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E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t In some instances, the break-even point for resources invested in a knowledge worker may come several years after training. If a corporation invests years of knowledge worker time in training, and the person leaves the corporation voluntarily or is downsized within a few months, the corporation may not be able to recoup its investment. For this reason, corporations typically attempt to limit an early exodus of trained employees by imposing a payback penalty on outside courses taken and paid for by the corporation. However, penalties for leaving a company after in-house training are rarely imposed.
Another possibility is that there may never be a break-even point because of changes in the value of the training or because the cost of training is out of proportion to the potential benefit, as in Exhibit 7.5.
Sending a manager or knowledge worker to a management course at Harvard or Stanford instead of to a local community college may increase the value of the person sent for training, but the expense may E X H I B I T 7 . 5
ofit
Pr
Loss
Training
Time After Training
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not be reflected in profit to the corporation. Furthermore, the value of the education to the corporation may be further eroded if the training was in a now-defunct technology or process. For example, at the height of the dot-com boom, hundreds of companies sent anyone who could use a keyboard to training for programming and web design. Many of the same companies found themselves downsizing these employees in a matter of months. What’s more, Web programmers who once could command significant salaries and stock options found themselves unable to find a job, despite their training.
Incremental Value
One way to assess the value of a Knowledge Management initiative is to look at the incremental value of information along the KM life cycle. As illustrated in Exhibit 7.6, the contribution of the KM process to the incremental value of information varies with the processing of information. In general, the largest contribution to value is the initial creation and acquisition of information. Also significant is the translation and repurposing phase of the life cycle, in that the incremental value of translating information can result in an increase in value similar to that of the original creation and acquisition phase. Archiving, modification, and implementing user authentication and other methods of providing restricted access to the information generally provide significantly less incremental value to the information. For example, the value of information in an archive may drop precipitously because of changes in the market or within the corporation.
In addition to fluctuations in the value of information over time, there are differences in incremental contributions to the value due to administrative costs, competing services, economies of scale, inefficiencies of processing, labor costs, overhead, and the details of the process. For example, some processes, such as archiving, incur greater administrative 169
E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t E X H I B I T 7 . 6
Use
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Access
Disposal
Acquisition
Translation/
Archiving
Repurposing
Transfer
Creation/
Acquisition
alue
Translation/
Repurposing
Modification
emental V
Incr
Archiving
Access
Transfer
Creation/
Archiving
Modification
Translation/
Transfer
Access
Acquisition
Repurposing
costs than others do. Similarly, competing services create an upper boundary on the incremental value of a given phase of the knowledge life cycle. For example, the cost of an outside archiving service limits the value that an internal archiving effort can add to the information.
Summary
The bottom line in assessing the value of Knowledge Management is whether it can provide significant, measurable return on the corporation’s investment. In the absence of industry-wide proof that a KM
approach is economically rewarding, and since ROI and benchmarking techniques cannot provide meaningful assessments, the balanced score-170
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card can be used to assess value and plan for future activity. However, the balanced scorecard technique is fraught with uncertainties resulting from the variability in how indicators, metrics, and objectives are assigned.
Finally, when dealing with intellectual capital, issues such as information life span and time value of information have to be considered.
A little knowledge that acts is worth more than much knowledge that is idle.
—Kahil Gibran
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C H A P T E R 8
Getting There
After reading this chapter you will be able to
• Recognize the internal predictors of a successful Knowledge Management initiative
• Develop a practical Knowledge Management implementation plan
• Appreciate and recognize the risks involved in Knowledge Management
• Appreciate the significance of proper timing in implementing a Knowledge Management initiative
• Predict the likely future of the Knowledge Management industry and how it will affect your organization Moving from theory to practice in the Knowledge Management (KM) arena requires leadership, clearly defined business goals, a receptive corporate culture, and an understanding of when and where to incorporate enabling information technologies. This chapter describes an implementation strategy that should be just as applicable to a small business as to a Fortune 500 company.
For the Record
The progression of activities in the story of how the Custom Gene Factory eventually transforms itself into a knowledge organization is 172
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indicative of the typical circuitous path to Knowledge Management.
For example, in an effort to gain a competitive edge over Healthcare Productions, the management of Medical Multimedia hires a consultant to develop a multimedia asset management system. This system is designed to keep track of images, sounds, and other media that the company repackages for various customers. In creating this system, the consultant interviews company employees to determine the current process. She then designs a database system that mirrors and improves on the manual handling of multimedia assets.
In the course of the consultant’s work with the multimedia, she discovers that Medical Multimedia’s management sorely needs a system to track its other intellectual property as well. After a year of effort, which includes working closely with the information systems department, the consultant develops a limited KM system for tracking and managing intellectual property at Medical Multimedia. A competing company doesn’t embrace Knowledge Management and succumbs to the more competitive Medical Multimedia.
