Rethinking the Knowledge-Based Organization

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Many companies have embraced the notion that to operate effectively in today's economy, it is necessary to become a knowledge-based organization. But few truly understand what that means or how to carry out the changes required to bring it about.

Perhaps the most common misunderstanding is the view that the more a company's products or services have knowledge at their core, the more the organization is, by definition, knowledge based. But products and services are only what are visible or tangible to customers — they're the tip of the iceberg. Like the iceberg, most of what enables a company to produce anything lies below the surface, hidden within the so-called invisible assets of the organization — its knowledge about what it does, how it does it and why.

In the course of working with more than 30 companies over the past eight years, the author found that a knowledge-based organization is made up of four elements. Each one forms a basis for evaluating the degree to which knowledge is an integral part of the organization and the way it competes. Executives who understand how the four elements interact will be able to start changing their companies to take advantage of the intellectual assets hidden below the surface.

Michael H. Zack is an associate professor at Northeastern University's College of Business Administration in Boston. He can be reached at m.zack@neu.edu.

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