Defining Organizational Knowledge

Turning individual knowledge into organizational intellectual capital

It is often said that an organization’s most valuable assets are the people it employs. The
ideas, experiences, expertise and knowledge contained in the mind of an individual may be
worth more to an organization than can be quantified with respect to how that knowledge is
applied each day to save time, reduce costs, and advance the organization’s initiatives. How
can an organization capitalize on individual knowledge? How do individuals contribute to
subunits or groups within the organization to build and perpetuate group knowledge? How
does individual and group knowledge become organizational knowledge that can be captured,
reused, and applied to achieve measurable positive effects for the organization? When might
extra-organizational knowledge be used to further increase or enhance the capabilities of an
organization? This paper explores these questions, first by defining each knowledge type,
then by examining how knowledge moves through an organization and becomes valuable
organi...

Introduction

It is often said that an organization’s most valuable assets are the people it employs. The
ideas, experiences, expertise and knowledge contained in the mind of an individual may be
worth more to an organization than can be quantified with respect to how that knowledge is
applied each day to save time, reduce costs, and advance the organization’s initiatives. How
can an organization capitalize on individual knowledge? How do individuals contribute to
subunits or groups within the organization to build and perpetuate group knowledge? How
does individual and group knowledge become organizational knowledge that can be captured,
reused, and applied to achieve measurable positive effects for the organization? When might
extra-organizational knowledge be used to further increase or enhance the capabilities of an
organization? This paper explores these questions, first by defining each knowledge type,
then by examining how knowledge moves through an organization and becomes valuable
organizational intellectual capital.

Defining Knowledge

"Traditional epistemology" defines knowledge as a "justified true belief" (Nonaka, 15). From
an information systems approach, knowledge can also be defined as information that has been
put into context and through the application of experience or previous knowledge and is now
actionable and therefore of value to the individual or organization. Before we define
knowledge as it is assigned to the people or institutions that create or possess it, let us first
review the two primary definitions of tacit and explicit knowledge and the modes of
knowledge creation.

Tacit Knowledge. Tacit knowledge can be defined as knowledge that has not yet been
codified outside the mind of the individual or individuals that posses it. It is intangible and
“consists of knowledge which is difficult to express and to communicate to other people by
means of symbols (Schulz, 11)”. Tacit knowledge is more difficult to transmit than codified
knowledge (Schulz, 11) and “has a personal quality, which makes it hard to formalize and
communicate” (Nonaka, 16). An example of tacit knowledge might be the instincts a Navy
helicopter pilot possesses that allow him or her to gauge safety conditions by the physical feel
of flight. Tacit knowledge therefore is the kind of knowledge that comes from experience and
is difficult or impossible to communicate.

Explicit Knowledge. Explicit Knowledge, in contrast, is knowledge that can be

codified and "is transmittable in formal, systematic language" (Nonaka, 16). It
“consists of knowledge which can be expressed in symbols, and which can be
communicated through these symbols to other people” (Schulz, 11). To continue
using the example of Navy helicopter pilots, there is always an operator’s guide
or set of standard operating procedures (SOPs) for each type of helicopter.
Former and active duty pilots write the SOP, filling it with pertinent tacit
knowledge now made explicit by the fact that has been written and shared. The
use of an SOP and the language contained within the SOP are understood and
accepted as standard among that particular community or group.

Individual Knowledge. Individual knowledge can be defined simply as

knowledge possessed by the individual. This knowledge is most often tacit unless
the individual possesses explicit knowledge that is not shared with anyone or any
organization other than the individual. A private journal or private blog might be
considered explicit individual knowledge.

Individual knowledge can be acquired through experiences, and at times it can

be acquired without language. “Apprentices work with their mentors and learn
craftsmanship not through language but by observation, imitation, and practice.
In a business setting, on-the-job training (OJT) uses the same principle." (Nonaka,
19) In the case of OJT, an individual is acquiring knowledge from observing
another person’s actions, and once the individual applies his or her own
experiences and background to what is learned it becomes individual knowledge.
The creation of new ‘individual’ knowledge derived from observation, imitation
and practice is called socialization, or tacit to tacit knowledge sharing.

Individual knowledge can certainly develop from explicit knowledge. What a

person reads, for example, can contribute to new thoughts and ideas in the mind
of the individual. This method of knowledge creation is referred to as
internalization – turning explicit knowledge into tacit knowledge. By reading or
acquiring explicit knowledge, independent thought and analysis can develop into
new, individual knowledge.

An individual can make a greater contribution to the knowledge sharing and

creation process by allowing their knowledge to be internalized by others or
socializing their knowledge with others, which leads to the creation of group
knowledge.

