In his research paper, “Working with Tacit Knowledge,” Joseph A. Horvath, Ph.D. of the IBM Institute for Knowledge Management, states that knowledge is “… the only sustainable competitive advantage.” Indeed, here in the 21st Century, knowledge is the most important ingredient in business. In industry after industry, knowledgeable organizations are leading organizations.

What is Knowledge?

But what exactly is knowledge? Where does it come from? And how can you build it up and spread it around your organization?

Referring to the above figure, note that data are our starting point. Data are simply recorded inputs. Like stacks of cash register receipts in the back office of the grocery store.

You’ll need to analyze data in order to convert them to information. For example, you can analyze your cash register receipts (the data) to discover how much of each product you sell (the information).

Clearly, your cash register receipts are data internal to your organization. Thus, your analysis of that data will yield internal information. At times, you’ll also need information from outside your organization… like your customers’ buying preferences, for example.

But gathering data from outside your organization is generally both expensive and time consuming. Fortunately, you can often skip this external data gathering step and obtain information available from (analyzed by) somebody else. Indeed there are many sources of published information on social, economic, environmental, political, legal and technical topics.

Communicating Information

You really can’t communicate data. Imagine trying to present a ten minute talk about a stack of cash register receipts. In order to communicate your findings, you first have to analyze the data thus converting it into information. Clearly, you could present a ten minute talk about sales by product, sales by product category, or sales by day of the week… all information obtained by analyzing your data (the cash register receipts).

Having converted data into information, you’ve increased your level of knowledge. But you’d increase it still further through

Having analyzed the cash register receipts (the data), you may learn (the information) that you sell many more red apples than green. But you don’t yet know why.

Were you to stand in the produce section of your grocery store observing your customers, you might notice that many of them first reach for a green apple. Then, noting the higher price for green apples, many customers select the lower-priced red apples. Perhaps you’d couple this observation with your recollection that you sold about as many red apples as green apples when their prices were more similar.

Aha, you’ve just taken your information, coupled it with experience, and developed an understanding. (Every time someone says “Aha,” they’ve arrived at understanding.)

Information is knowledge about what is happening; understanding is knowledge about why it is happening. Understanding (knowing why) is important in a strategic sense. You need to understand (to know why) before you can use knowledge to predict… before you can apply it toward decisions about the future, toward strategies.

Just as you can communicate information, you can also communicate understanding. Just as you can inform a co-worker about your selling more red apples (information), you can also share your understanding of your customers’ price sensitivity.

This ability to communicate both information and understanding suggests a powerful benefit… a significant point of leverage… many people - indeed your entire organization - can gain understanding from the experience of a single individual.

Two Significant Challenges

As a leader, you’re faced with two significant challenges related to building a knowledge-based organization.

1. How to encourage individual employees to increase their own level of knowledge (successfully move from data to information to understanding).
2. How to stimulate the entire organization to increase its level of shared knowledge.

The steps required to accomplish both challenges include:

• Model learning. Be inquisitive. Ask “What’s happening?” and “Why is it happening?” Encourage others to ask similar questions.
• Don’t concern yourself so much about immediate answers. Answers may be a while in coming. At least initially, the questions are far more important.
• Discover where the knowledge (data, information and understanding) currently resides in your organization. Map it, or catalog it. Let everyone know whom they can turn to for data, information and understanding.
• Devise systems for apprenticeship, mentoring, and coaching.
• Develop on-going processes to scan for both data (as appropriate) and information (as applicable).
• Make sure that any analysis of data is performed by someone experienced in the applicable subject area. Analysis based on the judgment of an experienced person will produce better information.
• Locate individuals in close physical proximity to encourage informal sharing of information and knowledge.
• In those circumstances where close physical proximity isn’t possible (due to disperse geography or travel), assure that the necessary tools (like e-mail) are available to encourage on-going dialog.
• Form task teams… get people thinking together.
• Celebrate and reward team efforts. Diminish celebration and reward for individuals alone.
• Welcome - in fact, seek - input from outside the organization.
• Together with your leadership team, conduct periodic strategy sessions to explore “What’s happening?” and “Why?” While you’ll likely publish notes from your sessions, your notes won’t be your maximum benefit. Instead, your maximum benefit will be the increased level of shared knowledge among your leadership team. Some years ago, at his company’s strategy session, a client of ours remarked, “Even if we forgot to take notes from this session, we’d still have most of the benefit.”
   

This article is adapted from Bill Birnbaum's book, Strategic Thinking: A Four Piece Puzzle