Original Source
IBM Systems Journal
May 23, 2001
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Where Did Knowledge Management Come From?
by Larry Prusak
Executive Director, IBM
Institute for Knowledge Management
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In this essay I look at the history of knowledge management and offer insights
into what knowledge management means today and where it may be headed in the
future. This is an updated version of an article first published in Knowledge
Directions, the journal of the Institute for Knowledge Management, fall 1999.
Now that knowledge management is widely known and practiced in many large
organizations, it might be useful to look back a bit and try to give some
perspective on how this old but new subject developed and, in particular, what
some of the specific antecedents of today's knowledge management movement are.
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Some skeptics may argue that consultants developed knowledge management to
replace declining revenues from the waning re-engineering movement. Others may
feel that knowledge management is just a "re-badging" of earlier information
and data management methods. Perhaps the majority of skeptics take the
position-not an unnatural one-that every so-called new approach is, in
reality, either old or wrong. I would say to them that knowledge management,
like any system of thought that has value, is both old and new, and its
combination of new ideas with ideas that "everyone has known all along" should
reassure practitioners rather than unnerve them. And while the idea of
consultants looking for a profitable new subject to replace an expiring one
has some credibility, the fact is that knowledge management is not just a
consultants' invention but a practitioner-based, substantive response to real
social and economic trends.
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Let us briefly examine three of them: globalization, ubiquitous computing, and
the knowledge-centric view of the firm.
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Globalization is the most obvious and clearest culprit. The complexity and
volume of global trade today is unprecedented; the number of global players,
products, and distribution channels is much greater than ever before. The
speeding up of all elements of global trade-mainly because of information
technology-and the decline of centralized economies have created an almost
frenetic atmosphere within firms, which feel compelled to bring new products
and services to wider markets ever more quickly. This combination of global
reach and speed compels organizations to ask themselves, "What do we know, who
knows it, what do we not know that we should know?"
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An unintended consequence of ubiquitous and transparent computing is the
premium value of knowledge that cannot be digitized, codified, or easily
distributed. As access to information dramatically expands, so that people
increasingly have access to almost all the information they might need at any
time and in any place (and, surprisingly, at low or no cost), the value of the
cognitive skills still unreplicable by silicon becomes greater.
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Subsequently,
knowledge components such as judgment, design, leadership, better decisions,
persuasiveness, wit, innovation, aesthetics, and humor become more valuable
than ever before. After the last few decades, when many commentators argued
that information is the ultimate object of every firm's quest, the value of
these more knowledge-intensive skills has been more and more widely
recognized. The premium that firms pay for them reflects this valuation.
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Though we have seen a tendency-especially among vendors of software-to
reductively define knowledge management as moving data and documents around,
knowledge management grew out of an understanding of the critical value of
these other, less digitized factors, and the clear need to devise ways to
support and benefit from them.
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A perhaps less evident but no less important trend is an emerging
knowledge-centric view of the firm. Sidney Winter's description of firms as
"organizations that know how to do things" expresses the idea most
succinctly. 1
Increasingly, economists, strategy academics, and commentators
agree that a firm can best be seen as a coordinated collection of
capabilities, somewhat bound by its own history, and limited in its
effectiveness by its current cognitive and social skills.
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The main building
block of these capabilities (or unit of analysis, if you prefer) is knowledge,
especially the knowledge that is mostly tacit and specific to the firm. These
ideas have had a significant impact on executives through academic writings,
management programs, courses, and conferences. Although the new ideas have not
totally displaced older ideas of firms as primarily information processors,
productive machines, or quasi-military structures, they have proved potent
enough to act as a spur to real action in organizations. Consequently, the
phrase "let's do something about knowledge" has been heard in the land.
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Having been present when that cry first went out-being one of a small group of
practitioners who began to talk and write about knowledge management about
nine years ago-I feel qualified to discuss its origins. Perhaps a good
milestone to mark the beginning of the knowledge management timeline is a
conference held in Boston in early 1993 that several colleagues and I
organized-the first conference specifically devoted to knowledge management.
To our surprise, it attracted more than 150 paid attendees and many interested
hangers-on.
