Page 451 -

450 Part Three Key System Applications for the Digital Age

data into categories of understanding, such as monthly, daily, regional, or
store-based reports of total sales. To transform information into knowledge, a
firm must expend additional resources to discover patterns, rules, and contexts
where the knowledge works. Finally, wisdom is thought to be the collective
and individual experience of applying knowledge to the solution of problems.
Wisdom involves where, when, and how to apply knowledge.
Knowledge is both an individual attribute and a collective attribute of the
firm. Knowledge is a cognitive, even a physiological, event that takes place
inside people’s heads. It is also stored in libraries and records, shared in lectures,
and stored by firms in the form of business processes and employee know-how.
Knowledge residing in the minds of employees that has not been documented
is called tacit knowledge, whereas knowledge that has been documented is
called explicit knowledge. Knowledge can reside in e-mail, voice mail, graph-
ics, and unstructured documents as well as structured documents. Knowledge
is generally believed to have a location, either in the minds of humans or in
specific business processes. Knowledge is “sticky” and not universally appli-
cable or easily moved. Finally, knowledge is thought to be situational and con-
textual. For example, you must know when to perform a procedure as well as
how to perform it. Table 11.1 reviews these dimensions of knowledge.
We can see that knowledge is a different kind of firm asset from, say, build-
ings and financial assets; that knowledge is a complex phenomenon; and that
there are many aspects to the process of managing knowledge. We can also
recognize that knowledge-based core competencies of firms—the two or three
things that an organization does best—are key organizational assets. Knowing
how to do things effectively and efficiently in ways that other organizations
cannot duplicate is a primary source of profit and competitive advantage that
cannot be purchased easily by competitors in the marketplace.

TABLE 11.1 IMPORTANT DIMENSIONS OF KNOWLEDGE
KNOWLEDGE IS A FIRM ASSET
Knowledge is an intangible asset.
The transformation of data into useful information and knowledge requires organizational resources.
Knowledge is not subject to the law of diminishing returns as are physical assets, but instead experiences
network effects as its value increases as more people share it.
KNOWLEDGE HAS DIFFERENT FORMS
Knowledge can be either tacit or explicit (codified).
Knowledge involves know-how, craft, and skill.
Knowledge involves knowing how to follow procedures.
Knowledge involves knowing why, not simply when, things happen (causality).
KNOWLEDGE HAS A LOCATION
Knowledge is a cognitive event involving mental models and maps of individuals.
There is both a social and an individual basis of knowledge.
Knowledge is “sticky” (hard to move), situated (enmeshed in a firm’s culture), and contextual (works only
in certain situations).
KNOWLEDGE IS SITUATIONAL
Knowledge is conditional; knowing when to apply a procedure is just as important as knowing the
procedure (conditional).
Knowledge is related to context; you must know how to use a certain tool and under what circumstances.

MIS_13_Ch_11 Global.indd 450 1/17/2013 2:30:00 PM