Editorís 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 itís all about and why you should care!
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 firmsí value was associated with its tangible assets
and 20% associated with intangible assets. By 1988 intangible assets accounted
for 55% of the surveyed firmsí assets. By 1998, a stunning 70% of the firmsí
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?
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 couldnít 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 1990ís (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 Yearsí 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 Bankerís 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
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 didnít learn anything in eighth grade!
Is There Really a Business Issue Here?
Undoubtedly! Our friends at IBM cite the following training
- 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 companyís mission statement. At the broadest level, we are
seeking whatís 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 individualsí 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 Doesnít Have a KM Culture"
Letís 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
- 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 organizationís 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 donít document where you put something, thereís no way youíre 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 youíre 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 doesnít know
they exist or where to find them, all effort is in vain. Couple this with the
IT groupís effort to have users constantly delete information in an effort to
save server space, and you have a perfect recipe for information dropout and
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
- Presence of defined organizational goals and measurements
- 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 Ďchampioní
Is Knowledge Management Considered Training?
No, and yes. KM obviously differs from classroom training,
yet KM is not one of the various flavors of Ďdistance learningí. 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.
- Information Broadcasting (PUSH of information)
- Same Info to all
- Information filed for future (not immediate) use
- 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 businessesí value is attributed to intangible assets (information), itís
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) :
In the final analysis, Knowledge Management is just plain
Ďole 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 organizationís 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".
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;
and Web: www.rmahq.org