Managing Knowledge in Small Businesses; Experience is Expensive

What follows is extracted from a graduate school knowledge management discussion forum. My passion rests with knowledge management in the small business arena, and I offer my thoughts to instigate discussion and additional reflection.

[pasted forum entry follows... in response to a classmate entry]

While there are certainly plenty of Type-A personalities owning or running smaller organizations, the personality type may not be a principle factor with respect to knowledge assets and behaviors.

A friend of mine introduced me to this phrase: “Experience is expensive“. 

Indeed, it is. I recently had the expensive experience of replacing a sheared tractor PTO shaft which would have been prevented if I had known the difference between a hardened bolt and a shear bolt. A shear bolt is designed to break first, so the more expensive and difficult-to-access PTO shaft does not break. 

Experience is expensive. So is knowledge. It cost me $2,000 to learn that an $.89 bolt rather than a $1.09 bolt was the correct choice. One might argue that bit of knowledge had a ten thousand-fold return on investment!

By tracing a small organizations’ critical knowledge to its source, we often find the origins of the business. We find the risk-takers who, using their experience and knowledge, put their personal resources and reputations on the line; we find the hard lessons learned, or the lessons learned the ‘hard way’. Those expensive experiences cast a long shadow within individuals, and become part of the organization’s DNA. The smaller the number of people in the organization, the less that DNA is diluted. It’s one thing to pass on (transfer knowledge) specific lessons learned, but an entirely different thing to transfer the contextual knowledge and appreciation for risks to a firm’s finances, reputation, and so forth. That may account for your ‘micro management’ observation. 

I appreciate 100% your statement I consistently find it difficult to apply the various models and techniques that we are learning to the few organizations with which I [you] have had direct experience. Small organizations differ from large ones in more ways than size. In a small firm, risk and reward live side-by-side, and are very intimate personal experiences. Owners and workers bear the direct brunt of their knowledge and decisions in ways that are at once direct, immediate, and lasting. This is not the case in larger organizations or enterprises. 

The KM community (in my opinion) does not address these crucial differences in the knowledge assets and behavior between small organizations and large. KM practitioners must learn to recognize and account for these differences.  

Anyone who has worked in a large organization has heard that ‘@#$% rolls downhill’. In a small firm the exact opposite is true. @#$% rolls uphill, and eventually makes its way to the owner’s desk or check book. In most small businesses, there is no ‘bullpen’, no reserves to call upon. Many positions are one person deep. When costly mistakes are made but recovered from, key leaders unfortunately can tend to ‘trust no one but themselves’. I would submit that this behavior is less a function of personality type and more a reflection of risk management. If we think back to Sessions 1 and 2, we recall that the purpose of measurement was to quantify or qualify risk, and mitigate the firm’s risk exposure.

In a larger firm or major enterprise, it is difficult to find those who took personal risks to make the organization what it is today. In a major enterprise, lessons learned rarely ‘draw blood’, or risk personal fortunes. 

There truly is a different executive and managerial mindset between small organizations and large enterprises. If the KM enterprise is to be anything but a practitioner’s echo chamber, it must develop awareness and tools that are capable of discerning these differences. Modern medicine took 100 years to develop the specialities of pediatric and geriatric care. Children are not simply little bodies; nor are the elders simply older bodies. Medical practitioners now recognize that the differences are greater than the similarities. So too with KM. We often read ‘One size does not fit all’ but there is little I have come across that addresses these differences between small and large organizations.

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