Early in the industrial era, organizations improved their efficiency, effectiveness and hence their competitive edge, by automating manual labor and reducing redundancy. Now in the age of Knowledge workers, many organizations have gone through massive restructuring to eliminate redundant workers and jobs. Sometimes these efforts lead to the ideas of business process engineering. Downsizing resulted in major loses, sometimes irreplaceable, of core knowledge assets as employees walked out the door with their knowledge. The effects of such knowledge dissipation are stunned innovation, teamwork and productivity.
In 1990s, the nature of competition changed rapidly because of increased global connectivity, distributed expertise and shorter product development cycles. Organizations are now, streamlining their processes and exploring ways of working smarter through improved collaboration and communication. As the whole world (almost) continues to migrate towards a knowledge-based economy, knowledge management has emerged as a methodology for capturing and managing the intellectual assets of an organization as a key to sustaining competitive advantage. Knowledge management is a new strategic initiative that is changing the paradigm of information systems from one of processing data and providing information to one of harvesting and capitalizing on the knowledge of an entire organization, ranging from expertise in individuals‘ heads to documented material.
Through a supportive organizational climate, and today along with good knowledge management, an organization can bring its entire organizational memory and knowledge to bear on any problem anywhere in the world and at anytime. Knowledge about how problems are solved can be captured so that knowledge management can promote organizational learning, leading to further knowledge creation. Today, organizations are making major long-term investments in knowledge management. Worldwide spending on knowledge management services is expected to grow from $1.8 billion to more than $8 billion by 2003 (Dyer, 2000) (KM news archive, 2000).
Knowledge management requires a major transformation in organizational culture to create a desire to share, the development of methods that ensure that knowledge bases are kept current and relevant, and a commitment at levels of a firm for it to succeed.