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The economic imperative to manage knowledge

It was Bruno Bettelheim who pointed out that “contrary to the ancient myth, wisdom does not burst forth fully developed like Athena out of Zeus’s head; it is built up, small step by small step.” Clearly, organizations have been sharing knowledge long before knowledge management became fashionable in the mid to late 1990s. Like Moliere's Bourgeois Gentilhomme, who had been speaking prose long before he realized it was prose, organizations have been knowledge organizations for many years before they explicitly realized that this is what they are.

The initial efforts, for instance, to understand the economy of China, or republics of the former Soviet Union had – for economists – something of the aura and wonder of Marco Polo’s account of his first visit to China in the 13th Century. The economies of these countries which had been mere terra incognita in the economic landscape suddenly became visible and brought into focus. The economies had of course existed before these studies, but little was known about them.

Which organizations have most actively taken up the challenge of formal knowledge management? Some regard the major international consulting firms as the early adopters. Others point to the work on communities of practice at Xerox PARC and the Institute for Research on Learning. Whatever the origin, the popularity of such programs is spreading rapidly across all sectors of business.

Many factors have transformed the way in which organizations now view knowledge, but perhaps the pivotal development has been the dramatically extended reach of know-how through new information technology. Rapidly falling costs of communications and computing and the extraordinary growth and accessibility of the World Wide Web present new opportunities for knowledge-based organizations, to share knowledge more widely and cheaply than ever before.

Thus organizations with operations and employees around the world are now able to mobilize their expertise from whatever origin to apply rapidly to new situations. As a result, clients are coming to expect from global organizations, not merely the know-how of the particular team that has been assigned to the task, but the very best that the organization as a whole has to offer. Knowledge sharing is thus enabling — and forcing — institutions that are international in the scope of their operations, to become truly global in character by enabling knowledge transfer to occur across large distances within a very short time.

Once clients realize that global sharing of knowledge is possible, they want nothing less than this. If one organization will not provide it, then they may turn to another that will. As a result, sharing knowledge ceases to become an option, but rather a necessity of business survival. In a real sesne, the strategic choice facing an organization is knowledge sharing or death.


As more information – much more information – has become available with the advent of the World Wide Web, information became very abundant. The proliferation of data made it appear less solid, and liquid images were widely used to depict the situation. The “drought” of data and information had become “a flood”. People found themselves “drowning in information”. They described themselves as “drinking from a fire hose”. In this “ocean of information”, it was becoming very difficult to find the specific piece of information one needed.

As the information proliferated, so also did inconsistencies. When there was only one source of information, it was easy to agree on basic data, by going to the one and only source, even if – in retrospect – it turned out later, like Marco Polo’s account of his travels, to be less than entirely reliable. Once multiple sources of data appeared, judgments had to be made between the sources to resolve discrepancies. As multiple sources of data emerged even within organizations, internal questions about data started to have many answers. The answers to apparently simple factual questions began to resemble a tangle of contradictions.

Efforts were needed to establish order in the multiple conflicting information systems. Data repositories or warehouses needed to be constructed with accurate information. Logical data taxonomies needed to be set up. Clear procedures for inputting information had to be established. Hierarchical responsibilities were required for establishing and maintaining order in the luxuriant overgrown data jungle. Scientific principles were aggressively applied to data storage. The categories of information were known, or at least knowable. In these efforts, it was usually felt that given sufficient willpower and resources, the system could be engineered – and built. Progress in its construction and maintenance could be readily measured.

These plans rested on the assumption that information is a thing. It is something that can be managed and measured. It is a resource that can be extracted from stores of information, like a precious mineral is extracted from rock. It is something can be traded for a certain value, an asset you can be put on the balance sheet and track from quarter to quarter. As a thing or an object, information is something that can be controlled.


When it came to knowledge, the situation was less clear cut. Sorting out differences between different data sets involves asking an expert – someone who knows – what the right answer is. When there is more than one expert, one encounters the dilemma that the experts may not agree. The disagreements often concern not so much questions of fact, but rather questions of interpretation of those facts.

The problems that these organizations had to grapple with are often what are known as wicked problems, where the question is not so much what is the answer to a given question, but rather what is the right question to ask. If one could be sure of what sort of a problem it was, finding the answer would be much easier.

More fundamentally, questions start emerging as to who is the real “expert”.Who is the person who really knows how to resolve such problems? The post-modernist critique of knowledge began to seep, at least implicitly, into debates about knowledge, as independent voices – reflecting third world, or environmental or gender concerns, began to question not only whether traditional expert organizations had any monopoly on knowledge, but also whether there was any basis at all for the underlying concept of truth. There was a growing sensitivity to the political dimensions of the claim to possess knowledge, with the suggestion that what you knew depended on who you were and what you did and where you sat.

Amid such debates, it became steadily more important to know what expertise an organization was relying on. Managers needed to know the organization’s view on issues for the purposes of decision-making and in representing the organization. Staff – particularly new staff – needed to know what the organization knew so that they could use its knowledge. And the organization itself needed to understand whether the best know-how was being used in the organization’s work. As staff retired, it was becoming an issue as to what knowledge they were taking with them.

As preliminary efforts to establish what the organization knew were launched, it started becoming apparent – to the surprise of many – that the organization did not know what it knew. Inquiries as to the cause of the hesitancy revealed that even the experts were not sure of what they knew. The experts even contested whether they were responsible for sharing their knowledge. They often contended that their job was to meet with their clients and deal with their needs, not sit in an office in headquarters and assemble best practice manuals.

If an organization's knowledge was difficult for managers and staff to access, the situation was even more difficult for those outside the organization. It was common ground that these large organizations were treasure-houses of expertise on what worked – as well as what didn’t work – in their respective areas of expertise.

But how did one get access to such expertise, outside of such a formal report? The reality was that in the mid-1990s, one couldn’t. Most of the organization’s knowledge remained locked away in the minds of staff or in the filing cabinets of the organization. Yet the emergence of the World Wide Web showed that there was no reason in principle why large-scale access both inside and outside the organization couldn’t be accomplished if the necessary decisions were taken and strenuously implemented.


By the mid-1990s, many large organizations were facing analogous challenges. Thus information needs to be managed in a structured and disciplined fashion, consolidating multiple information systems into a single integrated comprehensive system. At the same time, knowledge needs to be shared through building communities of practice, that can connect people who need to know with those who do know, and collecting what is known so that existing expertise is widely accessible to those who need it.

By 2007, more and more firms were recognizing the need to manage their knowledge. The factors creating massive change were diverse: accelerating competition in the global economy, the consequent imperative for ever faster innovation, the emergence of global networks of partners, the rapidly growing role of intangibles, which can’t be controlled like physical goods, the increasing ownership of the means of production by knowledge workers, the escalating power of customers in the marketplace, and the burgeoning diversity in both the workplace and marketplace—all these forces imply a vastly more important role for knowledge and leadership in the future.

The ability to get results in the face of these massive challenges will depend in part on having better knowledge and in part on being able to leadership -- the capacity to mobilize energy to exploit that knowledge. Leadership will be at least as important as management. Executives will depend on a capacity to inspire enduring enthusiasm in people over whom we have no hierarchical control.

To learn what's involved in meeting those challenges, see The Secret Language of Leadership.


Stephen Denning, The Springboard: How Storytelling Ignites Action in Knowledge-Era Organizations. Boston, London, Butterworth Heinemann, October 2000.

Stephen Denning: The Leader's Guide to Storytelling (Jossey-Bass, 2005) chapter 8.

Stephen Denning: The Secret Language of Leadership: How Leaders Inspire Action Through Narrative (Jossey-Bass, October 2007)

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