BACHELOR OF ARTS (HONS) IN INTERNATIONAL BUSINESS (ISB) 2009

INVESTIGATIVE REPORT ON KNOWLEDGE MANAGEMENT SYSTEMS (KMS)

Introduction
The aim of every organisation is to achieve its set goals and objectives as well as secure
competitive advantage over its competitors. However, these cannot be achieved or actualised
if staff or workers act independently and do not share ideas. Today, prominent businesses are
becoming more aware that the knowledge of their employees is one of their primary assets.
Sometimes organisational decisions cannot be effectively made with information alone; there
is need for knowledge application. An effective knowledge management system can give a
company the competitive edge it needs to be successful, and, for that reason, knowledge
management projects should be high priority.
This means that for any organisation to be competitive in today’s global world there is
need for combination or pooling together of ideas by employees in order to achieve
teamwork; this is in support of the saying that ‘two good heads are better than one’. Since
organisational knowledge is one of the important assets of the organisation, it needs to be
managed like other assets, hence the need for Knowledge Management Systems (KMS).
Knowledge management systems ‘collect all relevant knowledge and experience in the
firm and make it available whenever and wherever it is needed to support business processes
and management decisions’ (Laudon & Laudon, 2006, p60). Knowledge here could be
referred to as the understanding that a person has gained through education, experience,
discovery, intuition and insight or a combination of instincts, ideas, rules, and procedures that
guide actions and decisions. It is an intangible asset that is unique and can be used to achieve
long-term strategic benefits or advantage. This is because knowledge has more competitive
significance than physical assets in a consulting organisation like ours that relies on unique
competencies and methods. Also, unlike other physical assets of an organisation, knowledge
is not subject to the law of diminishing returns as are physical assets, but increases in value as
people share it.
Knowledge can be in a form that can be stated, codified or written and understandable by
everyone (explicit) or in a form that cannot be expressed easily and unconsciously applied but
understood by individuals (implicit or tacit). Therefore, what knowledge management
systems do is to provide collaborative capabilities, using groupware to facilitate sharing of
explicit and implicit knowledge among employees. It is also meant to change people’s
behaviour to make their experience and expertise available to others. These systems involve a
process that helps organisations identify, select, organise, disseminate and transfer important

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information and expertise that are part of the organisational memory that typically resides
within the organisation in an unstructured manner (Turban & Aronson, 2001, p347).
The main objective of knowledge management system is to identify knowledge and
explicate it in a way that it can be shared in a formal manner, and thus reusing it. It helps in
transferring the intellectual assets of the firm to value processes such as innovation and
knowledge acquisition. It is meant to improve the organisation’s ability to execute its core
processes more efficiently by capturing intellectual assets for the tangible benefit of the
organisation. Knowledge Management Systems also aim at codifying knowledge (such as
best practices), organising it in repositories for later access, finding knowledge (using search
engines and other schemes), and providing organised ways to find people who possess the
required knowledge (Alter, 2004, p197).
It is poised towards determining what knowledge the organisation has, as well as
acquiring the knowledge that is lacking for the purpose of providing collaborative capabilities
and facilitates sharing of explicit and implicit knowledge among employees. Knowledge
management systems enhance knowledge creation through learning, knowledge sharing and
communication through collaboration as well as knowledge capture and explication, use and
reuse, access and archiving (Turban and Aronson 2001, p358)). It is meant to transform
information and intellectual assets into enduring value for the organisation and transform
knowledge to add value to the process and operations of the business. It also aims at
leveraging knowledge strategic to business to accelerate growth and innovation as well as
using knowledge to provide a competitive advantage for the business.
These systems also capture knowledge about how problems can be solved in order to
promote organisational learning, leading to further knowledge creation. In doing this,
intellects that are in the form of tacit knowledge in individuals, groups within the
organisation and other areas are transferred to value processes that lead to innovation,
knowledge creation and replenishment of the organisation’s core values. Knowledge
management systems also capture knowledge in an external repository, identify needed
knowledge and help in matching and exchanging knowledge. Some technologies that support
this system are: e-mail, document management, search engines, enterprise information portal,
data warehouse, groupware, workflow management and web-based training. Knowledge
management systems are also meant to provide collaborative capabilities, using groupware to
facilitate sharing of explicit knowledge among employees; its activities or processes are
supported by software such as Wincite, grapeVine, and Knowledge X (Nickerson, 2001,
p.365).

