Literature Review on Knowledge Management in Banking Industry

This Literature Review Knowledge Management Banking Industry study about basic information of banking industry,this is second part of dissertation on Success factors of knowledge management in banking industry in saudi Arabia. It is part of dissertation Help. 

Literature Review

Knowledge Management in Banking Industry-Introduction

Knowledge can be defined as the special skills and expertise acquired by a person through experience or education and involves theoretical and practical understanding of the subject. It can also be termed as a total of all the information which has been explored into a particular field (Fong et al, 2004, pp.43-74). It includes facts, figure and principles which have been already explored into the particular field of interest.

According to Plato (2005) a particular statement having the following three essential criteria’s are considered as knowledge:

  1. Statement should be justified
  2. It should be true
  3. It should be believed by people at large

Though many philosophers have different views on the topic as some argue that knowledge tracks the truth while other philosophers claim that every statement which is known by the public at large and is justifiable cannot be said to have knowledge within it (Garvin, 2003, pp. 2-7). Knowledge is considered to be the most imitable source of competitive advantage and some philosophers do consider that it is the only source of competitive advantage since other factors can be easily imitated.

Literature Review Knowledge Management Banking Industry

Knowledge Types

Depending upon the ways of expression and nature of experiences attached with knowledge, there are basically two ways in which knowledge can be categorised, which are as follows:

  1. Explicit Knowledge: this is that form of knowledge which can be easily represented into formal language through use of grammatical statements, mathematical expressions, specifications, manuals and so on. Explicit knowledge can be written down, shared with others and put into a database. In addition, it can be explained by individuals and can be transferred easily. Moreover, it is expressible and simple to codify, organise and share. Explicit knowledge can be transferred from experienced employees to documents so it can be acquired by other employees with no need of personal contact. Elizabeth (2003) stated that Accenture, the Consultant Company, use a people-to-documents approach and so transfer the explicit knowledge from their experienced employees to documents (Manjula & Shrinivasan, 2007, pp.165-132). So, this form of knowledge is easy to represent in front of others, resulting in this kind of knowledge management taking place easily.
  2. Tacit Knowledge: this is the personal knowledge which is gained by individuals through experience or educational report. The visible part of tacit knowledge includes the personal belief and value system of individuals. The main difference between tacit and explicit knowledge is that tacit knowledge is hard to explain with the help of formal language. Before communicating tacit knowledge, it needs to be converted into signs, symbols, numbers and models for easier understanding by the people.

Tacit knowledge is in the minds of individuals and cannot be transferred to documents. It is an action-oriented knowledge and based on practise. It cannot be documented or expressed and it is difficult to be extracted from people, however, it is rich and valuable.  One of the ways of sharing or transferring tacit knowledge is via face-to-face communications. (Manjula & Shrinivasan, 2007, pp.165-132) One of the advantages of tacit knowledge is that it is difficult to leak to competitors.  Tacit knowledge is something known but individuals are unaware that this knowledge is known. There are two aspects of tacit knowledge which are as follows:

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  • Technical dimension: This is knowledge acquired by a person on behalf of his experience by completing that particular work. This kind of knowledge is very hard to represent and taught to others. For example, a craftsman has wealth of skill but it is not easy for him to represent these skills to others and it will take a long time to instill all the skill in another person. (Lettieri et al, 2004, p.3).
  • Cognitive dimension: This part of tacit knowledge consists of beliefs, values and perceptions of people and is hard to articulate. This knowledge of the person shows how a particular person perceives the world around him.

Knowledge Management

The Knowledge Management process is known as the key asset to any organisation since it can provide long term sustainability and act as a point of differentiation for any organisation. To obtain a real competitive advantage, Knowledge Management must be applied within organisations (Loermans,2002,p.242). Knowledge Management differs from knowledge transfer and knowledge exchange, however, some researchers have used these terms interchangeably.

Bartol & Srivastava define knowledge management as “an action in which employees diffuse relevant information to others across the organization”. Knowledge can be shared through formal and informal ways (Liao, 2006, p.98). However, Thomas and Laurence believe that informal ways of knowledge management is more vital to organisations and conversation in work time can be seen as a waste of time. On the other hand, Webber argues that in today’s new economy, conversation can be seen as the most important form of work (Thomsen & Hoest, 2001). Thomas & Laurence (2001)also went further to suggest that managers should say ‘start talking and get to work’ instead of ‘stop talking and get to work’.

