 In this topic, as we are discussing about knowledge management in multinationals, we are going to talk about factors affecting the significance of organizational knowledge. What is it that makes organizational knowledge so significant? So in that, we will first of all look at how organizational knowledge has become an important factor and how is it evolved to become an important factor. So we'll look at a short brief history of how knowledge has become one of the important factors in management. We say that knowledge is one of the major sources of competitive advantage. Is it something which has always been like that or is it something which has now emerged and evolved in today's times? It is something which has now evolved actually. Earlier, let's say 50, 60 years ago, 100 years ago, competitive advantage used to come from excess to cheap natural resources or other factors of production. So factors of production, which are land, labor, capital and organization, those factors of production, they had more of an influence, particularly cheap natural resources and labor, cheap labor. They were one of the major factors in establishing the competitive advantage of a multinational. So a multinational who was able to produce at the lowest cost and because mass production was the only competitive advantage, so the organization who was able to produce at the lowest cost was the most successful one. So the competitive advantage was like that. So you could see that why all the organizations, multinationals, they established their, they got their products made from China because the Chinese products, they were cost competitive. And similarly, many multinationals, they used to come to the subcontinent, to India, to Pakistan, to utilize the benefit of cheap labor. And many organizations, for example, Nike, Adidas, they used to have their production facilities in countries, in developing countries where they could produce at a lower cost. Now the textile industry after the slum of textile industry in Pakistan, the most of the textile industry has shifted to Bangladesh. So many of the organizations, textile organizations, they get their products produced in Bangladesh. So the competitive advantage earlier, it used to be how cost effectively you are able to produce your products and services. It is still an important factor. It is something which cannot be disregarded, but then more important factors, they emerged as creating the competitive advantage for an organization. So in the second phase of this management, the ability to manage and utilize such factors properly would differentiate between the competing actors. So the importance of management practices, how well you are able to manage the different factors of production, how effectively you are able to manage them, how effectively you are able to manage the people, how effectively you are able to manage the finances, how effectively you are able to manage. Because earlier what happened was that because multinationals, they were scarce. So the benefits of that place would be utilized at some point, but as soon as their expansion started, then you can understand the forces of competition that led to a higher level of skill that required to create that competitive advantage. So if every multinationals have put their subsidiary, their production plant in a cheap labor area, then what will happen next? What will differentiate them? So the next step in which differentiation was created is that you can manage it in such a way that the organization can gather its cheap resources and manage it in a very good way. And then the third level at which at the state at which we are standing in today's time is that the process of then not just management of the given resources, but to generate more resources out of the resources that you already have, that became a distinguishing factor because then there were so many organizations and all of them then they were managing well the given resources. So now you've got to do something more to actually stand out. So what you can do that is that you use your given resources to create more resources and how do you create more resources? You create more resources through experimentation, you create more resources through innovation, you create more resources through research. So and all these things, they are processes of knowledge generation and knowledge management. So knowledge and information factor as crystallized in the skills to produce and use electronic technology and to process information. So very important aspect is that you are able to use the technology which is at your hand and you are able to create a competitive advantage by developing skills that are able to utilize and exploit these opportunities of technology and information. So the solution is that you manage information and use it for further learning, further enhancement. That is something which is now the source of competitive advantage for organizations and particularly multinational organizations. So research suggests, research tells us that companies with access to these new factors which is the ability to use electronic technology, the ability to use skills, the ability to manage information, they have a competitive advantage and they are more likely to succeed. So what do they do when they, what is essential for this knowledge development process? What are the dimensions of that? Successful companies are those that consistently, what do you do in this knowledge management and creation process? Is that number one, you create new knowledge through innovation, through R&D, through research and then you don't keep it with you, you don't put it in a room, you don't put it in a box and don't put it in a book, you disseminate it, you share it with your knowledge workers and you provide them with ideas and generate new ideas from them. And then embody it in new technology and product. So once again, knowledge you create in a box, you use that knowledge to create new technologies and new products which embodies the knowledge that you have created, it is kept in it, it is seen in it. And most important is that you are able to transfer knowledge to utilize across the organization so you just don't disseminate, you transfer, you transfer it from one place to the other and transfer means that when it goes to the other place, it's not just they hear it and then they forget about it, they get it, it is something which is transferred which is, which is then entrenched in as, as part of the organization and they use it to utilize it to create more knowledge. And so knowledge transfer happens through learning because when you acquire some new knowledge, what does it lead to? It leads to learning, it leads to and what is learning? Learning is a permanent change in behavior or attitude of persons and organization. So when we talk about organization, it means that when organizations they get knowledge and the transfer of knowledge has been successful, the organization will learn. Learning means it will start doing things in another way, it has to be change in behavior of the organization. So behavior of the organization, they start managing things in another way, they start communicating in another way, they restructure their organization to make it more flexible, to make it more effective, to make it more productive. So that these are all the aspects of organization. So when you acquire new knowledge, we are talking about organizational level learning, not individual level learning. So when you talk about organizational learning, it's the organization as a whole, how does it look, what does it do and how does it convert knowledge into new learning behaviors? And that is something which is directly related to the knowledge skills and abilities of employees which is called human capital. Human capital is something which was the term emerged from calculating the economic value of investment on education. So the concept of human capital was investment. It was emerged from looking at how much is the return on investment when you invest on education. So how much is the return in this? So from this discussion, the concept of human capital is that when you add value to your product or when you add value to your processes by learning new knowledge skills and abilities, it is something which makes it more valuable. So as the financial capital makes things more valuable, similarly, human capital makes your products and services more valuable. And then later on, in research, the non-economic value of knowledge or human capital that also emerged that the ability to manage in an effective way, the ability to lead people in an effective way, the ability to connect people in an effective way, which are the soft skills, those are the non-economic factors or non-economic value of the human capital, which is also very much important and which is also very much significant in making an organization successful. So what is important for knowledge management and transfer? Knowledge is important by creating organizational learning. It creates human capital. Human capital has got an economic value which is directly added into the products and services. It also has a non-economic value which manifests in the way the people and processes of the organization are managed. So a very interesting excerpt from an article by a Stalin dean says that some of the value is added directly by transforming the firm's product, but much of it is less tangible consisting of solving problems, coordinating the work of departments and exercising judgment in novel situations. So all these things being able to solve problems, being able to coordinate your work and being able to wisely exercise your judgment in different and unique situation, all of this is a part of organizational knowledge. It is a part of human capital and therefore it is something which creates value and carries a lot of significance for the organization.