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In summary, Turban and Aronson (2001, p358), citing Davenport et al. (1998), describe
four broad objectives of knowledge management systems in practice. These objectives are as
follow:
1. Create knowledge repositories.
2. Improve knowledge access.
3. Enhance the knowledge environment.
4. Manage knowledge as an asset.

Knowledge Management Systems: Costs and Benefits

Knowledge management systems like any other information systems have its benefits as well
as costs, weighing the benefits in relationship with the costs will probably provide a basis for
deciding whether to invest in it or not.

Costs
Although knowledge management system is beneficial and important to the organisation, it
also involves some cost. These costs vary quite a bit, depending on the size of the
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organisation, the current level of infrastructure and the scope of knowledge management
initiative. Also, the cost depends on whether or not there is an existing infrastructure.
According to Marks (n.d., p.37), the first step in determining the return on investment
for a knowledge management project is to determine the costs. On the surface, this may seem
deceptively simple, but there are costs involved in a knowledge management project that may
not be readily obvious to the manager who is not experienced in estimating such projects.
Costs here include, but are not limited to the costs of hardware, software, and training.
1. Software: Obviously, the project will incur the cost of whatever software is chosen to be
used. This can range from free, to nearly free, to several thousand dollars for an enterprise-
wide knowledge management (KM) system. In addition, any technical infrastructure for the
software that is needed will also have to be counted in the costs. The cost of software depends
on whether the organisation wants to use the bare-bones knowledge management systems,
which may use e-mail, Web servers, corporate intranets, newsgroups, shared file systems, or
centralized databases and other software the company likely already has and uses, or can
obtain for little or no cost. Or wishes to institute a level of knowledge integration and manage
knowledge transfer which will involve investment in a commercially available product
designed specifically for the tasks that the company wishes to be able to accomplish with the
knowledge management project.
2. Hardware: This involves the costs of infrastructure that will be needed to support the
system. There might also be need for internet and network connections. Any upgrades to the
company’s network that will be needed in order to handle increased traffic attributable to the
knowledge management system might also need to be considered. Using current systems and
equipment will lead to heavier loads than in the past, and this will need to be considered too.
3. Labour: It involves the cost that will need to be considered is the cost of employing a
member of the IT staff to install the KM hardware and software on all needed servers and
client machines as well as configuring the application to meet the need of the business. There
will also be need for maintenance. Knowledge will need to be input into the system in order
for it to be useful, the costs for doing this might be heavy early on, but will steady out in the
future, and will be based on the use of the system. The cost of training should also be
considered as a labour cost due to the time sacrificed for it.
Other, not so obvious costs that will be incurred include employee training, incentives
to entice employees to use the KM system, and the labour costs of employees choosing to use
the knowledge management system instead of working on other aspects of the job. Most of
these labour costs will become benefits fairly readily, but they are an investment made by the

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company and must be counted in the costs of the knowledge management project in order to
accurately measure or predict the cost of the project.
Implementation costs are usually moderate to acquire the hardware, develop internal
software or license software from 3rd party suppliers, and to train employees to utilize the
system effectively. However, the potential savings and increased efficiencies are enormous.
Payback period for most companies is estimated to be six months or less. The payback period
will decrease as the size of the organization increases, and with the number of global
locations that the company operates. McDonald and Shand (2000, cited in Turban and
Aronson, 2001, p.375), ‘reported that a typical consultant-assisted knowledge management
system costs between $1.5 million to develop’.