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With varying degrees of success, many of the speakers at this
event tried to define organizational knowledge to differentiate it from data
and information. To those at the conference, knowledge seemed to be a key
residual-what remained to explain internal productivity after everything else
was accounted for. Also, attendees felt (even if only as a form of unease)
that even "perfectly" managed information would not lead them to the promised
land of greatly improved productivity or innovation. Because the subject was
so new and untested, much of the discussion remained theoretical. But there
were a few promising "real-time" knowledge projects to point to.
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McKinsey & Company was trying to go beyond the electronic document management
systems being constructed by other consulting organizations, to develop a more
human network-response system.
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General Motors Corporation had initiated some
diverse knowledge projects under Chief Knowledge Officer Vince Barabba.
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And Arian Ward at Hughes Aerospace and Electronics Company was responsible for
an innovative system to capture information about recurrent problems in
satellite development and how these problems were resolved. That work quickly
proved its value in shorter development cycles and fewer errors.
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High-tech organizations including Xerox Corporation, Hewlett-Packard Company,
and IBM were also early explorers of knowledge practices (with varied success),
trying to apply their undoubted technological capabilities to managing
knowledge. Several pharmaceutical firms had some early successes in knowledge
management, most memorably Hoffman-LaRoche Ltd. and Merck & Company.
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These knowledge-related conversations and initiatives were new, but
nothing comes from nothing. They had both intellectual and practical sources.
Looking at some of those sources might give us a reasonably good picture of
where the practice of knowledge management came from, what its important
elements were then, and still are today.
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There is, of course, continual two-way traffic between the worlds of theory and
practice. I distinguish here between intellectual and practical antecedents
for rhetorical convenience, but they are not as distinct as this treatment
suggests. Reality is far more blended, messier, and more interesting.
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Intellectual antecedents
I present these in order of salience from most to least critical. The relative
importance of these disciplines helped define knowledge management as we know
it.
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Economics.
During World War II, observers noted that building the second
airplane of a given type took considerably less time than the first one, and
the second airplane had fewer defects than the first. In other words, it was
proven that workers really did learn from experience. In the fifties, the Rand
Corporation began to analyze and codify observations of this type. The
phenomenon was given its classic expression in Nobel Prize-winning economist
Kenneth Arrow's 1962 article, "Learning by Doing." 2
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The methods Arrow and others described provide a powerful raison d'ˆ'tre
for knowledge management, although we are still some distance away from fully
understanding the true mechanics of learning. If organizations can manage the
learning process better-the most effective ways to pass on the often tacit
understandings that form the basis of how they operate-then clearly they can
become more efficient. Developing these learning strategies has subsequently
become an important knowledge management theme.
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With regard to learning, another driver of knowledge management that
comes directly from economics, and more directly from practitioners, is how to
account for significant performance variation. Why is it that organizations
that have similar global operations often see their output vary substantially,
even though the workers of the firm have access to the same knowledge,
technologies, and all other corporate assets?
When BP (now BP Amoco) decided to analyze, using a knowledge perspective, why
they had such differing performance levels in their deep-water drilling rigs,
they found wide differences in local knowledge and practices, knowledge that
was mostly tacit and undocumented. As a result of their efforts to have this
local knowledge more globally practiced, BP achieved very significant savings
and subsequently achieved legendary status within knowledge management
circles.
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Organizational learning has of course been a subject and source of
organizational practice independent of knowledge management, but
organizational learning people often fail to take the hard constraints against
learning into account. They tend to believe "if you develop a process,
learning will occur." Also, there is very little economics or sociology in
their work; they fail to specify how learning occurs and what business and
economic outcomes we can expect from learning. Knowledge management has not
yet completely mastered these issues, but it recognizes their importance and
continues to work toward deeper understanding of them.
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Another essential question in economics - "What is the unit of analysis and how
do we measure it?"-has become an essential knowledge management question. We
are making clear progress on this issue, looking more and more at groups and
networks as the focal points of organizational knowledge.
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Sociology.
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Sociology has contributed both macro and micro perspectives to knowledge
management. The first rigorous attempts to define a postindustrial,
knowledge-based society were made by sociologist Daniel Bell and sociologically
oriented economist Fritz Machlip, among others. 3
Their documentation of this momentous change-the underlying principles for
working with knowledge-crystallized and validated a dawning sense that
something quite different was happening globally in the world of work.
