Knowledge Management and Competitive Advantage

Globalization, liberalization, and deregulation have increased the number of companies, products and services competing for customers’ attention, which has in turn made almost every marketplace a more difficult arena in which to operate.

While in the past there was a focus on improving processes within disciplines such as finance, accounting and marketing, there was still a lack of optimizing processes between these disciplines.

Knowledge management (KM) introduced a concept that allowed these different disciplines to become a more cohesive unity. This integration of disciplines leads to further optimization of the processes by creating more similarities and ultimately leading to removal of now obsolete processes.

Efficient knowledge use enhances competitive advantage and improves organizational success. Organizations with great knowledge sharing success will be better in responding to a changing environment for performance improvement.

Knowledge management has become increasingly important as organizations realize that the vast potential and use of the knowledge assets and resources provides them with the ability to innovate and respond to fast changing customer expectations.

Competitive advantage rests on the ability to constantly develop capabilities that will distinguish the company from existing or potential competitors, and find ways of making the marketplace aware of them.

To remain competitive it is insufficient to have resources and assets, as organizations must also possess strong KM capabilities for developing and supporting work practices and routines. This is especially true for organizations competing in fast changing dynamic markets as KM capabilities enable organizations to react to changing market conditions, and achieve and sustain competitive advantage.

Doing new things that competitors find hard to imitate is an area in which KM can really make a difference.

If we accept the need to drive KM from a results perspective, we must then decide which results to aim for, and how we can ensure that KM programs remain focused on the correct set of results.

A competitive advantage is a way in which you can create value for your customers that your competitors can not. This may be lower cost, faster service, better customer service, more convenient location, higher quality, or other factors. A competitive advantage means you need to offer some things your competitors don’t.

Creating a competitive advantage involves analyzing your business’s strengths and those of your competitors, and then learning how to take advantage of these factors. Examining the strengths of your business can let you know to which areas you can focus on to create a competitive advantage.

Ask yourself, “Why do customers buy from me?” The answer to this question will help you understand what value you offer them. Once you have identified your core strength areas, you can create several market strategies to build a competitive advantage, or to create new areas of advantage.

For example, Apple has a policy of integrating all their devices, so this brand association and innovation can clearly be seen as a sustainable competitive advantage. Another great example of competitive advantage is the continuous development of the Microsoft product and software ecosystem.

Cost reduction is one strategy that businesses can pursue to gain a competitive advantage, or to add to their advantage.

Predict future trends in your industry is also great way of gaining a competitive advantage. You will be able to get new ideas and see what others in your industry are doing.

Knowledge management eventually does lead to higher revenues or at the very least to higher profit margins due to integration and more knowledgeable employees. It focuses on exploiting intellectual capital and knowledge to propel the company up to the position of market leader, by making it a competitive advantage.

Competitive advantage can also be obtained when knowledge management has a more supportive role and leads to optimization of business processes. Competitive advantage should be sustainable and to lead to a superior resources over an extended period of time.

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