Benefits
Before any organisation can invest their funds in anything, there must have been some
expected or anticipated benefits or returns, there is need to highlight the benefits and cost of
knowledge management systems. This system just like any other information systems is
meant to add value to the organisation, but knowledge management system, deal particularly
with the intellectual asset of the organisation. Although the major reason why most
organisations invest in Knowledge Management Systems is to gain competitive advantage,
other derivable benefits are:
1. Efficiency and Problem Solving: Knowledge management systems when done right will
help in ensuring faster response time to key issues, make service delivery faster and also
enhance problem solving. This is because when best practices are well codified, stored, and
made available, and when methods for problem solving can be maintained, and made
available instantaneously, employees won’t have to spend time looking for answers (Turban
and Aronson, 2001, p.364). Problem solving will be eased as it will be possible to solve
problems anytime and anywhere which will make the organisation more productive, efficient
and effective. Due to the nature of this organisation, (consulting firm), the application of
knowledge management systems will help in carrying out the needed services efficiently. For
example, expert and dependable advice will be given to clients based on the availability of
experiences and knowledge for comparison and justification.
2. Better Decision Making: Knowledge management systems will help in making better
decisions. When knowledge and experiences are pooled together, there is an avenue for
critical considerations and judgement before decisions will be made. This is particularly
important when there is need to compare and contrast before arriving at a decision or
conclusion. The availability of needed idea, information and knowledge will help in making
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sure that the right decision is taken after critical and intense examination which will also
make the decision more concrete, justifiable and dependable. This will make this firm able to
make necessary decisions on the needed improvements that will make our services more
competitive and acceptable (preferable to client).
3. Quality Service Delivery: One benefit that will be obtained will be the increased quality
of services after using the KM systems. An employee who uses the knowledge management
system may be able to obtain knowledge that will reduce the amount of defective services
that employees deliver or will increase the effectiveness and quality of the services being
delivered. Higher quality services mean fewer dissatisfied clients, which mean fewer
complaints from clients. Fewer complaints improve the company’s revenues and profit and
are a benefit that can be attributed to a knowledge management system. If a company can
notice a decrease in clients’ dissatisfaction since the knowledge management system was
launched, at least a significant portion of this increase can be attributed to the KM system and
marked as a benefit for it. This means that this organisation will be able to come up with
better and more competitive services due to the possibility of sharing valuable organisational
information, knowledge, intelligence and experiences among employees. This serves as a
good way of avoiding or reducing redundancy and client satisfaction will be secured due to
the improvements that will be introduced.
4. Reduced Cost: Cost reduction is also a benefit that can be realized through the use of a
knowledge management system. ‘Cost reduction represents approximately one quarter of
benefits from KM projects’ (Anderson, 2002 cited in Mark, n.d., p.38). Besides labour costs,
knowledge management systems may also yield a savings in material costs. This can be as
simple as savings on paper that was previously needed to disseminate memoranda that are
now being replaced with entries in the knowledge management program, but the true benefit
of cost reduction through knowledge management is realised when employees discover and
share methods for reducing costs on final products. Management will likely notice these
savings, but will need to speak with employees to understand that the source of the savings is
indeed from the knowledge management system. This means that this organisation will be
able to reduce cost of inviting or seeking professionals, due to the availability of needed
knowledge and experiences.
5. Speed and Service Delivery: Knowledge management systems help in compressing time
and space for efficiency, reducing time wastage, which means increase in workers’
productivity. Employees who use the knowledge management system will be able to work
faster, because they will find information on the knowledge management environment that
will allow them to avoid repeating the work of others, such as a snippet of computer code, or
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allow them to forgo extensive research that would ordinarily be needed to address a situation,
or simply enlighten them to practices others have found that allow the job to be done more
quickly. The only way to measure this labour cost savings will be through interviews with the
employee. The employee’s estimate and confidence in it will be calculated as a benefit for the
knowledge management system. This means that clients will be attended to as fast as
possible, which will give the firm an advantage, especially by reducing delay.
6. Reduced Training Time: An investment in these systems will help to reduce training time
for new employees. Due to the availability of the needed knowledge and experiences,
employees will be able to constantly apply them which will improve their ability. Thus
training time for employees will be reduced as a result of the knowledge they are able to
acquire. This means that employees are being trained indirectly through the application of
knowledge management systems which reduces direct trainings. This will lead to a kind of
strategic movement through well-coordinated efforts among peers. Thus the organisation will
be able save time and money.
7. Retention of Intellectual Properties: Knowledge management system helps in retaining
intellectual properties after the employee leaves if such knowledge is codified. This is
because when knowledge is codified, it is added to the organisation’s knowledge repository
(a collection of internal and external knowledge), thus when knowledge is captured from an
employee, such knowledge will remain even after he/she leaves. This means that it will be
possible for the organisation to have a large knowledge base of several knowledge and
experiences as a result of the historic knowledge contribution process. This will also help in
building employees to become professionals as a result of the availability of previous
experiences and knowledge for acquisition.
8. Increased Revenue and Development of New Business Ventures: Knowledge
Management Systems helps in providing the personnel capacity for revenue generation. It
allows employees to work together and share ideas about certain plans especially in a global
firm. Due to the cross-pollination of ideas among employees, there is a possibility that new
business ventures will be developed and this will lead to an increase in revenue for the
organisation. Due to the availability of ideas and experiences, this organisation will be able to
manage the available knowledge for productivity and profitability.
9. Sharing Business Resources over Long Distances: Through the use of knowledge
management systems, the sharing of business resources is made possible. This is because
when ideas and knowledge are pooled together, a knowledge-base is created from which each
employee can access required information over long distances. If used effectively, these
systems will be able to foster the company’s culture across geographic boundaries. All
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employees will become part of an overall network, each with simple access to the intellectual
capital of every member within the network. As a result employees will be able to perform
better and jobs would be done faster. This is very important for a global consultation firm like
this where relevant information is needed for service delivery. There will be no need to
depend solely on the headquarters before needed information are gotten.