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At the micro level, sociology's strong research interest in the complex
structures of internal networks and communities has obvious relevance to
knowledge management. As I have suggested, most practitioners today would
probably agree that knowledge exists and grows mainly in these structures, and
they have begun to study networks and communities as the most productive units
of analysis for doing knowledge work.
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In his pioneering sociological work, Emile Durkheim emphasized "social
facts," 4
the real, observable behaviors that should underlie sociological
thinking. Knowledge management has inherited that concern for social facts.
Rather than build from theory, it looks at what people actually do-the
circumstances in which they share knowledge or do not share it; the ways they
use, change, or ignore what they learn from others. Those social facts guide
(or should guide) the development of knowledge management tools and
techniques.
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Philosophy and psychology.
Almost from the beginning, knowledge management has
explored the differences between tacit and explicit knowledge, between "know
how" and "know what." 5
This essential distinction, first made by Aristotle,
seems to have been forgotten during the years after World War II, when an
extraordinary amount of systems development occurred and much routine
commercial work was computerized. In recent decades, burgeoning electronic
information storage has made access to vast quantities of information a given
in developed nations. A consequence that may seem paradoxical to some but in
fact makes clear sense, is the subsequent dramatic increase in the value of
tacit, undigitized knowledge. 6
That value has two sources: one is scarcity-the
value of the expertise that is not readily copyable and widely accessible; the
other is the role of that knowledge in organizing and selecting from the flood
of information so that it can be put to use.
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One of the early accomplishments of knowledge management has been to
reacknowledge Aristotle's important distinction and begin to work with it.
Psychology too is concerned about different kinds of knowing as well as about
how and why people learn, forget, ignore, act, or fail to act. It looks at
natural cognitive processes and raises questions of will and motivation that
make it impossible to think of knowledge in terms of mechanical transfer from
donors to recipients.
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Taken together, the conceptual rigor of economics, the observational richness
of sociology, and the understandings of philosophy and psychology give
knowledge management the intellectual scope and substance it needs to wrestle
with the real human and structural complexities of knowledge in organizations.
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Practices
The three practices that have brought the most content and energy to knowledge
management are information management, the quality movement, and the human
factors/human capital movement.
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Information management developed during the seventies and eighties and is
usually understood as a subset of the larger information technology and
information science world. Information management is a body of thought and
cases that focus on how information itself is managed, independent of the
technologies that house and manipulate it. It deals with information issues in
terms of valuation, operational techniques, governance, and incentive schemes.
"Information," in this context, generally means documents, data, and
structured messages.
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In broad terms, knowledge management shares information management's user
perspective-a focus on value as a function of user satisfaction rather than
the efficiency of the technology that houses and delivers the information.
Information technology focuses, for instance, on how many bits an electronic
pipeline can carry; information management and knowledge management focus more
on the quality of the content and how much it benefits the recipient and the
organization for which he or she works. Information management discovered that
not all information is created equal, that different types of information have
different values and need to be handled differently. This insight-which is
more true of knowledge-remains at the heart of knowledge management today. We
see it in our ongoing discussions of what techniques and technologies are
appropriate for sharing different kinds of knowledge and in our focus on
knowledge use, not just knowledge availability.
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The quality movement focused significantly on internal customers, overt
processes, and shared, transparent goals. While knowledge management has not
yet achieved the levels of measurable success that the quality movement can
claim, it has usefully borrowed these three goals and adapted them to the
somewhat different aims of knowledge management. Quality techniques were
applied most successfully to manufacturing processes, while knowledge
management has a broader scope, including processes that do not seem to lend
themselves readily to measurement or even clear definition. Yet much knowledge
work involves making knowledge visible and therefore developing knowledge
processes, process owners, and governance structures in ways that owe a
significant debt to the techniques of analysis and improvement developed by
the quality movement.
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The human capital approach has a strong and well-known theoretical
base. 7 In practice, though, our understanding of
the value of human capital (and the importance of investing in it) tends to get
distorted or diluted. The essential message from investigators of human
capital is the financial advantage to states and firms of investing in
individuals, mainly through education and training. This kind of investment
has a higher return rate (in the form of higher worker productivity, skills
development, innovative capacity, and ease of labor mobility) than many or all
other options. Yet many organizations continue to think of their employees and
their education programs as expenses rather than investments.
