June 2017 - Knowledge

In business, knowledge is important to success. But there are two categories of knowledge. One is explicit: this includes anything that can be read in a book, copied from somewhere or downloaded from the internet. The second category is tacit knowledge and this lives in people's heads.

So when we are running a business we need to be aware that we cannot develop and sustain competitive advantage on products alone because they can always be copied by competitors. We cannot rely on technology because competitors can acquire that as well.

I was talking to someone who set up an online language business twenty years ago. He said that now subscriptions are in decline because other providers are in the market; many of his ideas can immediately be copied and in any case, the internet has so much "free stuff" these days.

A Herefordshire engineering business was disappointed with last year's staff survey result of just 40%. So the two main directors read the feedback and put their heads together. They decided to provide staff with more information about how and why the company needed to work; they started regular meetings and team briefings; they set up appraisals and provided job descriptions. When any member of staff has a birthday, it is announced and one of the directors issues some vouchers.

One year later, with exactly the same employees, the result of the survey is 65%.

People only share and develop knowledge with others when there is a culture of openness, honesty and transparency. The ability of the two directors to improve staff morale by 25% in one year is pure tacit knowledge.

Explicit knowledge in whatever form, wherever it is found, is going down in value. Tacit knowledge on the other hand, is the key to future success for any organisation.