19.2 Knowledge-based value creation

Knowledge in organizations takes many forms. It includes the competencies and capabilities of employees, knowledge about customers and suppliers, the know-how to deliver specific processes, codified and protected knowledge in the form of patents, licences and copyrights, systems for leveraging the company’s innovative strength and so on. Knowledge is the product of individual and collective learning, which is embodied in products, services and systems. Knowledge is related to the experiences of people in organizations and society.

Understanding knowledge: information – knowledge – competence

For firms, knowledge is a resource and an intangible asset and forms part of the so-called intellectual capital of an organization. In order to understand how knowledge-based value creation works, management has to understand what knowledge is and how it is related to the competitiveness of a firm. In the following the underlying terminology of value-based knowledge creation is explained by means of the so-called competence ladder (figure 19.2).

Let us start at the bottom of the competence ladder. People communicate by means of symbols – letters, numbers or signs. These symbols can only be interpreted if there are clear rules of understanding. These rules are called syntax: symbols plus syntax become data. For example, combining the digits 1, 3 and 5 and the symbols for degree Celsius plus a full stop to 13.5 °C transforms symbols into data. These data can only be interpreted if they are given an exact