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Knowledge
Management?
By Michael Alan Hamlin
September 1, 2003
Technology solution providers and management experts
have a new buzzword to kick around. It's Knowledge Management, known
predictably as KM, of course. KM is the new big thing. It's the
source of sustainable competitive advantage. It's the proverbial
leg up. It's the new wave of consulting intervention in major corporations,
and it's the latest reason to form new associations of like-minded
professionals.
But what exactly is KM? The closest I've come to a
coherent definition I found at www.ice.org.uk, which looks like
it should belong to some grunge musicians but in fact is the site
of the Institute of Civil Engineers in the United Kingdom. In a
paper posted on the site, authors Dr. John M. Kamara, Prof. Chimay
J. Anumba, and Dr. Patricia M. Carillo write that, "KM deals
with the organizational optimization of knowledge to achieve enhanced
performance, increased value, competitive advantage, and return
on investment through the use of various tools, processes, methods,
and techniques.
The key words in that definition are knowledge and
optimization, to me. Put in layman's terms, KM is about optimizing
the return on knowledge by developing tools and processes that allow
the people to wring maximum practical benefit from the knowledge
floating around a company. We're talking about all kinds of knowledge
here, too. Knowledge that has to do with business processes, market
intelligence, competitive intelligence, organizational dynamics,
technology and lots of other things.
This is exciting for software solution vendors because
knowledge management provides the opportunity to develop new systems
to store, organize, and analyze information so that it can be made
useful. When information can be easily accessed and made contextually
useful, it becomes knowledge that can be leveraged to do interesting
things that ideally contribute to meaningfully increasing revenues
and profitability.
Because companies are always on the lookout for the
next big thing that can provide a measure of competitive advantage,
KM should be interesting. And it is except for the dull reality
that it's really difficult to understand exactly how one goes about
doing KM. Where do you start? Who's supposed to be in charge? How
hard is it going to be to do? No one, apparently, has any easy answers
to these questions.
Probably the best way to get a grip on KM, therefore,
is to see it in action. Fortunately, this is possible thanks to
a group of McKinsey consultants, Susanne Hauschild, Thomas Licht,
and Wolfram Stein, who claim to have conducted a study of 40 companies
in Europe, Japan, and the United States with the intent to determine
how they leverage KM, and how they make it work (The McKinsey Quarterly,
2001 Number 1, http://www.optimizemagazine.com/mckinsey/2002/0121.htm).
The authors accomplish these tasks by comparing business and people
processes in successful and not-so-successful companies. They argue
that successful companies are successful in large measure because
they have managed to develop and institutionalize KM practices.
For example, in the area of competitive intelligence, Hauschild
et al. found that 93% of successful companies set world-class standards
for product development, while only 33% did so among less successful
organizations.
This finding holds true in other important areas, too, like process
innovation (87% vs 27%) and product and process quality (87% vs
33%). The key learning point here is that most successful companies
know enough about their competitors to understand what their benchmarks
should be, and they leverage that information by turning it into
a goal to meet or surpass.
The authors show how successful companies managed to get employees
to buy in to such goals as well - they paid them for performance.
Well, to be completely accurate, 73% of successful companies offered
meaningful (ie, money, other awards, recognition) incentives for
developing world-class products, while only 27% of less successful
companies offered such incentives. What is truly startling about
this finding is that 27% of 40 companies offered incentives and
still wound up losers.
The results didn't all have to do with money, however. Successful
companies encouraged participative decision making in such areas
as process innovation and product portfolio development. Team work
does work, apparently, when employees' ideas are acted upon. In
the McKinsey study, 60% of successful companies used such participatory
mechanisms as cross-functional teams in the development of process
innovations, compared to just 20% of less successful companies.
When it came to product portfolio development, likewise
60% of successful companies based their product development decisions
on participative decision making. That was true in just 27% of the
less than successful companies.
Hauschild and her colleagues made a number of other interesting
findings as well. What is important about their results is this
though: While KM may sound like a passing phenomenon, it's probably
not. No doubt KM practices will be benchmarked aggressively and
because of that the competitive advantage derived from KM will diminish
over time. But that will only make it a requisite to being in the
game in the first place.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is
currently at work on High Visibility: The Making and Marketing
of Asian Professionals into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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