In 2012, Knight Capital Group, a major player in the financial trading industry, suffered a catastrophic loss of $440 million in just 30 minutes. This incident, which nearly led to the company’s collapse, serves as a stark reminder of the critical importance of tacit knowledge in highly technical environments.
What happened?
The disaster unfolded when Knight Capital deployed new software on its automated trading platform. Unkown to the team, an outdated piece of legacy code was inadvertently activated during the deployment. This code, which was meant to be decommissioned, triggered a series of erroneous trades across multiple stocks, causing massive market disruptions and incurring significant financial losses.
Why did this happen?
The root cause of this failure was not just a technical glitch but a profound loss of tacit knowledge within the organization. Over time, key personnel who were intimately familiar with the system's intricacies had either left the company or moved to different roles. These individuals held critical, undocumented knowledge about the legacy code—knowledge that was never fully transferred to the remaining team.
Tacit knowledge, often gained through years of hands-on experience, is not easily captured in documentation or formal training. In Knight Capital's case, the engineers who were involved in the original coding and system architecture had an intuitive understanding of the platform’s behavior under different conditions. When these employees left, so did their deep, context-specific knowledge, leaving the company vulnerable to catastrophic errors.
How could Knowledge Fabric have helped?
Knowledge Fabric automatically constructs and maintains a living model of who knows what within the company, which we then use to pinpoint knowledge which is at risk of being lost. In this case, the knowledge asset regarding the legacy code in question could have been identified months or years before this happened and managers could have taken corrective interventions, possibly avoiding the situation altogether.
Talk to us today
Are you interested in learning more about how Knowledge Fabric can protect and enhance the tacit knowledge within your organization? We’re here to help you unlock the full potential of your team’s expertise. Talk to us today, and let’s start a conversation about how we can deliver lasting value to your business. Email us on letstalk@knowledgefabric.io.