Unfortunately, this early success in Knowledge Management is costly for Medical Multimedia in terms of employee relations. Most employees resist being interviewed regarding exactly how they perform their jobs, and one employee—the top graphic artist—leaves the company to run her own business. To minimize any further loss of intellectual capital, the consultant, working together with the head of human resources and the CEO, develops a company policy that recognizes employee contributions with public approbation as well as pay bonuses and stock options.
Meanwhile, the owners of Medial Multimedia decide to sell the company while it’s at the top of the market. Since they know that the market value of the company is greater than what the books suggest, they have the consultant arrange for an independent knowledge audit.
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E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t After assessing the intangible assets in the company, the valuation is double the company’s original book value, compared to previous assessments based on tangible assets alone. A biotech firm, Custom Gene Factory, acquires the company.
Custom Gene Factory’s CEO, who is impressed by the usefulness and value of the knowledge audit, hires a chief knowledge officer (CKO) who reports directly to the chief information officer (CIO). The original KM consultant, demoted by CGF, resigns and offers her services to the company as a high-priced consultant.
The strategy for KM initiatives in the company is now in the hands of the CKO. After observing the ad hoc communities of practice that have formed in CGF, he proposes a computer-based collaborative system for key knowledge workers and senior managers. His plan is accepted, and, after several months of work, an electronic whiteboard system that supports instant collaboration is in place and in use.With the success of TEAMFLY
the electronic whiteboard system under his belt, the CKO proposes a corporate-wide strategy for indexing, archiving, and disseminating the information recorded by the electronic whiteboard.
Working closely with a team of senior managers, middle managers, and representatives from various communities of practice, the CKO crafts a request for proposal (RFP). This document reflects the corporate consensus on the technical capabilities that are needed to facilitate Knowledge Management. After an extensive evaluation of the solutions available, including an assessment of the vendors and developers, a vendor is selected, and a contract is negotiated for a pilot project in the company’s research and development (R&D) division.
About a year into the pilot, the CKO is faced with the challenge of defending spending on the KM system to move it company-wide.
Because ROI and benchmarking tools fail to capture the benefits and goals of the KM project, the CKO uses a balanced scorecard technique 174
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to convince senior management to opt for company-wide expansion of the KM system. What remains to be seen is how the system will be accepted by the company’s knowledge workers and how the investment in corporate resources will be reflected in corporate value—which is where the leadership of the CEO and other senior managers comes into play.
Issues
Custom Gene Factory’s circuitous path from a multimedia asset management system to a corporate-wide KM system, which includes acquisition of Medical Multimedi and several internal initiatives, highlights many of the issues relevant to a practical KM implementation:
• A successful implementation requires a solid plan that makes provision for multiple contingencies and the leadership to bring the plan to fruition.
• A KM implementation plan should include a strategy for achieving employee buy-in, including a means of shifting corporate culture from one of knowledge sequestering to one of knowledge sharing.
• The focus of a KM initiative should reflect both the perceived needs and ad hoc experiences of knowledge workers and management. That is, a formal KM initiative should amplify current KM practices, regardless of how latent.
• A knowledge audit can provide quantifiable valuation of intangible corporate assets.When applied appropriately, this technique has a proven track record of delivering value to the corporation.
• Knowledge engineers, knowledge workers, and KM consultants work synergistically with others in the corporation.
Similarly, the CKO typically reports to the CIO or other senior manager.
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• Loss of intellectual capital, in the form of attrition of knowledge workers and management, is a part of everyday business and a primary reason for implementing a KM system capable of archiving and repurposing rules and heuristics.
• Realistic implementation time lines for KM initiatives range from several months for limited, department-wide projects to a year or more for corporate-wide systems.
• Perhaps the greatest challenge of KM professionals is proving to investors, senior management, and other primary stakeholders that transforming the corporation into a learning organization through KM methods will result in a significant, quantifiable increase in corporate value.
Implementation Overview
A successful Knowledge Management implementation requires that senior management understand the corporation’s needs and have a clear vision for its future, a grasp of the range of technologies available for enabling the KM processes that apply to the corporation’s business, and the experience to navigate the inevitable legal, contractual, and economic hurdles ahead. Addressing these requirements systematically through an established process maximizes the odds of success and provides senior management with flexibility in modifying the approach to meet their needs.
The road map offered here, consisting of five major phases, addresses practical a KM implementation from the perspective of senior management aided by a CKO or KM consultant:
1. Ad hoc experience. Collect data about the company’s ongoing KM
activities.
2. Fact finding. Determine if a corporate-directed KM implementation is warranted and feasible.
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3. Formalize approach. Define specific milestones and outcomes for success.
