Knowledge Management: The Next Steps

Knowledge management is getting past the stage of 'latest consultancy fad'. So where do we go next? Renowned KM expert David Skyrme makes his predictions.

Knowledge management is a field in which management consultants have played a leadership role - in fact it is now over three years since management consultancies started drawing attention to knowledge management as a means of achieving strategic advantage.

The start of its march to prominence is often seen as the Knowledge Imperative Symposium in September 1995 at Houston, Texas, co-sponsored by Arthur Andersen and APQC (American Productivity and Quality Centre).

In the same year, what many regard as the seminal book on the subject - The Knowledge Creating Company by Ikujiro Nonaka and Hirotaka Takeuchi - was published by Oxford University Press.

Subsequently there has been a rapid growth in the number of ‘knowledge’ conferences, and the burgeoning of ‘knowledge’ products and services, including software tools, web sites and publications.

A further indication of the strength of this area is the launch of half a dozen new periodicals in 1997, including the Journal of Knowledge Management, Knowledge Management and Knowledge Management Review. They all routinely publish instructive case studies, many of which show the significant business benefits being achieved.

Thus, BP Amoco estimates that by transferring knowledge gained in the Andrew oil field in the North Sea to the start-up of its new Schiehallion field, it has saved over $50 million. Similarly, Dow Chemical, through active management of one of its key knowledge assets - its patent portfolio - generated over $125 million in revenues and savings within two years.

These and many other pioneering cases - such as Skandia, Booz Allen & Hamilton, Hewlett-Packard, PriceWaterhouseCoopers, Buckman Laboratories and Glaxo Wellcome - described in detail in the Business Intelligence report, Creating the Knowledge-based Business - have spawned numerous corporate knowledge initiatives and a corresponding development in news lines of business for many management consultancies.

The net result is that today, according to studies such as KPMG’s annual knowledge management survey, less than five percent of manager believe that knowledge management is a fad, compared with some two-thirds two to three years ago. As a result many organizations are now realizing the fundamental role of knowledge in their business strategies and operations.

But how exactly does knowledge contribute to business strategies? What is the current state of management practice, and how is it likely ot evolve in future?

Background

The knowledge economy is, in the late 1990s, developing strongly. Some of the world's fastest growing industriy sectors are knowledge intensive - including media businesses, Internet content and services companies, pharmaceuticals, and naturally management consultancy.

Governments and international agencies are also recognizing the importance of knowledge for wealth creation. The World Bank’s 1998-9 annual development report is called Knowledge for Development and the UK government’s latest competitiveness white paper is called Building the Knowledge-driven Economy.

Within companies analysis of best practice has identified two main approaches:

• Better sharing of existing knowledge. Sharing best practices or developing an expertise database (so you can connect those who need knowledge to the experts who have it) are common early ‘quick wins’ in knowledge programmes.
• Creating new knowledge and converting it into worthwhile (i.e. valuable) products, services or processes. This focuses on better and faster innovation, through taking a knowledge perspective to the innovation process as shown in Figure 1. By rethinking ways of improving knowledge flows and conversion, good ideas can better managed and customer needs more directly addressed.

Figure 1 - Knowledge Management and Innovation

There are several knowledge levers that organizations can use to boost business performance, but yet are frequently mishandled:

• Customer knowledge. Most organizations do not know as much about their customers as they believe. If they do, the knowledge is often isolated in sales or service departments and does not feed this knowledge effectively into new products and services.
• Knowledge in processes. As processes become automated, knowledge is often embedded in computer programmes. But many filter out the important tacit knowledge of human experts. As a minimum, automated processes should give quick access to additional knowledge, including humans.
• Knowledge in people - often cited as an organization’s most valuable asset. Yet many managers do not motivate and challenge their best knowledge workers. An important part of knowledge management is about creating the environment and culture in which your knowledge ‘stars’ will thrive and perform.
• Organizational memory. Many organizations do not know what they already know. They ‘reinvent the wheel’, at another time or place. Effective knowledge programmes will put significant emphasis on recording lessons learned. Does your consultancy conduct a formal post-project review to draw lessons, and capture knowledge from an assignment?
• Knowledge assets. “What you can measure, you can manage” runs the old adage. Yet while hoards of accountants and auditors record physical assets and financial transactions, few attempt even cursory measurement of intangible assets worth much more - often 10 to 50 times more if you compare the stock market value of companies with what is recorded in their financial accounts. That’s why companies like Skandia are using intellectual capital accounting to guide management actions and hence value creation and corporate growth.

As with other high profile initiatives that have gone before, such as business process reengineering, knowledge management is attracting its critics and various initiatives have stalled or failed.

