Knowledge Is Best Edge In Business

Aggressive entrepreneurs and managers are always looking for an edge - that critical difference in their modus operandi which will give them the advantage in their marketplace.

Q. I think I’ve read every how-to book for managers and I now possess more information about the keys to success than I’ll ever be able to use. But I still haven’t found the basic ingredient needed to stay a step beyond the competition. Can you sum up your best advice in one sentence?

A. I’ll do better than that. One word says it all: KNOWLEDGE. The true EDGE in business is derived from the unique knowledge that a firm’s employees - all of them, individually and collectively - possess, create and share. Perhaps coincidentally, the last four letters of the word describe what will be gained if knowledge is harvested and used properly.

The process of innovation - the hallmark of successful entrepreneurial behavior - involves discovery (looking outward for information and insights), creativity (searching within yourself for new ideas) and knowledge building and sharing (taking all the information gleaned in the first two steps and putting it to work). Knowledge is a fuel mined by heads, not hands, and is the primary propellant of continuous innovation.

In sum, a company’s edge in its markets is principally a function of the quantity, quality and use of the knowledge at its command. Management guru Peter Drucker has asserted that knowledge is not just one resource among the traditional, principal factors of production - labor, capital, land - but it is the only meaningful resource.

In their recent book, The Knowledge Creating Company, Professors Ikujiro Nonaka and Hirotaka Takeuchi draw a distinction between tacit knowledge and explicit knowledge.

Explicit knowledge, they say, is codified knowledge that can be communicated in formal, systematic language. It is easily traded and shared. This is the stuff that computers love to process, teachers love to teach, and number crunchers love to crunch. We can send it over the Internet or store it in our data bases. It comes in many forms and is available from many sources, but the most valuable type for a business is that which has been converted from tacit knowledge.

Tacit knowledge is highly personal and hard to express in formalized language. One form of tacit knowledge is experience-bred know-how of the type that distinguishes master craftsmen. It’s almost impossible to explain or impart via typical teaching methodologies. It is usually conveyed through apprenticeships, where students can absorb the knowledge as it is being applied and expanded, thus developing ownership through use.

There is also cognitive tacit knowledge which consists of extremely personal mental models, beliefs, and perceptions that individuals build within themselves over time. They are a person’s unique possessions and reflect his or her image of reality. This knowledge consists of insights, intuition and hunches as well as concepts acquired along life’s path.

Since tacit knowledge is very subjective and comes inconveniently packaged in human psyches it is not easy to access, convey, or share. Nevertheless, a firm’s true edge is derived from its ability to convert this elusive commodity into explicit, manageable knowledge.

Tacit knowledge must be gingerly extracted and given “handles” to make it portable and usable by others within the firm, both individually and collectively. This is how priceless new knowledge, essential to a firm’s innovative strength, is created and made available for use.

By continuously stimulating interaction among employees, and guiding those exchanges carefully, a firm can filter and cross-pollinate knowledge within its own walls. As a consequence, new knowledge will be perpetually manufactured, creating an institutional asset that is truly unique.

No other firm can posses this same advantage. A firm’s body of proprietary knowledge is as unique as the fingerprints of its employees and more valuable than any other asset on its balance sheet. It is this asset that can provide the company with an unmatchable edge.

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