Knowledge is the ability to make effective decisions, and take effective action (based on a definition by Peter Senge).
Part of the confusion between Knowledge Management and Information Management is almost certainly the lack, in the English language, of any distinction between Know-How, and Know-What. We use the word "knowledge" for both of these forms of knowing.
However Knowledge management has always delivered its real value when applied to "Know-How" - to improving the competence of the organisation by giving people access to the knowledge they need to make the correct decisions.
The implication of this definition, is that it allows you to align Knowledge Management with Decision Support. At a recent KM planning workshop, for example, the project leader asked that the KM plan be focused entirely in the upcoming decision to select the project concept. We then had a great discussion as a team about "what do we need to know, to make an effective decision on concept selection?" The knowledge needs inventory that emerged from this discussion was then used to plan the project learning actions.
What is the difference between information and knowledge?
Information is “know what” while knowledge is “know-how.” Information is “what is” while knowledge is “what works.” Information that helps perform an action better is knowledge. To a doctor, most of the contents of a typical daily newspaper is simply information – interesting but not useful for effective action as a doctor; however, an article from a medical journal in her field of specialization that improves her ability to diagnose or detect a newly discovered disease is knowledge. If a knowledge worker answers “yes” to the question, “does this help me do my job better?” then it is knowledge.