"There is too much information to pile it on the floor."
Marjorie Hlava of Access Innovations an excellent overview of the state-of-the-art with taxonomies, including both basic background and discussion of where and how taxonomies are used in the business world.
For those that don't know, taxonomy is generally a hierarchical means of categorizing a subject matter. Hlava includes in her definition all the data associated with each entry in the taxonomy - the term records that give each term its context, history, status, cross-references, etc. Others prefer to use "taxonomy" to strictly refer to the hierarchy and "ontology" to include the additional information about the terms. In either case, to be useful, you need this additional information, as the taxonomy continues to change as ideas emerge in the subject area.
Taxonomies fit in a number of places in the organization. Libraries use them, as you might expect. Websites tied to content management use them to help users navigate and provide consistent information displays. They are used to help stay abreast of the industry and keep up to date with terminology. They are used to filter newsfeeds and other data sources (for syndication to various clients). They are used in filing and cataloging. They can even be used in translation, either across different subject areas or even languages, given enough capability to create synonyms.
Hlava indicated that taxonomies themselves are a knowledge repository. If one were to "read" a taxonomy from a given discipline, one should be able to get a good overview of the important areas of focus within that discipline. Or within an organization, the taxonomy tells a lot about the organization itself. Hlava even reads taxonomies for fun.
In this vein, Hlava gave an example of taxonomies being used in support of communities of practice, particularly those that form around critical issues and need to be up-and-running as quickly as possible. The taxonomy can help with correlation across functional, regional and national languages; support navigation of information; help layout knowledge maps; improve search queries and results; and judge authority.
Hlava discussed how organizations go about building taxonomies, which sounds a lot like standard life cycle projects anywhere else: scope, requirements, collect, build, apply, continuous improvement. The critical aspect for me is the last piece of continual renewal of the taxonomy terms. Language changes, preferred usage changes and new terms come into favor.
Throughout the talk, Hlava provided some interesting visualizations of taxonomies that go beyond the traditional indented list, particularly since these make it difficult to see the cross-references and interrelations across branches of a large hierarchy. There are some graph techniques that show the density and connectedness of a given taxonomy. And these visualizations help see things within hierarchies that may not have been obvious.
Summary: Taxonomies create opportunities for knowledge sharing. They add value to any discussion, creating a common context around which people can speak.