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Editor’s Note: The information age is fueled by access to vast amounts of knowledge, much of which is stored in computers. The explosive growth of knowledge requires excellent knowedge management to be competitive in the information based economy.
The Essentials of Knowledge Management
What it’s all about and why you should care!
Ed Beasley
Knowledge Management is part of a discipline that studies intellectual capital within organizations. Corporations are currently interested in this topic because the shift towards an information economy has changed the corporate balance sheet from more tangible assets to more intangible assets.
The Brookings Institute has studied all non-financial, publicly traded firms in the Compustat database since 1978. In 1978, Dr. Margaret Blair showed that 80% of the firms’ value was associated with its tangible assets and 20% associated with intangible assets. By 1988 intangible assets accounted for 55% of the surveyed firms’ assets. By 1998, a stunning 70% of the firms’ value was associated with the value of their intangible assets.
"The rapid rise of the internet in parallel with the exponentially growing capabilities of information technology (computers, communications, etc.) has effectively moved the industrialized world into a new economic paradigm. . . .
In the industrial era tangible assets were the major source of value; but in the information era information has more value than tangible assets."
Sullivan, Patrick L. Value-Driven Intellectual Capital. Wiley & Sons, 2000.
Information is the primary commodity of the 21st century. The pre-Internet days are already considered the Information Dark Ages. We accumulate information-both vital and not so important-at an astonishing pace. The quantum leaps in communication overshadow those in the transportation industry, which went from horse and buggy at the beginning of the 20th century to the moon only 69 years later.
As metaphors go, this is about the magnitude of how information management (Knowledge Management) has changed in just the last ten years. Is your financial institution staying up to speed?
What’s Changed?
How technology and communications changed the equation:
When the stand-alone (un-networked) PC made its debut in the corporate world, it changed how the individual worked, but only the individual. People could now automate some of their more brute processing tasks using Lotus, and WordStar, but individuals working in isolation still couldn’t share with each other. The printed page still ruled over digital exchange for both internal and external corporate communications.
The LAN/WAN/IP Changes Everything
After the battles of the protocols in the early 1990’s (Novell vs. Microsoft), what emerged was the baseline communications protocol-IP (internet protocol). This is what truly changed the world. With a common standard communications interface, all company computers could talk to all other company computers. Just a very few years ago, this lack of interoperability was a real quagmire; forcing companies to spend great deals of money addressing network interface problems. The same drive towards standardization that affected networking, also affected hardware. The arm wrestling between Macs and PCs was protracted but the final solution was predictable. Today, PCs rule the corporate kingdom.
Maximizing the Already Existing Investment
Banks Search for Bang from Past Years’ IT Bucks
"After years of pouring cash into computer systems-first to avert a year 2000 calamity, and then to capture the power of the Internet-bankers now are cutting back on technology investments, trying to get the most out of the money they have already spent. . . . one key word is optimization."
American Banker’s Daily Briefing, December 3, 2001
Today, companies have huge investments in network infrastructure. To make use of this already capitalized expense, companies are turning to Knowledge Management (KM).
KM is a process of defining who in your company needs to know what information, at what point in time, from wherever they are located. An easy way to remember is the "who, what, when, where, why " rule of writing a composition. And you thought you didn’t learn anything in eighth grade!
Is There Really a Business Issue Here?
Undoubtedly! Our friends at IBM cite the following training statistics:
- In year 2000, $54 billion was spent on formal training.
- In year 2000, indirect training costs were between $140B to $240B
- Less than 30% of training gets transferred to workplace performance.
- 60% of employees spend an hour a day duplicating the work of others.
KM seeks to maximize employee efficiency and avoid re-work and the dreaded "re-inventing the wheel" syndrome. KM is a long-term, persistent business strategy which should involve all members of the organization.
It seeks to identify, capture, document, share, update, and improve business processes.
Where Do You Start a KM Project?
The Big Picture
KM does not exist in a vacuum. Begin a KM strategy by first reviewing the company’s mission statement. At the broadest level, we are seeking what’s important to the business and what is not. A layer below the mission statement is the strategic plan. Assuming this is more than a dust magnet, the strategic plan should give interested parties some hints as to where KM energy should be spent.
More towards the bottom of the organizational block chart, lie department plans, and even individuals’ job descriptions. All of these feeder documents can contribute to a robust KM strategy.
The intent is to stratify the organizational objectives into one of two categories: the significant few and the insignificant many.
"But, Our Company Doesn’t Have a KM Culture"
Let’s face it. Nothing can be done in an organization without the cooperation of the staff. Convincing employees of the merits of KM is not a hard sell. You would find nearly everyone in the workplace could agree on a list of adversity they confront each business day:
- Change is extraordinary and the pace is accelerating
- Resources to accomplish a task are stable or decreasing
- Personnel turnover is a problem
- Finding opportunities to train people and still accomplish the job are scarce
- Finding qualified applicants with the right skills is difficult
Implementing a knowledge management plan within the organization serves all entities well: employee, department, and organization. As an increasing share of an organization’s information is placed in digital form, companies must make efforts to define, categorize, and share it with those who need it. Management must also ensure that employees can find the information they need to perform their jobs. If the employee is new or unskilled, management must provide the tools to remedy the deficiency.
