Whenever you decide on investing in a new strategy, program, process, or project, you need to make sure that it is really worth investing and value-adding. You also need to analyze the cost-benefits of such an investment and the return or value that you get out of that investment. These are some issues that need to be considered before going in for knowledge management initiatives.

Today's increasingly difficult economic times pose the need for cost-effective initiatives such as knowledge management programs and practices. Organization heads always need a clear understanding of the bottom line Knowledge management benefits before they invest in such initiatives. The Knowledge management benefits can be categorized into three which include knowledge benefits, intermediate benefits, and organizational benefits.

A typical example would be of an organization such as a manufacturing firm or an academic institution or a government agency which has numerous physical files. Categorization and segregation into working databases allows the employees who need specific information to access the databases more efficiently through word or category searches instead of having to sift through so many folders. Updating of these databases will also result in having the most recent and relevant information and knowledge stored and easily accessible by any employee who may need any specific information. .

The category of organizational benefits includes better/faster innovation, improved customer service, reduced knowledge loss, and increased productivity/better performance. These are the benefits which will have an impact on the way an organization thinks and operates to achieve its objective, for example, to provide quality education, quality products and services, or quality programs to bring about the good of civil society.

In a constantly evolving and competitive environment, organizations are faced with the problem of having to continuously improve in the area of creating innovative products and service that would meet the constantly evolving needs and wants of their customers. Patronage from customers is the only way ahead for the success of any organization both small and big.

Considering the huge number of physical files in an organization example, as the databases are organized the decision maker has the necessary information and knowledge to substantiate or justify research and development initiatives that leads to more innovations which in turn leads to the creation of new products and services.

These initiatives may seem a bit costlier for the company in the beginning stages. But if these initiatives when looked at on a long-term perspective help the organization to create products and services and then sell them to a market that needs or wants them. This helps the organization to actually reap the rewards of satisfied customers translating into increased sales revenues which helps offset the initial capital sunk into the research and development initiatives.