PurposeThe purpose of this research was to model the impact of customer knowledge on the performance of organization with a focus on information technology industry. Furthermore, it is intended to analyze the effect of customer knowledge investment on the performance measures, by reviewing investment policies.Design/methodology/approachThe relationship between customer knowledge and performance measures was specified using literature review and grounded theory method. The system dynamics approach was then applied to analyze the impact of the customer knowledge on the performance measures.FindingsThis study provided a dynamic model on the causal relationship between customer knowledge and organizational performance. The results showed that measures such as product development, financial performance, idea generation, technical knowledge and knowledge maturity were affected by the customer knowledge while the relationship with customer loyalty and the number of customers was not proven. Besides, it was found that to increase the impact of customer knowledge on organizational performance, knowledge maturity was essential, and investing on customer knowledge without investing on knowledge maturity would reduce the organizational performance. The results also showed that more knowledge investment would not necessarily increase financial strength of the organization.Practical implicationsResults of this study could be useful for strategy formulation and deployment especially for IT-based companies showing the importance of investment on customer knowledge on the one hand and the knowledge maturity in the organization on the other hand.Originality/valueIn this research, the impact of customer knowledge on both financial and nonfinancial performance measures was studied showing new findings on the dynamism of their relationships.