Conditions for Success

Certain factors or concerns also need to be considered in order to make this firm’s investment
in knowledge management systems worthwhile. There is need for a major transformation in
organisational culture to create desire to share, (give and receive). When there is
organisational culture barrier, people tend to hoard their knowledge. One of the reasons why
employees don’t share knowledge is the belief that knowledge is power and that hoarding it
guarantees job security. Employees also tend to believe that there is no credit for knowledge
sharing or won’t be able to own it anymore if they share. There might also not be time for
knowledge sharing or afraid of making mistakes or being reprimanded. Some employees also
do not know how to share knowledge or do not realise that their knowledge is valuable to the
organisation (Holloway, 2000 cited in Turban and Aronson, 2001, p.348).
In order to solve these problems, employees need to be educated on the value of
knowledge and how they can be shared and used. Also, reward and recognition systems
should be revamped and make knowledge sharing a requirement of the job. Employees
should be made aware that making mistakes is not a crime, but an opportunity to learn and
know more.
Other concerns are the development of methods that ensure that knowledge bases are
kept current and relevant, and a commitment at all levels of a firm for it to succeed. It is
important that all employees work together by pursuing the same aim or goal for the firm to
progress. When employees are willing to work for the firm with commitment, then an
investment in knowledge management systems will yield results. According to Davenport et
al., (1998 cited in Turban and Aronson, 2001, p.375), knowledge management success factor
could be links to ‘economic performance or industry value; a technical and organisational
infrastructure; a standard, flexible knowledge structure; a knowledge-friendly culture; a clear
purpose and language; a change in motivational practices; multiple channels for knowledge
transfer; and senior management support’.

Conclusions

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Knowledge management system is surely most suitable information system for this
organisation. This is because it is a new strategic initiative that is changing the paradigm of
information systems from the one of processing data and providing information to one of
harvesting and capitalising on the knowledge of an entire organisation, ranging from
expertise in individual’s heads to documented material (Turban and Aronson, 2001, p.347).
In today’s global business climate, companies must be able to retain and transfer internal
information quickly from one party to another. The internet has not changed the need for
information sharing; it has only lowered the barriers inhibiting such transfer of knowledge.
The introduction of knowledge management system will empower employees in this firm to
perform better due to the opportunity to contribute and receive knowledge during their time
with the organisation. This will guarantee a competitive advantage over other firms who do
not have this information system.
However, it is important to note that a robust knowledge management system alone
without considering the factors that affect it, will not guarantee success for the firm, but a
lack of a KMS will also put the firm at a great disadvantage in comparison to the KMS
initiatives by competitors.

REFERENCES
Alter, Steven, 2004. Information Systems: the Foundation of E-Business. 4th ed. Singapore:
Pearson Education Ltd.

Laudon, Kenneth C. & Laudon, Jane P., 2006. Management Information System: Managing
the Digital Firm. 9th ed. New Delhi: Prentice Hall of India Private Limited.

Mark, Michael, n.d. Measuring Return on Investment of Knowledge Management Projects.

(Online). Available at: http://www.systems-thinking.org/kmgmt/kmlinking.pdf
(Accessed 15 March, 2009).

Nickerson, Robert C., 2001. Business and Information Systems: International Edition.USA:
Prentice Hall Inc.

Turban, Efraim & Aronson, Jay E., 2001. Decision Support System & Intelligence Systems.
6th ed. New Jersey: Prentice Hall.

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University of Iowa, 2008. Knowledge Management System Benefits. (Online) (Updated 12

October 2008). Available at: http://www.its.uiowa.edu/
(Accessed 15 March, 2009).

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