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Ideas about human capital and how it can be developed to increase innovation
and productivity are still in the early stages of being established in firms.
By definition, human capital focuses on the individual, whereas most knowledge
management work is concerned with groups, communities, and networks.
Nevertheless, knowledge management builds on human capital ideas and has, as
one of its tasks, to continue making the value of human capital clear to
organizational leaders while developing tools and techniques for investing and
reaping benefits from it. However, it is becoming more concerned with group
knowledge and the processes of social capital that undergird group
knowledge. 8
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The past and the future
Although this essay is mostly about the origins of knowledge management,
looking at the past is one good way to try to understand something about the
future.
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Knowledge management seems likely to follow one of two future paths.
The better one is the direction taken by the quality movement. Its key ideas
became so deeply embedded in practices and organizational routines that they
became more-or-less invisible. The quality movement can boast considerable
success, saving several firms and industries from being replaced by more
quality-conscious competitors and contributing valuable and sustainable
concepts, vocabularies, and work processes to the pursuit of organizational
effectiveness. 9
Some commentators have assumed that the absence of quality
from center stage in management discussion suggests its failure; in fact, the
opposite is true. People do not talk about it much because it is a given, an
integral element of organizational effectiveness. Knowledge management may
similarly be so thoroughly adopted-so much a natural part of how people
organize work-that it eventually becomes invisible.
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A less appealing path would be similar to the one taken by re-engineering.
While the re-engineering movement began with viable and valuable intentions,
it was quickly hijacked by a host of opportunists. It became a byword for a
crude, reductionist downsizing that has created no permanent value to
organizations and in fact did a lot of harm. As a result, the practical legacy
of re-engineering is almost nil. In fact, some of the good ideas that
re-engineering advanced have been unfairly discredited by their association
with what re-engineering became. The same thing could happen to knowledge
management.
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Two paths, two directions. I cannot predict what people will be saying about
the knowledge management movement five years from now, but my hope is that the
intellectual and experiential legacy I describe in this essay has given it
substance and validity that cannot be readily hijacked by sales
representatives and sloganeers. Practitioners reading this brief history can
help keep knowledge management on the better path by drawing on that legacy
for their own thinking and action, maintaining a tolerance for ambiguity and
complexity and a striving for rigor that define the best of knowledge
management.
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Accepted for publication May 23, 2001
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Cited references and notes
- S. G. Winter, "On Coase, Competence, and the Corporation," The Nature
of the Firm, Oxford University Press, Oxford, UK (1993).
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- K. Arrow, "The Economic Implications of Learning by Doing,"
Review of Economic Studies 29, No. 3, 153-173 (June 1962) and R.
Solow, Learning from "Learning by Doing," Stanford University Press,
Stanford, CA (1992).
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- See D. Bell, The Coming of Post-Industrial Society: A Venture
in Social Forecasting, Basic Books, reissue edition (1999) and F.
MacHlup's three books from Princeton University Press.
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- E. Durkheim, The Rules of the Sociological Method, S. Lukes,
Editor, translated by W. D. Halls, Free Press, New York (1982).
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- The most common citations are G. Ryle's The Concept of Mind,
University of Chicago Press, Chicago, IL (1984), and M. Polyani's
Tacit Dimension, Peter Smith Pub. (1983) and Personal Knowledge:
Towards a Post-Critical Philosophy, University of Chicago Press,
Chicago, IL (1974).
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- See, for example, T. Bresnahan, "Computerisation and Wage
Dispersion: An Analytic Reinterpretation," Economic Journal (June
1999).
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- Gary Becker and Theodore Schultz, two Nobel Prize winners, have
prominently studied and written about human capital.
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- See, for example, D. Cohen and L. Prusak, In Good Company:
How Social Capital Makes Organizations Work, Harvard Business School
Press, Boston, MA (2001).
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- See the two books from R. Cole, The Death and Life of the
American Quality Movement, Oxford University Press, New York (1995),
and Managing Quality Fads, Oxford University Press, New York (1999).