4. Implement. Take action.
5. Evaluate. Assess progress toward milestones and outcomes, and, based on the results of the evaluation, follow one of the four following paths:
a. Modify. If the current solution doesn’t suit the needs of the corporation, then modify the approach and implement a new KM solution. Since few implementations will work perfectly on the first attempt, this is the most likely initial outcome of the evaluation phase.
b. Extend. If the KM solution suits the needs of the corporation, either from the initial attempt or as the result of a modified approach, then extend the solution through more of the corporation.
c. Maintain. At some point, the corporation will reach a steady-state condition in which the current KM solution is stable and satisfies the corporation’s foreseeable needs. Maintenance of a KM system is a dynamic
process that will require a continual stream of resources.
d. Disable. If the current approach to Knowledge Management fails, at some point senior management has to decide whether to continue to invest resources in it or to disable the current implementation process and either reformulate the strategy or wait for changes in technology or corporate culture.
Ad Hoc Experience
The first phase of the implementation process involves observing the internal processes of the corporation as they relate to Knowledge Management. Even if there isn’t a formal KM process in place, virtually every corporation is involved in KM activities. Everyone in business 177
E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t creates, archives, repurposes, transmits, shares, copies, modifies, and disposes of information on a daily basis.What may be missing is a formalized approach to extending the practice—which may be personal or limited to a small working group—department- or corporate-wide.
Fact Finding
The second phase of a KM implementation process involves a systematic information-gathering initiative that extends and builds upon the ad hoc experiences within the organization and extends to factors external to the corporation. The major fact-finding activities revolve around five key axes: 1. Stakeholders
2. Strategy
3. Finances
4. Corporate culture
5. Tactics
Questions and issues relevant to each of these axes are provided.
Stakeholders. Early in the implementation process, it’s important to clarify who is for and who is against a KM initiative. In creating a map of the political landscape, including primary stakeholders, it’s also key to identify any hidden agendas. Are there any major dissenters in senior management?
If so, is the resistance surmountable? Similarly, will there likely be resistance from organized labor? Finally, in working with stakeholders, who should have a say in deciding on the details of the implementation approach?
Strategy. Strategically, it’s key to identify the problems that proponents of the KM initiative hope to solve. In particular, why is a KM initiative preferable to other strategies? What are the projections for the growth of the company, the industry, and the need for Knowledge Management? How well will a KM project fit with the overall corporate strategy?
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Another issue is how Knowledge Management will likely affect the company’s core competency. For example, if the company enjoys technological superiority in an area, how will a KM implementation leverage this advantage?
Finances. The financial feasibility of moving to a knowledge organization depends on projections for the company’s future needs and whether addressing these needs warrants investment in a KM initiative. As with T I P S & T E C H N I Q U E S
Timing Is Everything
Implementing a Knowledge Management program takes time and requires the coordinated timing of events. Relevant questions to ask before making the move are:
• What is the motivation to change?
• Is the current business process viable without a KM program? If so, then why change?
• Is there a consensus at all levels in the organization that a KM program is necessar y?
• Is the corporate culture ready for change? If not, what is necessar y, other than the simple passage of time, to prepare it for change?
• Is there a commitment to long-term support from senior management?
• What are the risks of changing—and not changing—now?
A KM program not only costs the corporation money and other resources, but also increases or at least changes the nature of the workload of virtually every employee. Instead of simply responding to situations, employees may have to respond and then take the time to document their decision-making process. Although the burden is greatest at the start of a KM program, the overhead never completely returns to the original baseline level.
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E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t all business endeavors, timing is critical, especially relative to planned mergers and acquisitions. Developing a KM system, unlike developing a comprehensive information system, can’t simply be outsourced to an external vendor. It involves integration of processes, cultural change, and technology within the corporation.What’s more, a KM implementation can take years and involve significant investments in training and in information technology.
Corporate Culture. In exploring the financial feasibility of a KM implementation, due diligence on the part of management includes exploring options from outsourcing to using internal development staff.
Decisions on how to handle development will determine the short-and long-term capital requirements as well as the scope of the planned implementation and how disruptive it will be to the corporate culture.
For example, if the company prides itself on its close relationship with employees, then a significant downsizing associated with a KM initiative may be unacceptably disruptive to the corporate culture —especially if resources that could have been used to pay employees in the company instead go to outside vendors.
Other issues that affect corporate culture include the interest, at all levels in the organization, of formalizing ad hoc KM behavior into a KM
system. Because a move to Knowledge Management and the associated technology infrastructure represents a major shift in employee skill set requirements, some employees may resist the move for fear of being downsized. Corporate stability also may be adversely affected if employees opt to find employment elsewhere instead of submitting to the overhead of documenting their activities and decisions.
