Professional Documents
Culture Documents
[Year]
Benefits of KM for
SMEs in Malaysia
Mohammad Zakersalehi
Multimedia University
July
2009
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Benefits of KM for SMEs in Malaysia
Content
Introduction ...........................................................................................................2
Methodology ..........................................................................................................6
Analysis .................................................................................................................6
Discussion..............................................................................................................15
Conclusion .............................................................................................................18
References .............................................................................................................19
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Benefits of KM for SMEs in Malaysia
INTRODUCTION
Small and medium size enterprises play a vital role in the every nation‟s economy. These firms
[SMEs] typically account for more than 90 per cent of all firms outside the agriculture sector,
constitute a major source of employment and generate significant domestic and export earnings
(OECD 2004, p. 32). On the other hand the management of knowledge in firms of all sizes is
recognized now more than ever before, this stretches the importance of managing knowledge in
SMEs as a nowadays vital part of its factors for retaining its knowledge assets.
Malaysia‟s plan for becoming a knowledge-based economy began when Vision 2020 was started
in 1991. Companies to remain competitive have to organize their knowledge and use it to
To make the operation act to secure its workability and general success.
SMEs in Malaysia play an important role in the country‟s economic development. They have
been observed according to their size, financial flow and activity. In Malaysia SMEs are defined
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SMEs in Malaysia are focused on the textile and clothing, food, metal and wood industries.
SMEs must know what their knowledge assets are and then know how to manage them to make
Knowledge management for the SME‟s must focus on identifying, organizing and making
available the whole collection of explicit knowledge for the workers. The workers will reply by
using its tacit knowledge to grow and improve the explicit knowledge. They will improve their
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Successful knowledge management claims that the right knowledge is made beneficial. This
requires a clear and brief plan to why knowledge management is implemented and where the
company wants to go with it. It involves that both management and employees are aware of their
eagerness and they identify and develop the knowledge that is necessary to meet those
In this paper, the focus lies on the benefits of the knowledge management on the SME‟S to help
We will first conduct a review on the relating literature, then will try to analyze the subject by
first trying to understand the attributes and contributions of KM for SMEs, we will then try to
understand the SMEs standings in Malaysia and relate KM to Malaysian SMEs and try to
understand the success factors contributing to the benefits, last but not least we will make a
Literature review
The difference between small medium size enterprises with the large companies is on their
resource scarcity. Because of less tangible resource like labor, capital and equipment, SMEs
cannot compete with large companies. However, SMEs can remain in the competition and
overcome their rivals by utilizing their intangible asset such as knowledge. So how we can use
knowledge in SMEs?
Kuan Yew Wong has proposed some certain factors for effective implementation of KM such as
management leadership and support, culture, IT, strategy and purpose, measurement,
organizational infrastructure, process and activities, motivation aids, resources and HRM. by
knowledge management. SMEs from the services sector are facing both opportunities and
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challenges due to the information and communication technologies development (Plumb Ion,
Zamfir Andreea.2008)
Dimitris and Iraklis 2007, have proposed an alternative approach to developing organizational
knowledge management system for SMEs. The five peculiarities of knowledge management at
SMEs are the following: Dominance of Socialization in the SECI Cycle, Common Knowledge,
Some of the problems in implementing the KM in SMEs are “difficulties with management
effectiveness of their work tasks, not enough knowledge of policies of communication and
cooperation in research and production‟‟(Ileana Hamburg, Steffi Engert, Petschenka Anke 2006).
Dr. David E. Chesebrough 2006 has proposed two benefits of KM for SMEs: an adaptive
enterprise which is the real benefit and faster and better decisions that help SMEs to enhance
their competitiveness.
Toward this trend Malaysian companies try to utilize this valuable asset (intellectual capital) at
its best. Promotion of KM in Malaysia began with the establishment in 1996 of the Multimedia
Super Corridor (MSC) (IDA YASIN,2008). There are some famous organizations such as
Siemens, Nokia Malaysia and Telekom Malaysia, one the largest telecommunication companies
in Malaysia, which are the pioneers for the implementation of knowledge management in their
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Methodology
The data for this study is collected through research articles and is based on a secondary data.