What Does the Absence of Knowledge Management Look Like?
If you live in a house with a basement, open the basement door, walk down the steps, and try to find something, anything. Maybe, you have a garage instead of a basement, but the same principle applies: if you don’t document where you put something, there’s no way you’re going to find it, at least not easily.
You could also walk into any Home Depot to see what a lack of KM looks and feels like. How do you find a little thumbtack in over a 100,000 sq. ft. of space if you’re left on your own? Is this how the employees feel at work when looking for business information?
In most companies, one need not go very far to find an example of information anarchy. Just open Windows NT explorer, or similar tool, and peruse the company server drive. Is the information segmented either by department or business process? Is the information current, or outdated? Are updates handled in a seamless fashion?
Does anybody really know what time it is?
A company can devise, issue, and update all the policies and standard operating procedures it wants, but if the employee doesn’t know they exist or where to find them, all effort is in vain. Couple this with the IT group’s effort to have users constantly delete information in an effort to save server space, and you have a perfect recipe for information dropout and classic re-work.
Email- A Two-Edged Sword
The ease and speed of email drives the frequency of email communication; this results in a glut of information, much of it unimportant. The technology itself drives the frequency of communication. Walk down any larger city sidewalk and note the number of people talking on cell phones. They talk because they can. They email because they can.
Email can significantly contribute to information anarchy. When you were hired or email was made accessible, what guidance was given to you by the company?
Was a baseline "folder" organization proposed for the department, or was everyone on their own to devise whatever? Since the initial email deployment, what continuing directives have been issued by the company or department?
A recent Gartner study found more than a third of business email is "occupational spam"- unnecessary email sent by co-workers.
Kaplan-Leiserson, Eva. "The Tremendous Issues of Technology."
T+D (Nov, 2001): 30
So, Knowledge Management is about Technology?
KM is not as much about technology as it is using the technology to define, organize and distribute knowledge within the organization to achieve the highest return on the intellectual capital. In the struggle to configure the company for maximum effectiveness, someone must be looking at business processes and how they meet the goals of the organization. KM is a dynamic interplay of policy and process, technology and culture, information and control. Some of the factors influencing the effectiveness of a KM program within an organization are:
- Presence of defined organizational goals and measurements thereof
- Recognition of the value of intellectual capital
- Management and employee buy-in and support
- Previously articulated business processes
- KM program persistence orchestrated by an internal ‘champion’
Is Knowledge Management Considered Training?
No, and yes. KM obviously differs from classroom training, yet KM is not one of the various flavors of ‘distance learning’. KM does serve as a business process reference tool or content management tool.
KM can provide new employees and junior people with a persistent organizational memory accessible to them on their PCs. Web-based KM is digital rather than printed, so updates can be made quickly, and are immediately accessible to all users.
While in its purest theoretical construct, KM is not training, KM can include a database of questions that would allow users to test their understanding of the concepts presented. Through this device KM shifts delivery towards a more familiar training paradigm.
While KM does have the potential to transfer skills to a degree similar to training, big differences exist in information direction, timing, and control. These differences are illustrated below.
|
Traditional Training |
 |
Characteristics
- One-to-Many
- Information Broadcasting (PUSH of information)
- Same Info to all
- Instructor-decided
- Information filed for future (not immediate) use
Characteristics
- One-to-One
- Information on demand (PULL)
- Individualized Info (Only when needed)
- User (employee) selected
- Just-in-time use
How Is Management Affected by the Change to an Information Economy?
(Or, What the Heck Should I Be Doing About This?)
"Bankers who dismiss knowledge management, however, do so at their peril. In fact, most bankers are probably engaged in some form of knowledge management without giving it that label."
Lamb, Ellen Clair. "Knowledge Management" Community Banker
(Sep, 2001): 26
Managers have a responsibility to their business to use assets to the best advantage of the business (and stockholders). As more and more of the businesses’ value is attributed to intangible assets (information), it’s the mangers responsibility to efficiently and effectively manage this asset. The following is some good advice:
". . . Look at the existing ways in which employees and the organization share information. Find out how they communicate, document, or store knowledge and information. Build upon those successful processes that already exist. Keep in mind that two principles govern the value of knowledge management: relevancy and accessibility for the potential user."
Snidell, Milo T. "KM Conversation." T + D (November, 2001) : 21.
In the final analysis, Knowledge Management is just plain ‘ole good management. Intellectual assets are organizational capital and, as such, need your attention, just like any other asset. Recognizing the importance of the forces of change-the shift to an information economy-is the first step. Taking constructive action to leverage the value of your organization’s intellectual assets is the next step.
To assist you in planning, your Risk Management Association (RMA) will be addressing KM topics in future issues of the "The RMA Journal". Stay tuned!
References:
Recommended reading: Value-Driven Intellectual Capital. Patrick Sullivan. John Wiley & Sons. 2000.
About the Author:
Ed Beasley is Project Manager for Professional Development at The Risk
Management Association (RMA).
His phone: 215-446-4063;
Fax: 215-446-4101,
email: ebeasley@rmahq.org
and Web: www.rmahq.org