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The last two years have seen rapid growth of interest in the topic of knowledge management.

As more companies experience the kind of results noted by the likes of BP and Hewlett-Packard, of which more below, the momentum will grow. New management books on the subject are being published all the time. Companies are creating knowledge teams and appointing CKOs (Chief Knowledge Officers) or Directors of Knowledge. Knowledge is clearly on the strategic agenda. The momentum has been building for several years. Many innovative companies have long appreciated the value for knowledge to enhance their products and customer service. I see several good reasons why the level of interest has grown dramatically .

First, existing initiatives only go so far. Total Quality Management (TQM), Business Process Re-engineering (BPR) and similar initiatives have helped organisations become more efficient at what they do. But how many such initiatives really make the best of a company¹s talent and help them differentiate themselves in the marketplace?

Second, knowledge can clearly command a premium in the market. Applied know-how can enhance the value (and hence the price) of products and services. Examples are the 'smart drill' that learns how to extract more oil from an oil field, and the hotel chain that knows your personal preferences and so can give you a more personalised service.

A systematic approach to knowledge should help an organisation avoid costly mistakes; by retaining knowledge as they downsize or restructure, they should certainly avoid 'reinventing the wheel'. By sharing best practice companies can save huge sums, taking the knowledge from their best performers and applying it in similar situations elsewhere.

Finally, there is the question of successful innovation: companies applying knowledge management methods have found that they can more easily take advantage of developments such as the Internet to bring the global market ever nearer.

These and other benefits, such as improved customer service, faster problem solving and more rapid adjustment to market changes, have resulted from a focus on corporate knowledge.

Knowledge management: an oxymoron?

Can knowledge be managed? The idea of knowledge management looks at first to be an oxymoron. Knowledge is largely cognitive and highly personal, while management involves organisational processes. Besides, many knowledge workers do not like to be managed in the traditional sense.

But knowledge is increasingly recognised as a crucial organisational resource that contributes to market leverage. That makes it a factor of strategic importance. Its management is therefore far too important to be left to chance.

Knowledge management is the explicit and systematic management of vital knowledge and associated processes - creating, gathering and organising knowledge, distributing, using and exploiting it.

In the strategic sense, knowledge management means transforming personal knowledge into a corporate resource that can be widely shared throughout an organisation and appropriately applied.

If this still sounds discouragingly abstract, consider the practical steps involved. The report Creating the Knowledge-based Business, which I co-authored after a year's research into world-class knowledge leaders, highlights several recurring critical success factors. Many will be immediately and reassuringly familiar to any IT manager. You will note that many of the factors relate to people and processes, the very elements usually in short supply in failed IT projects:

• Knowledge leadership: there must be a compelling vision actively promoted by senior management
• Clear business benefits: you must be able to track success and develop new measures
• Systematic processes: these will include knowledge mapping and IRM (Information Resources Management)
• A knowledge-sharing culture: teams that work across boundaries
• Continuous learning, through pilots and learning networks
• An effective information and communications infrastructure - groupware and other collaborative technologies, such as an intranet.

Equally familiar are several of the characteristics of a knowledge management programme. It should typically have one or more of the following activities, some of which stem naturally from the critical success factors:

• Appointment of a knowledge leader - to promote the agenda, develop a framework
• Top management support
• A clear value proposition
• Creation of knowledge or intellectual capital, to identify and audit intangible assets
• Develop Knowledge Bases: best practices, expert directories, market intelligence etc - and Knowledge Webs - networks of experts who collaborate
• Active process management - of knowledge creation, gathering, storing etc
• Collaborative technologies: a technical infrastructure that supports knowledge work, from simple knowledge support tools to intranets, and ultimately more sophisicated groupware and decision support
• Creation of a culture that supports innovation, learning and knowledge sharing
• Knowledge centres and systematic knowledge processes, supported by specialists in information management.

Even where features of knowledge management programmes diverge from the general experience of IT specialists, the point that the raw material can be treated in a systematic fashion is still valid.

Companies tend to adopt two broad thrusts in applying knowledge management methods. One is to share existing knowledge better - making implicit knowledge more explicit and putting in place mechanisms to move it more rapidly to where it is needed. The other aims to promote innovation, making the transition from ideas to commercialisation more effective.

Bottom-line benefits

Companies that have applied knowledge management techniques are already reporting bottom-line business benefits. BP, by introducing virtual teamworking using videconferencing, has speeded up the solution of critical operation problems. Hoffman La Roche has reduced the cost and time to achieve regulatory approval for new drugs through its Right First Time programme. Dow Chemical, by focusing on the active management of their patent portfolio, have generated over $125 million in revenues from licensing and other ways of exploiting their intangible assets. Skandia Assurance has grown revenues much faster than the industry average by developing new measures of intellectual capital and instructing managers to concentrate on increasing its value.

In the IT business, Texas Instruments saved the equivalent of investing in a new plant by sharing best practice between its semiconductor fabrication plants. Hewlett-Packard, by sharing expertise already in the company, but not known to their development teams, now claims to bring new products to market much faster than before.

Cultural challenge

The biggest challenge reported by those practitioners I have spoken to is that of changing the culture from "knowledge is power" to "knowledge sharing is power".

Other common obstacles are:

• Introversion - afraid to learn from outsiders or expose internal operations to customers
• Too focused on detailed process - rather than the big picture and the more chaotic process of knowledge creation
• Treating it as one-off project or quick-win - knowledge management is a commitment to the long-term, the organisation's future prosperity.
• Individual disciplines and 'turf wars' - knowledge management goes beyond the remit of any single function or discipline. All functions must collaborate
• Organisational recognition and reward systems usually do not sufficiently recognise knowledge contributions. They are linked to traditional financial measures.

In short, any successful knowledge management programme should be:

• Explicit - bringing assumptions to the surface; codifying that which is known
• Systematic - leaving things to serendipidity will not achieve the benefits
• Vital Knowledge - you need to focus; you don't have unlimited resources
• Processes - knowledge management is a set of activities with its own tools and techniques.

Usually the knowledge agenda develops through a process of evaluation from pilot projects used to build capabilities and derive learning for subsequent applications.

Although many programmes start by reviewing how existing knowledge can be shared, my experience indicates that it is the creation of new knowledge and the processes of innovation that give the best long-term pay-off.

Additional Reading

Several books give a good overview of knowledge management strategies and practice:

• Innovation Strategy for the Knowledge Economy: The Ken Awakening, Debra M. Amidon, Butterworth-Heinemann (1997)
• Intellectual Capital: The New Wealth of Organizations, Thomas A Stewart, Doubleday (1997)
• The New Organizational Wealth: Managing and Measuring Intangible Assets, Karl Erik Sveiby, Berrett Koehler (1997).

Published in Information Age, pp. 8-9, (September 1998). Reproduced with permission.

Last updated: 29th March 2011