 3C’s of knowledge management

  1. Culture: It is a commonly held belief among people or can also be seen as the attitude and values among people of any organisation. Culture creates knowledge management capability as well as also possessing hindrance to the process of knowledge management into any organisation (Liebowitz, 2003, p.142). Furthermore, culture of any organisation needs to be such that it can enhance knowledge management into any organisation.
  2. Competition alongside co-operation: Co-operation and competition combined amongst individuals is one of the expected traits since all are a part of society and requires one or another in order to accomplish work (Leonard, 2008, pp.142-146). Human beings should have competition alongside co-operationamong themselves in order to support knowledge management culture into an organisation.
  3. Commitment: Commitment is the dedication shown by the organisation in order to align their culture and competition alongside co-operationamong their employees in order to manage the proper knowledge flow organisation wide.

Knowledge Management Stages

Knowledge management is a continuous process and follows the sequence of many sub process which are interlinked with each other. Knowledge management in organisations is carried out in the following four steps:

Literature Review Knowledge Management Banking Industry
Figure 2.1: Showing Knowledge Flow in Any Organisation

Application of Knowledge Management in Banking

The banking industry is the backbone of the economy as no industry can be self dependent without the support provided by the banking industry (Chase, 2006, p.12). The banking industry is hugely important and one of the most knowledge driven industries which is affected by knowledge transformation among the various parties. Knowledge management becomes the key tool for the banking industry and in this industry there are various applications for knowledge management which can be described as follows:

  • The importance of the knowledge management process in the banking industry is evident from the example of the knowledge management process implemented by the World Bank itself. In order to have proper knowledge management in place, the World Bank identified a relevant know how and then made it a basis so that it could be stored for the usage of all the staff and stake holders (Lettieri et al, 2004, p. 3).
  • Knowledge management becomes significantly important whenever there is a business expansion, as in the case of one of the major insurance giants in Sweden named Skandian. Skandian expanded its point of sale from 5000 to 50,000 in a span of five years only and due to this, the company needed to initiate its new venture very quickly and for that particular reason, the knowledge management process had become very important. Senior management implemented the knowledge management system in order to start up time for the new venture and so the company reduced the start up time from seven years of industry standard to just seven months (McAdam & McCreedy, 2001, pp.42-87).
  • Bank of Montreal, one of the largest banks of Canada, with a gross sale of $12.23 billion has also implemented a customer centric knowledge based solution (Loermans, 2002, p.242). The bank wanted to change the old knowledge discovery and captured the benefits of turning the efficiency model. The bank signed a multimillion dollar deal with a knowledge management company in order to make the knowledge management process economic and error free.
  • Deutsche Bank, which is the second largest bank in the world, has always adopted the strategy of continuous learning and enhancing the intellectual capital through the creation of the Deutsche Bank University (DBU) which completes knowledge management for the bank.

Culture of the Banks

Most of the knowledge intensive industries are based on the knowledge sharing process and banks are not an exception to this philosophy. Like every other organisation in banks, the knowledge sharing process is considered as the asset to the organisation (Leonard, 2008, pp.142-146).

Banking culture is also the same as other cultures in various other industries. The culture of various banks have been found to be dependent on the nature of the bank such as the commercial or retail banks, private or government banks, domestic and foreign banks.Culture has become an essential part in any banking system; there are various reasons which support the existence of culture in any banking system which are as follows:

  • Banks need to prove their long term sustainability and superiority from other banking competitors in the system since banking systems need to gain more and more clients and also extend their relationship type so as to increase their profitability and growth demanded by their investors. In order to establish themselves as the better investment option for customers, only then would they be able to sustain through tough competition.
  • The pressure of boosting up the profitability of any bank also gives rise to various ethical concerns in the banking industry as employees directly deal with money (Marquardt, 2006, pp.102-165). In order to create a good reputation and build a strong brand name in the market, banks need to adopt a culture which supports the ethical business in the banking industry.
  • The size of banks is increasing day by day, as some of the international banks have their thousands of branches and enormous numbers of employees as well. Therefore, to deal with these customers and manage their operations across various nations, banks require to adopt a uniform culture across all the nations, so that, an integrated communication and trust model can be established in the banking sector (Leonard, 2008, pp.142-146).