Tactics. Hundreds of unknowns need to be addressed. For example, are there sufficient in-house resources to create a KM system? Is the time line for implementation reasonable and compatible with other corpo-180
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rate activities? How will privacy and security concerns be addressed?
How will quality control be implemented? What additional training will be required for employees and management, and at what direct and indirect cost? Similarly, of the hundreds of enabling technology solutions, which are most appropriate and affordable?
Exactly how internal fact finding is carried out depends on the culture and size of the corporation. For example, external fact finding through site visits can help facilitate external data gathering and provide the implementation team with a perspective on exactly what is involved day-to-day in an implementation effort. Sending a corporate representative to attend seminars, networking with colleagues in other businesses, and working with consultants also can facilitate external fact finding.
Regardless of the approach used, for implementation to move past the fact-finding phase into a formalized approach, senior management must be fully behind the initiative. This is true whether the motivation for a KM implementation is to increase profitability, to provide higher-quality service, or to transform the corporation into a learning organization.
Formalize the Approach
The third phase of the Knowledge Management implementation process involves formalizing the approach—that is, developing a comprehensive plan—based on ad hoc experiences and the results of fact-finding. One of the key tools at this phase of implementation is the request for proposal, which documents much of the internal strategic planning. For example, the RFP defines the functional and requirements specifications for any technologies involved in the implementation. These include definitions of the operational constraints of technology, such as hardware and software requirements, in terms of performance and standards.
A formalized approach includes details on project management, including resource management, time lines for technology infrastructure 181
E S S E N T I A L S o f K n o w l e d g e M a n a g e m e n t improvements, contingencies for problem management, slips in time lines, and disaster recovery. Perhaps the most important issue during this phase of implementation is expectation management, as expressed in return on investment and customer service. In this regard, a clear definition of the metrics for success is key to helping direct the flow of resources over the implementation of the KM system.
Implement
The fourth phase of the implementation process involves taking action and actually doing the work defined in the implementation plan.
Working the plan normally involves vendor selection and negotiating contractual agreements, such as legally binding agreements between vendors and the corporation. If external vendors are involved in development, such as information system infrastructure development, a variety of service-level agreements may be involved as well. The human resources department typically is intimately involved in this phase of implementation, especially if extensive downsizing, training, and recruiting of employees are in store.
Evaluate
The fifth major phase of the implementation process is evaluating the results of the efforts in the first four phases. A component of the evaluation phase is problem management, in that there are inevitably problems in timing, cost overruns, and the way resources are managed. For example, service-level agreements may have to be modified to reflect the reality of what vendors actually can deliver.
Evaluation is a continuous process that involves reexamining internally monitored metrics as well as service-level agreements with outside service providers at regular intervals and adjusting the implementation processes accordingly. Rarely can a KM system be established on the first attempt. For example, a pilot program may be evaluated and the 182
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decision made that it must be modified before it can be extended throughout the organization. In other cases, the problems discovered during the evaluation phase may be insurmountable, and the entire program may need to be discarded.
A major milestone in the evaluation phase is signing off on work that has been performed internally and by vendors. However, even if everyone involved with the project has delivered within specifications and according to agreements, the resulting KM system may not work as expected. In most cases, the approach will have to be modified to reflect the results of the evaluation. For example, a videoconferencing system may not work as expected because of interruptions and delays in audio and video signals. The service provided by the DSL or cable modem vendor doesn’t provide sufficient bandwidth for uninterrupted audio and video conversations to be held over the Internet. Knowledge workers and managers may be forced to use a cumbersome telephone conferencing system for the audio portion of the conversation and the Internet for the video segment. As a result, setting up an impromptu meeting via the Internet may be practically impossible, and knowledge workers may opt to use telephone conferencing.The modification in this example might be to purchase a higher-end videoconferencing system that includes special hardware for compressing the audio and video in real time so that conference participants can see and hear each other in real time.
Risk Management
For most senior managers, managing risk is a continuous process that involves rethinking strategies and employing tactics to maximize likelihood of success. One of the primary tactics for managing the risks associated with a KM implementation is learning to predict where threats can arise and to recognize threats as soon as possible. As described here, the key areas of risk associated with a KM initiative relate to: 183
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• Management
• Politics
• Finance
• Law
• Technology
• Marketing
Management
The implementation activities associated with risk range from selecting an appropriate implementation strategy, establishing a workable reward system, and filling resource requirements, to dealing with excessive market volatility, maintaining focus, exercising the appropriate leadership, and selecting the appropriate vendors. For example, in selecting the best implementation strategy, management must decide whether to TEAMFLY
attempt a corporate-wide implementation from the start or to experiment with a limited pilot program.
The advantage of a pilot program is that there is limited risk in the event that the project fails, less financial exposure, and less disruption of the corporate culture. There’s also the advantage of being able to sel