Analysis
There are many benefits, which both small and large firms can derive from the implementation
of KM systems. Three main benefits in this case are: (1) locating and capturing knowledge; (2)
sharing knowledge and (3) creating new knowledge (see Figure 1).
By locating and capturing innovative ideas and other types of strategically important knowledge,
KM can cultivate innovation by encouraging the free flow of ideas, for example, best practices
could be used by technicians to solve maintenance problems; small entrepreneurs can improve
response time. Furthermore it also helps find the current status of the organization as compared
to the competitors. In this case the documentation, yellow pages and data mining are useful KM
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SME owners can achieve substantial savings. Obviously they can avoid frequent mistakes which
can take a place if they do not take into account the past experiences. Actually SMEs can reduce
Through the analysis of completed projects and the generation of new knowledge in form of
lessons learned through so-called after action reviews of sales campaigns, completed projects
etc., small entrepreneurs can avoid potentially costly future mistakes (Carlsen & Skaret 1999;
To utilize customer knowledge to To link ‘islands of knowledge’ within To create product and/or service
anticipate changing customer an organization or in innovations by combining the
preferences (by mining of data such regionally/globally operating firms expertise and competencies of
as customers’ buying habits) for the benefit of various different subject matter experts
stakeholders by transferring such as designers, customers,
knowledge to those who might marketers etc.
benefit from it elsewhere.
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Sources: Von Krogh (1998); Von Krogh, G., Ichijo, K. and Nonaka, I. (2000); Von Krogh, G.,
Nonaka, I. and Nishiguchi, T. (2000)
Creating new knowledge, for example within small teams whose members share a mutual
context of experience and collaborate on a joint task bonded by a common sense of purpose and
the need to know what the other „community members‟ know, can lead to profitable product and
In order to implement each part of KM in SMEs and obtain their benefit we need KM tools. In
table 2 we observe the important tools to establish KM in SMEs in order to reach benefits from
KM.
Sources: Schrage (1997); Von Krogh (1998); Von Krogh, G., Ichijo, K. and Nonaka, I. (2000);
Von Krogh, G., Nonaka, I. and Nishiguchi, T. (2000)
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KM benefits tree
One of the simple but effective tools for showing relationship between types of benefits from
knowledge management is the „benefits tree‟. In case of benefits from knowledge management
many managers want to find a clear understanding of the 'bottom line' benefits of knowledge
management before they invest. Because basically implementing knowledge management needs
an infrastructure project where the cost is considerable, the benefits are diffused throughout the
organization. A benefits tree relates the immediately visible benefits from knowledge
management, through a series of steps to those understood by managers or investor in this case.
Example Tree
According to figure 2, we can find the outputs of three separate situations when knowledge
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In order to explain the figure 3 we can say that the arrows indicate which benefits lead to higher
level benefits. Actually the benefits on the left are those that are the most visible or quantifiable.
Those to the right are the result of several factors, including non-KM factors, combining. In this
special tree, there are three different classes of benefits from knowledge management that have
been used:
1. Knowledge Benefits
These benefits are those coming from more efficient processing of information and
knowledge, actually these benefits streamline operations and reduce costs and save valuable
2. Intermediate Benefits
These kinds of benefits show how the knowledge benefits could be translated into benefits
that can be indicated in terms of efficiency or effectiveness. A common example in this case
is that best practices databases help eliminate less efficient or costly operations through
3. Organizational Benefits
These types of benefits are those that impact some of the organization's key objectives, such
as productivity and customer service. Actually this benefit can improve customer service by
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streamlining response time and giving them more relevant and valuable solutions to their
problems.
Malaysia‟s government has started the knowledge-based economy development index (KDI) to
monitor the progress of the economy with a target to become more knowledge-based.