Group Knowledge. In the field of social psychology, “a group is defined as 'a

dynamic whole based on interdependence rather on similarity'" (Nonaka, 23).
Group knowledge might then be defined as individual knowledge that multiple
individuals rely upon as truth, share and understand. Group knowledge is
“broadcast information” (Corrêa da Silva & Cullell, 56), but is not necessarily
information shared ‘publicly’ (i.e. “common knowledge”). While group knowledge
is shared, it remains contained within community of practice, a subunit, or other
group or team of individuals who share tasks, or common or related functions.
Further, "it is not the aggregation or multiplication of individual interpretations,
but the synthesis [of those interpretations] which leads to group knowledge."
(Richter, 243)

Group knowledge can be generated and disseminated through socialization and

often results in the transformation of tacit knowledge into explicit knowledge, or
externalization. When groups come together and exchange ideas, “individual
knowledge is synthesized to arrive at group knowledge, which eventually
becomes routinized at the organizational level. Thus, the transformation of
individual knowledge into organizational routines leads to complex and
embodied organizational knowledge" (Richter, 243)

Organizational Knowledge. When group knowledge from several subunits or

groups is combined and used to create new knowledge, the resulting tacit and
explicit knowledge can be called organizational knowledge. Since “organizational
learning is seen as encoding inferences from history into routines that guide
behavior”, (Schulz, 11) it could be said that organizational knowledge is the
product of those routines. For example, again using the Navy as a point of
reference, during and after major combat operations, lessons identified across
the organization are usually captured in a formalized system and assigned to the
appropriate offices of primary responsibility (OPRs) for action. By sharing those
lessons explicitly across all groups, organizational knowledge is created. The
process of reviewing those lessons and providing responses that in effect change
routines already in place in a way that improves the performance of the
organization or speeds decision processes constitutes organizational learning.

At the organizational level, new knowledge is often generated by combining

explicit knowledge with explicit knowledge. A command-wide standard operating
procedures guide, comprised of SOPs developed by various groups within the
organization is an explicit form of “combined” knowledge. "Organizations
continuously create new knowledge by reconstructing existing perspectives,
frameworks, or premises on a day-to-day basis." (Nonaka, 19) Organizational
knowledge becomes particularly powerful and measurable when combined
knowledge is used create standard routines, create a common culture and
language, and encourages and enables cross-functional group interactions within
an organization. It is in the interest of the organization to develop its individual
and group knowledge sources, to expand their organizational knowledge base.

What if, however, an organization does not possess the knowledge it needs to
gain a competitive advantage? A common strategy involves introducing extra-
organizational knowledge into the organizational knowledge creation process.

The Value of Organizational Knowledge

How does an organization assign value to its knowledge and quantify the
knowledge assets in its possession? Doing so requires identifying a method or
methods by which intellectual assets can be valuated. Daniel Andriessen
attempted to identify a methodology for measuring the intangible, identifying
knowledge as the first of seven “characteristics” of the “intangible econonmy”
(Andriessen, 4). According to Andriessen, “a value reflects the concept an
individual or group has regarding what is desired. It serves as a criterion to
determine a choice from existing alternatives” (Andriessen, 11).

Andriessen identifies four methods for determining value. First, the financial
valuation method, which assigns monetary value to an object. Second, the value
measurement method, which involves using a non-monetary criterion and
translating it into an observable phenomenon. Third, the value assessment
method, which is dependent upon the personal judgement of an evaluator. And
fourth, “if the framework does not include a criterion for value, but does involve
a metrical scale that relates to an observable phenomenon” (Andriessen, 13),
intangibles can be measured by what he calls the measurement method.

How an organization chooses to approach measuring the value of organizational

knowledge might depend on the source of the knowledge or on how that
knowledge might help meet a current objective. For example, certain groups
within the organization might share knowledge that directly affects spending,
and if the organization’s objective is to cut unnecessary costs for a certain
period, the organization might require its groups or subunits to perform an
assessment of software products in use. If after reviewing the results of the
assessment the organization can identify that three subunits are using three
different software products that provide the same or similar services, they may
decide to select one product to use organization wide, reducing costs by the
number of dollars expended on the upkeep and licensing for the other two
products. In this case the financial valuation method would apply.

The value measurement method might be used to assign value to organizational

knowledge if the knowledge held has an observable effect and non-monetary
criteria. Perhaps making a practice of knowing and then celebrating special
events or milestones in an organization will positively impact morale, so much so
that the changes and positive or negative impacts are observable among the
staff.

The value assessment method might be applied in situations where a leader,

manager, or commander is able to evaluate the immediate value of
organizational knowledge. In the commander’s case, perhaps having access to
organizational knowledge allows he or she to make a critical decision more
quickly and easily. He or she can then make an assessment based on the results.

Finally, organizational knowledge or extra-organizational knowledge acquired

might give and organization a competitive advantage in an advertising
campaign. The success of that campaign can be measured on a numerical scale
and perhaps be observed if the campaign contained a tag line that becomes part
of common language and culture in the general public. In this case, the
measurement method might be used to assign value to organizational
knowledge.

Ultimately, the ability for an organization to be agile, successful, improve

performance and positively impact its internal culture will determine the true
value of organizational knowledge to the organization.