The setbacks can usually be traced to one or more of the following factors:

• Knowledge management is seen as a quick win. One of the trickiest aspects is to create a culture where knowledge is freely shared within an organization. Such a culture change is not an overnight job.
• Too much emphasis is put on technology. While there are a growing number of excellent knowledge management tools, such as document management, concept mapping and visualization, intranets and intelligent agents, technology is only an enabler. The knowledge it conveys needs organizing, for example through knowledge maps.
• Over-ambitious in scope. Some of the most effective corporate-wide initiatives start as selective pilot projects. The pilots are used to develop understanding, build capabilities, and derive lessons for a wider roll-out.
• Inappropriate skills. Good information management skills, of the information science / library type provide an essential perquisite. Good networking and facilitation skills are also important. Many knowledge management teams do not have sufficient breadth and depth in the range of skills needed.
• Lack of leadership. Like any significant new initiative knowledge management needs business champions and top-level commitment. In one recent assignment, a knowledge initiative had stalled. “We know what to do, but don’t do it” said one senior manager. It was only when the top management team committed their own time, and formalized it as a core activity, that the programme moved forward.

The successful consultant will work on one or more of these levers and demonstrate how they contribute to the client’s business and personal needs. Some of the best consulting opportunities are not through generic knowledge management assignments, but on exploiting the knowledge dimension as a service differentiator in existing consultancy lines of business. practice. For example, strategic reviews, customer relationship management, process improvement and better innovation are typical of consultancy areas that can be enhanced through applying the knowledge dimension. A challenge is that the link between better knowledge management and the bottom line is an indirect cause and effect relationship - as shown in Figure 2. If you can demonstrate these links for your speciality, you are on to a winner!

Figure 2: Typical Benefit Tree

Knowledge Futures

As knowledge management comes of age, it will become a speciality and discipline in its own right. Knowledge teams and knowledge centres are focal points for these specialists.

Yet, at the same time, it is becoming integrated into other business activities. In other words, knowledge is becoming an increasingly important facet of marketing, finance, quality management, R&D, customer service among others.

Other developments, and the opportunities they create for consultants are:

• New Methods. Techniques such as structured dialogue, knowledge mapping, decision diaries, communications and information resources management are all gaining in prominence. There are opportunities to run workshops and train practitioners in these new methods or to act as independent assessors of their effectiveness. Embedding them into your own methods should also add a distinctive edge.
• New Tools. Technological solutions for knowledge management are evolving rapidly. Thus, knowledge management suites such as Open Text’s Livelink integrate document management with computer conferencing to create knowledge ‘communities of practice’. Tools need specialists to install and implement within a programme and integration into larger enterprise systems. Just as SAP and Lotus Notes have created opportunities for business partners and systems integrators, consultants should look out for similar opportunities with this emerging genre of knowledge software.
  
  
• New Markets. The Internet will be host for a growing number of electronic knowledge markets. Not only will information be sold or traded, but so will other knowledge assets and products, including consultancy. Online courses are growing in popularity, including courses in knowledge management run by the Knowledge Ecology University.
  
  Consultancies, and individual consultants, need to think about the own intellectual capital and knowledge assets, and how they can be packaged for online sale, in services such as that of Bright, whose slogan is "turning knowledge into cash"
  
  Once experience has been gained there are numerous opportunities to consult on this specialist branch of electronic commerce - perhaps it will be called k-commerce!
  
  
• New Measures. More companies will want to actively measure and manage intellectual capital, as is happening in Skandia and through a Danish Ministry of Business initiative involving over 20 companies. Putting in new measurement systems requires specialist knowledge and implementation skills. One consultancy, Intellectual Capital Services, is already offering such services and a proprietary method.
  
  
• Knowledge Policy and Ethics. As noted earlier, knowledge is already on various policy agendas, and is seen as a crucial component of economic development. A key strand that is likely to emerge is that of knowledge ethics, addressing issues such as ownership and governance of knowledge and intellectual property rights. Consultancies already working in various policy fields will see many new opportunities.

Whatever your specialist area, you need to practice what you preach by managing and exploiting your own knowledge effectively. Consultancies like Ernst & Young, Arthur Andersen, PriceWaterhouseCoopers, gained early market acceptance of their business lines in knowledge management consultancy, because they had previously gained experience through implementing knowledge management internally for their own use.

We are now entering a new phase, where a new generation of knowledge practices need to be developed and practised.

In this new phase, it is the emergence of electronic knowledge markets that could significantly change the established consultancy model. If your consultancy edge is knowledge, then as a consultant you need to exploit the different ways in which that knowledge can be packaged, priced and delivered.

Consultancies like Arthur Andersen with KnowledgeSpace and Ernst & Young with ERNIE are already selling knowledge online, through an all inclusive service price, rather than a pay-as-you-go model.

But, as in other fields of online commerce, such as with Amazon.com for books, it is often not the established players who become leaders in the new media. Therefore, the field is wide open for every consultant to develop new ways of trading their expertise in the future.

The conclusions for all consultants are clear. First you must demonstrate the link between knowledge management and business benefit. Then you must develop unique niches as the marketplace segments - but most importantly you must exploit new ways of packaging and marketing that uniqueness, your own knowledge. See you online!

Dr David J. Skyrme of David Skyrme Associates is a world recognized knowledge management consultant who has published widely on the subject, including two management reports for Business Intelligence and the books Knowledge Networking and Commercializing Knowledge published by Butterworth-Heinemann. To subscribe to his free monthly briefing I³ UPDATE, you can email him at david@skyrme.com. Internet: http://www.skyrme.com

This article was first published in International Consultant's Guide, pp. 8- 10 (July 1999)

© Copyright 1999. David J. Skyrme. All rights reserved.

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