Knowledge Management and SMEs

A while back we covered the basics of Knowledge Management. In this post we will cover the topic from the view point of SMEs (SME = Small & Medium Sized Enterprise). Of course, SMEs are a very motley crew and thus generalisations are hard to make, but the following chapters discuss some of the most typical characteristics of SMEs and their linkage to knowledge management.

Before going forward, it’s important to understand that SMEs are not ”big enterprises” down-scaled and therefore guidelines that apply in big companies can not directly be copied to SMEs. In order to implement knowledge management successfully in small businesses, the unique characteristics of SMEs must be taken into consideration.

Many SMEs are in fact actively doing knowledge management without actually knowing it, since the term is not familiar to them and their approach is less systematic than in bigger companies. They apply knowledge management without detailed strategy or plan and rarely have IT tools or systems to support it. There are also SMEs, where knowledge management is a completely unfamiliar term or then they see it as being something for big organizations only.

If you look at an organization chart of an SME, you seldom see layers or boxes and lines (if in fact such a chart even has been made). In addition to having flexible and flat organization structure, SMEs don’t have strict job titles or roles and the division of responsibilities is flickering. Many employees are experienced enough to handle several different types of roles. Some employees have over become sort of “multi-talents” for the company, since they seem to know so much on everything. These persons are often (unwillingly) the receivers of multiple questions, since co-workers are in the habit of turning to few trusted key persons in problem situations. “Go and ask from Mister X, he will know”, is a common phrase when some issue needs to be resolved. In our company the development manager is the usually the centre for all types of questions since he seems to have the knowledge on everything from product dimensioning to machine and software issues. This works as long as the number of personnel is few and everybody knows each other well. But finding the proper knowledge might become an issue, when the company grows. Pretty soon it will find itself in a situation, where more systematic approach to knowledge management is needed.

The flat organization structure keeps communication channels short and communication is informal and open. The employees have close relationships, since they interact almost daily. This is why lots of knowledge and experiences are shared face to face through observation and learning. Close relationships facilitate the sharing of tacit knowledge.

Tacit knowledge and vast amount of it is an important theme in knowledge management for SMEs. They often don’t have a central repository for knowledge and only small part of information is documented, instead it scattered in different parts of the organization. The organizational knowledge base is largely compromised of the experiences, know-how and learning of individual employees, which has accumulated over the years. One key source of knowledge is the founder / owner of the company. In Ekocoil, our CEO Veikko holds a large amount of invaluable knowledge and learning from our field, as he has observed it already for decades.

Tacit knowledge is a critical success factor for SMEs and they should pay attention to maintaining this knowledge inside the organization even in a situation, where key personnel leave the company. This issue is topical especially now, when the big generations are approaching pension. Companies must find ways to pass on the tacit knowledge of an individual employee, so that is becomes available for the whole organization to use. We will discuss this topic in more detail in future posts.


Knowledge Mangement for SMEs: Part 1 – why knowledge matters

What is knowledge really and how does it differ from data and information? Wikipedia provides a rather good definition:

Knowledge is a familiarity, awareness or understanding of someone 
or something, such as facts, information, descriptions, or skills, which is acquired through experience or education by perceiving, 
discovering, or learning.

Knowledge contains, but is not limited to data and information, since it has a wider scope extending to skills and understanding. Interpretations, values, experiences and views developed through expertise are all part of knowledge. Knowledge is so multi-dimensional that it may be hard to put it into words or pass on to others. That’s why in organizations it resides not only in documents, databases and tools, but is also included in organizational culture, ways of working and in processes and practices.

As the focus of competitive edge has shifted from tangible assets to intangible, the significance of knowledge as a valuable resource and as a unique competitive factor has increased. Nowadays, products alone wont guarantee success and companies must constantly reinvent themselves, for example through more efficient production methods, shorter delivery times and through fast-paced product innovations. In addition, service is more or less always included with the product, as companies are offering whole solutions opposite to just offering the physical product. It is getting increasingly difficult to compete just with products alone, since they can often be easily copied, but a rich knowledge reserve and skilful utilization of this knowledge provide companies with a strong competitive edge.

It has become a rarity for a company to exist in a completely stable environment. Changes seem to happen in continuously more rapid-paced cycles. In order to successfully sail these stormy seas, companies must have the ability to endure uncertainty and to adapt themselves to changing circumstances. This requires not only accurate knowledge about markets, economical trends and competitors but also the skills to use this knowledge to create business benefits. Careful monitoring of the business environment allows company to foresee changes and their possible effects thus making it possible to adjust strategy accordingly. A strong vision and understanding of the surrounding dynamics makes it possible to turn threats into opportunities and challenges into victories.

In conclusion, intangible assets need to be nourished and valued. The knowledge of a single employee should be harnessed and made available for the whole organization. The next posts in this series will provide means for this as we discuss knowledge management.