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Knowledge Management as the Source of Competitive Advantage

by internationaldirector

By: Diana Bailey, Columnist, International Director

According to today’s standards, the best competitive advantage can become obsolete in no more than twoyears. Having a competitive advantage is only the beginning. Organizations need a lasting and sustainable one that can endure the constant encroachments of competitors. Having the right tangible resources is also no longer enough, since competitors can readily acquire those with some effort. The only refuge for organizations today to achieve a sustainable competitive advantage lies in talent management and knowledge management, given that both of those two sources can hardly be copied.

Brands with talent

Strong brands that are established on the strength of the people behind them can hardly be competed against. An example of this is Tom Ford, the fashion brand (and the name of the person behind it). Thomas Ford had worked previously as the creative director at Gucci, and he was responsible for picking the company up when it was struggling. The majority of Gucci (around 67 percent) is owned by Kering, a French retail group. Following the departure of Thomas Ford, Kering’s (then known as PPR -Pinault-Printemps-Redoute)share price plummeted sharply, and a big percentage of the company’s market value was erased. Then Thomas Ford went on to develop his own brand, Tom Ford, which flourished with his efforts. This goes to show that talent behind a brand can actually be its foundation, and taking away that foundation can make the brand suffer.

Companies need to have outstanding performance on multiple levels to reach the level of a distinguished brand. They need to perform well in terms of product quality, customer service, entire presence in the market and the environment they generate. Consider for example Apple. This brand has been known for its innovation, design and user-friendly application. Such high performance that encompasses multiple business areas can only be enabled by superior knowledge-management efforts.

What Tom Ford and Apple have in common is a specific type of knowledge that is very hard to copy: the know-how. This creative know-how is not only hard to copy, but it is also hard to teach by the person who possesses it. It is based on talent rather than merely transferable knowledge, and it is where knowledge management and talent management meet for optimum business results, as can be seen in high revenue and strong brand equity.

A different knowledge-management approach

A key challenge that managers face when approaching knowledge management is their inability to capture value from the information their organization has. A former Hewlett-Packard chief executive officer once noted, “If only HP knew what HP knows, it could be three times more productive”. While many other executives agree on this statement, it may not convey the full picture. The statement implies that with more knowledge comes better performance, which is not necessarily the case. Having more data, information or knowledge can be an overkill if there is lack of knowledge about how to use it.

Quantity of knowledge can lead to quality, but only if used well. For this reason, managers need to think about knowledge management differently. The hierarchy of knowledge management (with data at the bottom, knowledge at the top and information in between) needs to be viewed in an upside-down way. The most critical piece of knowledge for success can only be identified after having set very clear and specific business objectives. Those objectives then determine which knowledge is needed to extract the most business value. Then, based on that knowledge, the information needed is identified, and then the data. Such an approach works in the opposite direction to the conventional approach, in which the focus is on acquiring as much data and knowledge as possible. But it stands to be one of the best approaches to achieving sustainable competitive advantage from knowledge-management efforts.

Technology is an accelerator.

Based on the results-driven knowledge-management approach, technology’s role becomes secondary to that of people. People are the actors, and technology is simply the tool. Research by the Cranfield School of Management about the advantages gained by using information technology discovered that benefits are realized from knowledge management only when people do things differently. Technology helps people do whatever they do more efficiently, but it is not creative enough to devise new ways of working for people. Only people can do that, and thus it is people who are the source of true sustainable competitive advantage. Whereas having powerful technologies, much like having cost leadership, gives the organization only a short-term competitive advantage. Companies such as Microsoft and Adobe understood this and turned this understanding into actionable knowledge-management strategies to become well-renowned and respected brands.


Tangible resources are a source of strength but not a source of lasting competitive advantage. Only intangible capabilities such as creativity, talent and innovation are. Companies would do well to obtain the data and the information they need based on the requirements to achieve business objectives. Those objectives can be market share, adoption rate, profitability or any other business measure. Knowing that people hold the seed of lasting competitive advantage for an organization, talent retention becomes of crucial importance.


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