Banking culture can be of either type i.e. it can be either positive or negative depending upon the drivers of the culture which sets up this culture. There are four big success stories in the banking industry which have also been dependent on the culture set up by these organisations. The first success story pertains to Goldman Sachs in investment banking, Handels banken in Sweden in corporate banking, and two other banking success stories related to the retail banking industry ( no need to individually explain each and every example’ this is unnecessaryily buffing up the dissertation size)

Bank Culture in Saudi Arabia vis- a- vis other Countries

Saudi Arabia has one of the fastest and largest growing banking markets in the world. During the last few years there have been various banking reforms in the country which has contributed to the success of the banking sector in the country (Liebowitz, 2003, p.142). Some of the major factors which have contributed to the success of Saudi Arabian banking industry are: new product service and distribution models, more banks offerings Islamic banking services for customers and opening up of the banking and insurance sector for the foreign investors. All these factors have resulted in positive changes in the Saudi Arabian banking system (Marquardt, 2006, pp.102-165). It is expected that in light of the various banking reforms mentioned above, the banking industry in the country is expected to grow at a rate of 18% during 2011-2014 (Liao, 2006, p.98).

In terms of the pool of funding in Islamic banking system, Saudi Arabian banking systems are the largest banking market in the world (Leonard, 2008, pp.142-146). In Saudi Arabia, the government support to the banking sector and demand for Islamic products are the major reasons for this strength. In terms of the credit exposure and deposits received, private banks are further ahead of the government banks in the country.

The whole Saudi Arabian banking system is divided into four major sectors which are: SAMA (The Central bank of Saudi), commercial banks in which government has only 10% of the stake, specialised credit banks which caters to the need of some specific sectors and the stock market (Chase, 2006, pp. 12). The financial system in the country is composed of many financial standards and its payment systems are similar to other countries. The profitability of banks in Saudi Arabia is on a higher side since the banks have remunerated deposits in excess; costs are on the lower side and focused banking is centred on the consumer banking activities.

Factors Contributing to the Success of knowledge Management in Banking

The success of the knowledge management initiatives taken by the various organisations depends upon various factors since every organisation considers the knowledge management process as the key asset to their company which provides sustainable growth and competitiveness in the business. Some of the major factors responsible for the success of knowledge management in the banking industry can be defined as follows:

  1. Leadership
  2. Culture
  3. Structure, role and responsibility
  4. Information technology infrastructure
  5. Measurement


Leadership has a vital role in the success of the knowledge management process implementation in the banking industry since leadership is one unique factor which defines the behaviour which management is trying to promote among employees in the workplace. In major international banks, the higher management of the bank involves itself with the process of knowledge management in the bank so that the process can be taken as more effectively and yields better results for the bank (Marquardt, 2006, pp.102-165).

As an example, the World Bank president himself has shown substantial commitment to build such an infrastructure which enhances the communities of practice (Cop) and so enhances knowledge sharing among employees of the bank. The Cop approach used by the World Bank is a unique initiative and has produced excellent results for the bank. Furthermore, management is still committed to discover more and more innovative approaches to enhance the knowledge sharing processes among employees. 


The role of culture in the process of knowledge sharing can be justified by the simple reason that a culture of the organisation is made up of small-small sub factors which are a trust factor for any organisation. Some of the factors which add to the culture of any organisation are shared history, expectations, unwritten rules and social customs. The culture issues in the process of knowledge management in the banking sector arise due to the following reasons:

  • Lack of time: Technology is an effective tool which can reduce long periods of time for employees working in the bank (Marquardt, 2006, pp. 102-165). The knowledge management process should be designed in such a way that the initial design and planning phase of the KM should consider the employee working culture and patterns so that KM process assist in reducing the time consumption for each and every process.
  • Unconnected reward system: There should be equilibrium in the reward system designed by the organisations since the intrinsic and explicit rewards systems are only useful when the employees find some value in the knowledge being shared by another person.
  • Lack of common perspective: Knowledge sharing processes can be successful if the knowledge flow is processed from both ends, i.e. the receiving end as well as the transmitting end. So, if both persons do not have the common vision of sharing knowledge then the knowledge transfer process would not be completed.
  • Effective communication: In order to implement the knowledge management process fully it is important to have effective communication among employees as well as customers of the company. The changes occurring in the company should be communicated properly to the employees so that they have a proper reason for sharing knowledge (Marquardt, 2006, pp102-165). ( feedback implemented by making some changes in the language and of this paragraph and unwanted parts identified and removed)

