IBM Institute for Knowledge ManagementIntroductionEmbodied KnowledgeEmbedded KnowledgeThe Business Value of Tacit KnowledgeInnovationTacit knowledge is strongly implicated in organizational innovation. People develop and use tacit knowledge before they are able to formalize or codify it. Thus, the leading edge of the firm’s learning (and a source of its future innovations) is often toImitationTacit knowledge can help firms to resist imitation by competitors. Because it is embodied in people and embedded in the things they create, tacit knowledge tends to be “sticky”—to resist transfer to new groups and settings. Although this stickiness makeCore CompetenciesFinally, a consideration of tacit knowledge can illuminate the emerging core competencies of the firm. Tacit knowledge represents the unique value added by the people who generate it. It emerges from their particular situations, skills, and experiences aWorking with Tacit Knowledge: Notable PracticesImproving the Submissions Process for New Drug ApprovalPharmaceutical companies live and die by their ability to speed drugs to market. The patenting of a new chemical entity typically precedes its final approval as a drug by several years and the remaining period of patent-protected sales is critical to oveThe objective of the process redesign was to achieve a significant reduction in one segment of product cycle time—the period from the last patient visit in clinical trials to the submission of the New Drug Approval (NDA) dossier. A study of the current sThe submissions redesign began with the identification of tacit knowledge, resident within the firm, that was relevant to the development of effective submissions processes. The study of the current state had indicated that tremendous knowledge was indeeHaving mobilized the tacit knowledge of its members, the redesign group used existing technology and new policies to leverage that knowledge more effectively. Documentation guidelines were designed for easy access and readability via the company’s intranThe business benefit delivered by the submissions redesign was clear and compelling. Filing time was reduced from 35 to 18 weeks. By even the most conservative valuation of time-to-market, the company achieved a very high return on their investment in leCapturing “Lessons Learned” in the U.S. ArmyAuditing “Specific Knowledge” at XeroxWorking with Tacit Knowledge: General ApproachesCollectConnectCharacterizeConclusion1WORKING WITH TACIT KNOWLEDGEJoseph A. Horvath, Ph.D.IBM Institute for Knowledge Management1WORKING WITH TACIT KNOWLEDGEIntroductionTransforming changes in the business environment have brought the issue of organizational knowledge intofocus for researchers, consultants, and managers. It has become widely accepted that businesses competeon the basis of knowledge and, indeed, that knowledge may be their only sustainable source of competitiveadvantage. It has become likewise accepted that knowledge or “know how” represents an invisible butsubstantial component of a firm’s market value and, thus, an asset to be measured and managed--just asassets are measured and managed. This article explores some of the conceptual and practical issues thatcompanies must confront when they begin to look deeply at what it takes to manage knowledge. A premiseof the article, amply supported by research, is that some of the most valuable knowledge within a firm isessentially hidden or tacit--residing not in documents or databases but in the experience and skill of humanbeings. To talk of “managing” such knowledge is somewhat misleading; it is perhaps more accurate to speakof “working with” tacit knowledge. The goal of this article is to introduce readers to some of the concepts,methods, and practices required to work effectively with tacit knowledge in business settings.Philosophical debates about the “true” nature of knowledge have a long and interesting history but are, inbusiness settings, mostly beside the point. To work with knowledge a simple, working definition is required.One basis for definition is to recognize that people add value to information and, in so doing, createknowledge. People combine information with other information to form new and unique combinations. Theyrefine information for specific uses or generalize it for broader application. They evaluate or “warrant”information to establish its truth or usefulness. Occasionally, they reformulate or reframe information to yieldnew insights. In these and other ways, human beings lend context, meaning, and purpose to information andthus move it along a continuum toward what we commonly call knowledge. Thus, a working definition ofknowledge—suitable for use in a business setting—might be information with significant human valueadded.For example, medicinal drugs reach the market accompanied by printed package inserts that describeindications and contraindications, dosage instructions, and possible side-effects. From the perspective of thescientists and regulators who compose these inserts, their contents represent knowledge. That is, they arethe result of a value-adding process whereby a vast array of information (e.g., on dose response, safety,clinical efficacy) is organized, validated, and applied to build a usage profile for the drug. From the point ofview of the physician, however, the package insert represents information. That is, it represents the startingpoint in a value-adding process in which the physician combines information from the insert with other1information (e.g., on symptom patterns, outcomes for different patient subtypes, cost considerations) as shelearns from experience about when and how to use the drug.As these examples suggest, we can distinguish knowledge from information, but only with reference to aparticular intended use. Philosophers may define knowledge in structural terms (i.e., in terms of its relationto other concepts) but, in business settings, it makes more sense to define knowledge in functional terms(i.e., in terms of its use). This means that what is knowledge in one context and for one purpose may beinformation in another. There is nothing particularly mystical about such a definition. Consider the “valuechain” whereby raw materials and human labor are progressively converted into goods and services. Anylink in that chain may be considered either a “customer” (for the purpose of describing its upstream role) or a“supplier” (for