Knowledge management is the first competency that an organization needs to develop for the management of IC. Knowledge management constitutes the ability of an organization to learn, to remember what it learned, and to leverage what it learned internally and externally—internally by transferring it to different workers and departments, and externally by sharing it with suppli­ers, distributors, partners, and customers. In short, it enables an organization to leverage its knowledge to improve its overall performance. Knowledge management's critical importance lies in building the platform of knowledge on which innovation and other core business processes are launched and fortified. A weak knowledge management system or infrastructure would result in the waste of the knowledge resources of the organization, affecting the efficiency of its opera­tions and processes and the leveraging of its employees' brainpower.

British Petroleum (BP) leadership, a pioneer in knowledge management, transformed the entire organization to a "big brain," boosting its overall performance extensively by implementing a pro­gressive knowledge management program. In 1990, BP was suffering from the plummeting of its stock price after having grown in both size and operations. Downsizing and cost cutting in many operations, as well as top management promotion of knowledge sharing, did not help. It was not until 1995, when John Brown was appointed as CEO, that knowledge management was taken to another level, both on the strategic and operational planes, becoming a way of doing business at BP54.

Summarizing its knowledge management strategy, BP professed that collaboration between employees to transform personal into organizational knowledge is what makes "the bigger brain that is BP." BP innovated and implemented a number of programs on the operational level designed to make knowledge sharing the job of every employee and division, realizing great prof­its. Estimated profits from BP's knowledge management skyrocketed to $800 million to date.55 In one instance, B P showed a saving of $50 million just by transferring best practices on how to drill new sites. Knowledge management in BP moved from being a mere program or philosophy to a core competence that translated into a formidable competitive advantage.

But to manage knowledge alone is not enough. No organization can win by brains alone. What is also needed is a system that manages the output of brains to transform it into new products and services. This brings us to the second competency required for ICM—the systemization of inno­vation as the core business process of the organization.