledge management initiative. The resource-based approach takes the view that strategy should be based on resources and capabilities as the way to create competitive advantage.
The resource-based approach suggests that organizations should develop their strategy based on the things they are able to do that cannot be imitated by other organizations. Resources and capabilities unique to an organization should guide strategic management.
|Business Strategy||Role of Knowledge||Strategic Benefits|
|Conduct Knowledge-Strategy Gap analysis||Gives knowledge a strategic focus and helps identify where knowledge is lacking.||Develops alignment between knowledge and strategy.|
|Perform knowledge SWOT (Strengths, Weaknesses, Opportunities, Threats)||Identifies knowledge gaps in strengths and weaknesses.||Creates an informed and unique strategy, improving strategic positioning in the market.|
|Identify key capabilities||Describes capabilities and finds those that are most unique and valuable.||Generates a competitive advantage that is sustainable because the capabilities can't be copied.|
|Identify key resources||Supports finding and developing knowledge-related resources.||Finds those resources that provide the most value in creating advantages in the market.|
Figure 1: Components of business strategy and knowledge management
In the table above, selected components of a resource-based business strategy are aligned with knowledge management in order to demonstrate the potential for increased competitive advantage. The Business Strategy describes a way to integrate knowledge and business functions. The Role of Knowledge answers the question, "Why is knowledge important to this function?" Strategic Benefits refer to the expected results relative to strategy and the potential competitive advantage.
Author: Ben Pacewic—2004 AIM Graduate, Manager, Data Analysis and Reporting PacifiCare Health Systems
Abstract: Knowledge is a valuable driver of business strategy (Zack, 1999b). Establishing the link between knowledge and strategy is essential for competitive advantage (Von Krogh, Ichijo, & Nonaka, 2000). Content analysis (Palmquist, 2001) of selected literature in the areas of knowledge management (published 1996–2004) and strategy (published 1986–2004) provides the foundation for development of the connection. The outcome is a table for evaluating several methods of linking knowledge and strategy.