This brings us to a related idea, which is knowledge. That is, knowledge itself is a resource. Knowledge is of course completely intangible and what matters in a company is both the existing level of knowledge, what might be called the stock of knowledge, as well as the flow of knowledge.
Knowledge as a resource. Knowledge has a capability which is interesting, namely increasing returns. That is, over time one can actually increase the value of a piece of knowledge and increase the sales and revenues and profits from a piece of knowledge and this is the idea of increasing returns. Knowledge also can be shared without being lost in an internal market inside a company and of course, for knowledge to be useful the people who are sharing the knowledge should also share a context for that knowledge. In other words, we talk about the absorptive capacity of a department and of individuals inside a company. And finally knowledge is sticky, in other words, knowledge is related to a person or a team and it's hard to transfer it without having some kind of training take place so that the team and the individual can transfer that knowledge and make it stick on the other side.
So ultimately what we want to know is, are knowledge assets growing in a company? Does the organization have a culture of sharing knowledge? And is the organization using knowledge? Because without use, knowledge will not lead to a better strategy and to better results.
The various kinds of knowledge that a company may have access to. Such as knowledge about customers, about employees and their abilities, what is called intellectual property or intellectual capital, which is the conversion of knowledge into a form that is useful to companies. Organizational knowledge, which is primarily about business processes, how to do something right. And finally knowledge in the form of information technology and databases which is accumulated over time and is very valuable because it is historic in nature and can give evidence for ways of analyzing employee needs or customer needs, etc.
Knowledge management and link to capabilities. We have got to finally understand that knowledge must somehow transfer or be transformed into capabilities. Here we should understand that tacit knowledge is what resides inside people, what is known as know-how. Where as explicit knowledge is laid down on paper, available in books, on the Internet and we might call this know-about. So that for companies to transform knowledge into useful knowledge have to convert it from being tacit to being explicit and going from an individual to becoming organizational knowledge, disseminated across the entire organization. Hence, companies sometimes talk about knowledge processes, ways in which knowledge can be created and shared and replicated through training, through research, through benchmarking, through licensing.