KDI was defined when vision 2020 was launched in February 1991. The vision obliged
Malaysia becoming: “an economy driven by brain power, skills, and diligence, in possession of a
KDI displayed Malaysia‟s readiness to have a knowledge-based economy: KDI is inferred from
computer infrastructure, education and training as well as technology and research and
development (R&D). The overall KDI increased by 591 points from 2,413 in
2000 to 3,004 in 2005 with improvements recorded in all areas, as shown in Figure 3
improvement by 196.4% increase in terms of scores between 2000 and 2005, followed by R&D
and technology at 25.9% and education and training at 22.9%. In terms of KDI Malaysia was in
financial services and telecommunication displayed better knowledge readiness. In addition, all
these industries were generally better with regard to their information and technology
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The role of information and communication technology (ICT) in enhancing productivity and
average annual growth rate of 4.7% in a proper employment. In terms of ICT, the number of
personal computers installed is growing rapidly from 9.4 percent of population to 21.8 in 2005
while internet dial up subscriptions grew up from 7.1 percent of population to 13.9 during the
3- PROMOTING E-COMMERCE
As e-commerce make several of opportunities and increase productivity, its development was
intensified through the establishment of the essential infrastructure. The private sector, primarily
financial institutions and industry associations, was considerable to establish financial exchanges
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Multimedia Super Corridor (MSC) by its e-Business Program was piloted a number of action
plans under the internet banking services to promote the electronic mode of communications and
transactions through secure B2B and B2C online business transactions, particularly for small and
Overview of KM practices
KM practices are widely performed in the both public and private sectors in Malaysia. The issue
is if organizations have performed it explicitly or not. In other words, do they have a proper and
systematic approach of KM? Or meanwhile, when no system or paper guidelines have been
established yet, is any KM activity already being practiced? Knowledge management systems
are commonly performed by large enterprises and also multinationals, whereas small-and
medium-size enterprises (SMEs) seldom utilize KM systems. However some of SMEs try to link
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human resource management (HRM) to exploit knowledge management and also to comprehend
Most of the developed countries have recognized ICT as a driver to implement knowledge
management for a knowledge-based society. They impart KM as a driver of change and a tool
A study was conducted by Chong (2006) to compare KM components between its perceived
importances‟s versus its implementation in Malaysian companies. The respondents were middle-
level managers of ICT companies in Malaysia located at the Multimedia Super Corridor (MSC).
literature, are:
• Employee training
• Employee involvement
• Team working
• Employee empowerment
• Performance measurement
• Knowledge-friendly culture
• Benchmarking
• Knowledge structure
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In terms of employee training, managers recognized a big gap between importance and
implementation in their companies. Chong (2005) observed that the Malaysian ICT companies
surveyed are still in the initial stages of their KM program and thus unable to see the types of
training programs that are important to KM‟s success. He observes that many of the current
training programs focus on how to improve employees‟ skills in performing their jobs rather than
on how the knowledge can be managed (knowledge management in Malaysia, Ida Yasin,
The researches show that Malaysian organizations are still unfamiliar with KM and they are not
sure of how a knowledge-friendly culture be originated. The most of the knowledge- sharing
activities which have done by organizations was only within a project or team. Since several
companies are new (66% of them were established from 1996 and within the time that KM has
been introduced by MSC) and have been involved in the ICT business.
Discussion
Although there have been constraints for implementing KM as mentioned above, but still SMEs
in Malaysia have been able to enjoy some of the outcomes of KM where it has been properly
Migdadi 2009):
2. Employee development
3. Customer satisfaction
5. Organizational success
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One of the main outcomes of KM for SMEs in considered as systematic knowledge activities. By
using the term “Knowledge activities” we are actually referring to the processes of creating,
organization (Chong et al., 2006). Through effective knowledge processes, knowledge flows can
be examined, knowledge assets can be identified, and important knowledge can be exploited for
communication this may also lead to sharing of best practices which would lead to and
By implementing KM, SMEs also leverage their human capital by developing employees‟
knowledge. This is where knowledge workers are defined. Organizations may further leverage
the role of knowledge workers by utilizing them as value creators by setting best practice
experiences and other means of sharing their knowledge. Finally, proper utilization of knowledge
enables employees to identify new products and services in which the organization has the
potential to offer to its customers, thus resulting in the development of an entrepreneurial culture
By provide their key audiences with easy access to accurate and consistent information
organizations improve customer satisfaction and service, this is achieved through KM initiatives.
To identify the situations where customers have been dealt with in a pleasing manner in order to
define best practices, customers‟ knowledge can best help SMEs. This may also lead to more
efficient client interaction with the company which would enable organizations to target
offerings to specific customers and customer requirements where value is better created. A
successful implementation of KM not only creates means to better share knowledge within the
organization, but it also allows sharing knowledge with supplier, customers and other business
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partners, this is done mainly in form of feedbacks where it help the organization better create and
offer value.
