How small businesses can apply knowledge management

When an employee quits her job or retires, the company she leaves doesn’t just lose an employee—it loses all of the knowledge that employee gained during her tenure. That loss of knowledge has a cost: it’s estimated to cost Fortune 500 companies $31.5 billion each year.

While the cost of knowledge loss may not be quite so large for SMBs, the impacts can be more detrimental. In an enterprise, more employees typically means more overlap in roles—more shared knowledge. But in a small business, there’s often a single person in charge of crucial knowledge areas like HR, IT, or finance.

Even beyond knowledge loss from departing employees, poor knowledge management impacts productivity. Studies have shown that knowledge workers only spend about 10% of their time creating new knowledge. They spend the other 90% looking for or recreating information that already exists.

Regardless of company size, knowledge management is crucial to productivity and profitability. But how do small businesses apply knowledge management?

Let’s take a look at some examples of knowledge management programs in large organizations. Then, we’ll examine how small businesses can revise and adopt those practices for better knowledge management at their companies.

What is knowledge management, and why is it important?

Knowledge management is a complex-sounding term for a simple idea. When running a business, knowledge and information are assets. Knowledge loss—like loss of any asset—has a cost. Knowledge management is simply the process of taking steps to prevent knowledge loss.

A knowledge management process is typically composed of three parts:

  1. Collect and save important business knowledge and information.
  2. Make collected information accessible and easy to retrieve.
  3. Update collected information regularly for ongoing accuracy.

Knowledge management is important because knowledge and information are assets.

Imagine you run a company that makes most of its profits from sales on your website. Your website goes down, and the person in charge of managing the site is on vacation. No one else knows where the site is hosted, and they don’t have secret question answers or passwords. How much money would the company lose if the website is down for an hour, a day, or a week?

Knowledge management minimizes profit loss in this scenario because the information needed to fix the site is stored where others can find it.

Knowledge management is also important for productivity:

Knowledge management can be as simple as having a file room for storing important contracts, or as complex as artificial intelligence technology that collects, stores, and retrieves information like an intern or personal assistant. There are many different possible approaches.

Let’s take a look at how knowledge is managed at three major companies that are well-known for their effective practices—Toyota, Microsoft, and Amazon—to look for ideas to adapt for SMBs.

Knowledge management at Toyota

Dr. Philip Fung says there are two types of knowledge to consider in knowledge management: explicit knowledge and tacit knowledge. He uses an example of a chef to illustrate the difference.

While a chef may be able to write down the recipe for her most famous dish, she would probably struggle to communicate how she came up with the recipe. There’s a difference between the things we know (explicit knowledge) and how we do the things we know how to do (tacit knowledge); or as Fung says, “We can do more than we can tell.”

Toyota’s approach to knowledge management caters to both explicit and tacit knowledge.

To share explicit knowledge, Toyota details out all tasks completed by its employees in a Job Instruction (JI) document. The JI has three columns of information:

  1. Major Steps – Contains step-by-step instructions for completing the task.
  2. Key Points – Lists relevant tips and warnings for each specific step.
  3. Reasons for Key Points – Explains why the tips and warnings are important.

To share tacit knowledge, Toyota employees spend several months working alongside experienced employees on the assembly lines in Toyota’s factories. New employees can follow the instructions on the JI document, but they can also pull from the tacit knowledge they gained while observing experienced employees performing the tasks.

And when opening a new factory, Toyota not only sends the new factory workers to an existing factory for training, it also sends experienced employees from an existing factory to the new factory to work alongside new workers for a few months. This creates consistency in knowledge and processes across all Toyota factories around the world.

How Microsoft uses knowledge management

Microsoft has been building and refining its knowledge management strategy for nearly two decades. Back when most people were still accessing the internet with dial-up, leaders at Microsoft were speaking at conferences about the importance of knowledge management, what they called “a new management discipline that can be enabled by technology.”

Microsoft built its first knowledge-collaboration platform in 2006 on SharePoint. It was essentially an intranet designed to collect information about customer engagements and make the knowledge available to everyone in the company. By 2010, the platform hosted 37,000 sites.

Eventually, the company realized it needed a more modern system for collecting and distributing information. In 2013, they moved the platform to the cloud using Microsoft Office 365 and SharePoint Online. This allowed team members to access, share, and create knowledge assets from anywhere, using any device.

Today, Microsoft’s teams use a variety of the company’s programs to find and share knowledge:

Jean-Claude Monney, Microsoft’s Chief Knowledge Officer, believes that the future of knowledge management is in artificial intelligence. Instead of relying on employees to capture and update information, AI will capture and update knowledge automatically by tracking employees’ digital footprints.

How knowledge management is handled at Amazon

There’s a lot to learn about knowledge management from the world’s most valuable retail brand. Start by just thinking about how you shop with the company. When you want to buy something on Amazon, you go to Need a new computer, a car alternator, and some material to make a dress? Go to Amazon, search, and add all three to your cart.

Why buy from three different stores when you can save time by getting everything you need from one? is a perfect example of effective knowledge management. Make things easy by collecting all knowledge and information on a single platform, and people will use it.

But Amazon isn’t just in the retail business. It’s also a technology company. One of its newest products, Amazon Connect, is a productized version of the company’s own contact center software—another example of effective knowledge management.

Because Amazon processes billions of transactions each month, it’s impractical for the company to have a live customer service representative on hand to answer every question coming through the call center, provide every update, and resolve every complaint.

Instead, the company uses artificial intelligence, its knowledge repository, and voice recognition technology to provide customer support for simple requests.

Connect uses data from transactions to provide updates to customers on when their order will be delivered. It uses a database of historical customer service interactions to provide answers to commonly asked questions. It also uses voice recognition and historical interaction data to direct calls to the appropriate live customer service representatives.

The final remarkable example of knowledge management from Amazon is its seller APIs. Amazon not only has all of its knowledge available on a central platform, it provides that knowledge to its sellers so they have the information they need to earn the most revenue.

The best example: Amazon’s Subscriptions API allows sellers to get notifications 60 seconds after another seller changes the price on a product sold by both companies.

How small businesses can apply these knowledge management practices

As a small or mid-size business, you may not be able to develop your own suite of cloud-based collaboration software like Microsoft, or an AI-powered call center like Amazon, and you may not have multiple offices for hands-on training of employees like Toyota. But that doesn’t mean you can’t adopt their knowledge management practices:

Adopt the right tools:

Take advantage of new technologies:

Document important processes:

Find creative ways for employees to share tacit knowledge:

“Knowledge management is nothing more than managing information flow, getting the right information to the people who need it so that they can act on it quickly.”

– Bill Gates, Business at the Speed of Thought

Big data and knowledge management for small businesses

People most often associate terms like “big data” and “knowledge management” with major corporations like Google, Amazon, and Microsoft. But the reality is that the technology to access, store, query, and utilize data and knowledge is not only available to small and mid-sized businesses, it’s more affordable than ever.

If your company’s most important employee won the lottery tonight and never came back to work, would anyone be able to pick up where he/she left off? If the answer is no—or if you’re not sure—it’s time to seriously consider the role that knowledge management could play in your business.

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