by Ronald Claiborne

Created on: August 18, 2011   Last Updated: August 23, 2011

Knowledge management is important because it improves organizational performance, facilitates innovation, and creates sustainable competitive advantage.  Advancements in technology are responsible for creating the proliferation of enormous amounts of information flowing through businesses all around the world.  Therefore, a transformation is taking place in the business market that makes it possible for every company to have access to information and become competitive at the click of a button. 

Influence of Technology

According to Anantatmula (2007), globalization, increasing international competition and a free-market philosophy is creating a business environment that makes business competition very complex.  Technology levels the playing field in a manner that allows the small business to compete with the large business on equal terms.  Social networking, on-line marketing, and Web-business formation creates new ways of doing business that threatens the survival of traditional businesses.  Many business theorists believe that knowledge management has become a key economic resource (Anantatmula, 2007; Song, 2008; Wang, 2006).  Because knowledge management is a key economic resource, managing knowledge is critical for the survival of the 21st century business enterprise. 

Organizational Performance

Knowledge management is the process or practice of creating, acquiring, capturing, sharing, and using knowledge to enhance learning and performance in organizations (Ryan & Hurley, 2004).  Once business leaders understand that the worker of the 21st century is a knowledge worker they can begin building collaborative relationships to take advantage of the tacit knowledge available in the organization.  The knowledge worker or the individual is the most valuable resource in the 21st century organization.  Therefore, improving organization performance involves improving the quality of people the business hires, train, and retain.

Innovation

Process and product Innovation become possible when businesses establish a culture mind-set conducive to creativity and innovation.  Innovation becomes possible as organizations leverage organizational knowledge to improve learning, working, and the creation of an innovative environment for the knowledge worker (Wang, 2006).  Improving human performance requires organizations to help the knowledge worker become more self-aware to improve the level of commitment

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