The term “Organizational success” refers to the overall performance outcomes and benefits of an
both tangible and intangible outcomes should be realized. Effective utilization of knowledge
leads to increase in profits, revenues and higher market share and decrease in costs of all sorts. It
should be kept in mind that implementation of KM requires detailed study of its success factors
are some constraints which have to be recognized. When implementing KM, the first constraint
that comes to mind is the cost. Since it is quite costly for organizations to implement KM, this
issue becomes more apparent when looking at SMEs. This is because they are usually new in
business where they are in more advanced and high-tech sectors where KM is more focus at, and
their current IT infrastructure does not support the implementation of Km which also bears
another cost. Another reason is that since they are usually small in size, their priority is on
fulfilling their clients‟ needs rather than committing their efforts to build a knowledge
management system.
Although as mentioned earlier in the text KDI has already been defined further study is
recommendable in this field with quantitative measures. One of the constraints for conducting
quantitative measured research is the fact that KM is quite new for SMEs in Malaysia and
therefore no history data is available to compare the results with. The other is the intangible and
sometimes complicated nature of so much of KMs effects and results on organizations which
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Conclusion
SMEs can benefit from knowledge management concepts and tools. As economies and
businesses shift towards a new world configuration of digital information and knowledge-based
work, SME owners need to take on this challenge to find out how KM solutions can assist them.
Although there are constraints for implementing KM in SMEs in Malaysia namely its high cost
of implementing, but the benefit would outweigh these cost. The benefits of implementing KM
customer satisfaction, good external relationship, and organizational success. To assist the SME
sector to keep pace with the emerging knowledge-based economy, government agencies,
chambers of commerce, industry associations and private sector organizations will need to
commit more resources and assistance to make the implementation of KM in SMEs more
tangible and economically viable. Owners and managers of SMEs must be willing to break away
from practices that had worked well for them in the old economy, and embrace the changes now
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References
Carlsen, A. & Skaret, M. (1999) “Practicing Knowledge Management: Lessons From Processes
In Small Firms”, In: Knowledge Management: Enterprise, Network And Learning.
Schreinermakers, J. & Barthes J. (Eds). Wurzburg: Ergon Verlag, 47-55.
Chen Wai Ling, Manjit S. Sandhu, Kamal Kishore Jain, Knowledge Sharing In Anamerican
Multinational Company Based In Malaysia, Journal Of Workplace Learning Vol. 21 No. 2, 2009
Pp. 125-142
Chong Chin Wei, Chong Siong Choy And Paul Heng Ping Yeow, Km Implementation In
Malaysian Telecommunication Industry, Industrial Management & Data Systems Vol. 106 No.
8, 2006 Pp. 1112-1132
Chong, S.C., Wong, K.Y. and Binshan, L. (2006), “Criteria for measuring knowledge
management performance outcomes in organizations”, Industrial Management & Data Systems,
Vol. 106 No. 7, pp. 917-36.
Fei Gao, Meng Li And Steve Clarke, Knowledge, Management, And Knowledge Management In
Business Operations, Journal Of Knowledge Management; Volume: 12; Issue: 2; 2008
Kevin C. Desouza And Yukika Awazu, Knowledge Management At Smes: Five Peculiarities,
Journal Of Knowledge Management; Volume: 10; Issue: 1; 2006
Lisa G.A. Beesley, Chris Cooper, Defining Knowledge Management (Km) Activities: Towards
Consensus, Journal Of Knowledge Management Vol. 12 No. 3 2008, Pp. 48-62,
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Menkhoff, T. & Yue Wah, C. & Loh, B. (2005), Notes From An „Intelligent Island‟: Towards
Strategic Knowledge Management In Singapore‟s Small Business Sector, International
Conference On Globalization, Innovation And Human Resource Development For Competitive
Advantage. Bangkok, Thailand, 17th-19th December 2002.
Siong Choy Chong, Km Critical Success Factors A Comparison Of Perceived Importance Versus
Implementation In Malaysian Ict Companies, The Learning Organization Vol. 13 No. 3, 2006
Pp. 230-256
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