 Structure Roles and Responsibilities

In order to structure the KM initiative of banks, various options can be adopted but mainly there are some factors which affect the structuring process as well. These factors which support the KM initiatives of the company are as follows:

  • A central monitoring committee
  • Owners/management commitment for the initiative
  • A dedicated committee for KM initiative

The central group consists of various people having the skills of project management and better communication skills analysis. The business units and top management should have the best of leadership skills so that knowledge sharing initiatives can be planned and implemented successfully. 

Information Technology Infrastructure

In order to enhance the knowledge sharing initiatives in the banking industry, a strong back end IT support is required which should act a supportive function. Some of the major KM issues related with the information technology infrastructure are as follows: ( core content kept and irrelevant arguments removed)

  • Approach: The approach should be such that the people should understand the need of their users and must adapt themselves as per those needs. KM systems have to be matched with the KM objectives of the organisations.
  • Content: Great content is required for an effective KM process since the content should be useful and easily accessible for the users and should accomplish all their needs (Marquardt, 2006, pp.102-165).
  • Simple technology: The technology used should be simple enough that it must not create any kind of hindrance in the knowledge sharing process as it can become a major reason for some employees to avoid the knowledge sharing process.
  • Adequate training: Proper training should be imparted to the employees of the company about the technology being used in the process of knowledge sharing.


Many of the organizations are entierely focused on the return on investment concept before taking up any project or process. Knowledge management is a long term process which provides results in a untangible manner and they need to be tangibilized to perceive the changes it created. Normal financial concepts of return on investments cannot be applied here in its usual forms (Virany et al, 1997, pp. 232-233). Keeping a short term view towards knowledge management and expecting a return on investment in monetary terms will act as a hinderance in its effective execution. ( changes made in the explanation and some new information added while earlier repitative information removed)

Benefit of Knowledge Management

Knowledge management has led to various benefits for the organisation as well as for employees who share knowledge with their co-workers. Some of the important benefits of sharing the knowledge are as follows:

  1. Efficiency enhancement: Knowledge management into the organisation leads to an increase in enhancement of efficiency and effectiveness. Good ideas and good practices are followed up by sharing the knowledge which has been gained by one but will be useful for many people in the organisation and will also add value to firm (Argote et al, 2003, pp.571-582).
  2. Cost efficiency: the knowledge management process also leads to cost efficiency in organisations as the knowledge is created once but the same knowledge is shared across the organisation to be used by many people (Marquardt, 2006, pp02-165).
  3. Time saving: In corporate organisations, time is one of the most important assets which firms have to manage and sharing of knowledge provides time saving for firms as employees learn from experience and mistakes of other people.
  4. Decrease work tension: Knowledge management leads to decreased tension among people as the sharing of experience about any task before hand gives sufficient ideas to employees regarding the performance of tasks, or at least saves people from the mistakes the previous person may have done (Allee, 2007, pp.14-46). Therefore, this confidence gained by the person of not repeating the mistake leads to decreased work tension among people.
  5. Interorganizational relationship: Sharing knowledge is enhanced in organisations with the help of effective communication system. This interaction helps people with a well established communication system leading to the strengthening of the relationship between people working in the same organisation.
  6. Better solution: An organisation having the knowledge management capability can provide better solutions to the problem as more ideas and experiences can be applied in order to solve the same piece of problem.
  7. Way of innovation: Knowledge management leads to innovation in an organisation as the new ideas and information is applied on work which already has been done. Along with innovation, knowledge management leads to excitement, engagement and motivation within organisations.
  8. Satisfaction: There is always a sense of satisfaction among people who share their knowledge with others, similar to the feeling of having done some charity, since they realise the importance of their work for other people.

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Knowledge is a very important asset for any organisation which can assist the company in order to achieve sustainable growth for the long term. Knowledge management processes, as like other firms in the industry are essential for the banking industry as well. This knowledge management process depends upon various factors for its successful implementation, such as culture of the bank, leadership, IT infrastructure and structure, roles and responsibility. (some redundant data removed without changing the meaning of paragraph)