What is RAG, and is it better than fine-tuning for company knowledge?
Retrieval-augmented generation (RAG) means the system first searches your documents for passages relevant to a question, then asks a language model to answer from those passages, with citations. The approach was set out by Lewis et al. in 2020 (opens in a new tab) and is now the standard pattern for company knowledge assistants.
For knowledge that changes, RAG beats fine-tuning. Fine-tuning adjusts a model's weights with examples. It is good at teaching a format or a tone and poor at teaching facts that will be stale next quarter. It also cannot show where an answer came from, or hide one department's files from another.
| RAG | Fine-tuning | Off-the-shelf assistant | |
|---|---|---|---|
| Best for | Answers from changing documents | Fixed formats, tone, classification | Search across common apps without a build |
| Shows its source | Yes, down to the passage | No | Usually, linking to the file |
| Picks up a changed document | On the next sync | Only after retraining | On the vendor's schedule |
| Respects document permissions | Yes, when built in | No | For the connectors it supports |
Off-the-shelf tools such as Microsoft 365 Copilot or Glean are a fair first step when your documents sit in systems they already connect to. A custom build pays off when sources fall outside their connectors, when answers must cite the exact passage, or when you need control over how the assistant searches and refuses.
