Knowledge is a strategic organisational asset whose value is realised through its creation, sharing, retention and application. By connecting tacit knowledge embedded in people's experience with explicit knowledge captured in organisational systems, institutions can strengthen organisational capability, preserve institutional knowledge, support innovation and improve long-term performance.
Written: 12 February 2025
In knowledge-intensive economies, an organisation's ability to create, retain, share and apply knowledge is an important source of organisational capability, innovation and competitive advantage. Knowledge is therefore more than information available to an organisation; its strategic value emerges when information, experience and expertise are interpreted, developed and applied to organisational decisions and activities.
One of the central challenges facing organisations is that they may possess considerable knowledge without fully recognising, organising or using it. Knowledge can reside in documents, systems and processes, but it also resides in the experience, judgement and expertise of people. Understanding these different forms of knowledge is therefore important for organisations seeking to strengthen institutional capability and performance.
Tacit and Explicit Knowledge
Knowledge-management literature commonly distinguishes between explicit and tacit knowledge.
Explicit knowledge can be articulated, documented, organised, stored and transferred through mechanisms such as policies, procedures, reports, databases, manuals and other organisational records.
Tacit knowledge is embedded more deeply in people's experience, judgement, skills, insights and ways of working. It can therefore be considerably more difficult to articulate and transfer.
Gamble (2020) examines this distinction and the relationship between tacit and explicit knowledge within organisations, highlighting the importance of understanding both forms of knowledge in organisational contexts.
For institutions and enterprises, this distinction has important implications. An organisation may have sophisticated systems and extensive documented information while significant institutional knowledge remains concentrated in particular individuals or teams.
When experienced employees leave without mechanisms for transferring what they know, the organisation may lose not only people but also institutional knowledge and capability.
From Individual Knowledge to Organisational Knowledge
The strategic challenge is therefore not simply to employ knowledgeable people. Organisations need mechanisms through which individual expertise can contribute to wider organisational capability.
Nonaka and Takeuchi's influential theory of organisational knowledge creation explains how interaction between tacit and explicit knowledge can generate new organisational knowledge.
Their SECI model identifies four interconnected processes:
- Socialisation — tacit knowledge is shared through experience, observation, interaction, mentoring and working with others.
- Externalisation — tacit knowledge is articulated and converted into more explicit forms, including concepts, models, documentation and other representations.
- Combination — different forms of explicit knowledge are organised, integrated and combined to generate more systematic knowledge.
- Internalisation — explicit knowledge becomes embedded in people's understanding and practice through application, experience and learning by doing.
These processes form a continuing knowledge-creation cycle rather than a once-off transfer of information.
Later development of Nonaka's theory introduced ba as the shared context in which knowledge interaction and creation occur. This context may be physical, relational, mental or virtual and enables people to interact, exchange experience and develop knowledge collectively.
Knowledge Must Be Converted into Organisational Capability
Possessing knowledge does not automatically create organisational value.
Knowledge becomes strategically important when organisations develop the capability to identify it, share it, retain it and apply it to decisions, systems, processes, products, services and ways of working.
This requires deliberate organisational mechanisms. Mentoring and succession arrangements can facilitate the transfer of experience. Documentation and knowledge repositories can preserve explicit knowledge. Cross-functional collaboration can connect expertise located in different parts of an organisation. Learning processes can enable knowledge generated through projects and implementation to inform future decisions.
Knowledge management should therefore not be treated simply as information storage. It is part of the wider institutional architecture through which organisations develop and retain capability.
Knowledge, Innovation and Competitive Advantage
Knowledge also contributes to innovation.
Innovation frequently emerges when existing knowledge is combined, challenged or applied in new ways. Research by Zhang et al. examining tacit-knowledge management found a positive relationship between tacit-knowledge management processes and product innovation, with product innovation mediating the relationship with organisational performance.
The strategic value of knowledge therefore extends beyond preserving what an organisation already knows. Organisations also need to create conditions in which knowledge can be exchanged, developed and applied to emerging requirements.
This becomes particularly important in environments characterised by technological change, changing customer expectations, new forms of competition and increasing institutional complexity.
Building Knowledge-Enabled Institutions
For organisations seeking sustainable performance, several questions become important:
What knowledge does the organisation possess? Where does that knowledge reside? Which knowledge is critical to institutional performance? How is it transferred across people and functions? What knowledge could be lost when key individuals leave? And how effectively is organisational knowledge being converted into improved decisions, innovation and capability?
These questions elevate knowledge from an individual or administrative concern to an institutional and strategic concern.
At Goshen Business and Career Advisory Services, institutional capacity is understood to include the organisational capability required to translate governance and leadership into effective performance. Knowledge and learning are therefore important dimensions of institution building: institutions need not only capable people, but also mechanisms through which expertise, experience and learning become embedded within organisational systems and practice.
Knowledge is a valuable organisational asset. Its value, however, does not lie simply in possessing information or employing knowledgeable individuals. Its strategic value is realised when knowledge is deliberately created, shared, retained and applied to strengthen organisational capability, innovation and long-term performance.