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I3 UPDATE / ENTOVATION International News
No. 39: April 2000

Contents

The IRI Steps Up To The Knowledge Plate - Debra M. Amidon
Personalization, Privacy and More Ps to Ponder - David J. Skyrme
Marketing Knowledge: The Tenuous Connection - David J. Skyrme
A Reality Check for Virtuality - David J. Skyrme
Relaunch of Knowledge Connections Web Site
Readers Reply - Peter Duschinsky on Definitions (BuyIT), Soumit Sain on The Knowledge Economy
Snippets - NUA Knowledge News, Developing Knowledge-based Client Relationships
Events

Editorial

Welcome to this Easter edition of I3 UPDATE / ENTOVATION International News, a free electronic briefing giving insights into the evolving knowledge economy and its implications for executives, policy makers and professionals. This month provides a miscellany of articles covering the usual range from knowledge management (with an R&D and a marketing bias) to the Internet. We are pleased (finally) to announce to relaunch of The Knowledge Connections website at http://www.skyrme.com.

As usual, we look forward to your comments and feedback.

Back issues of I3 UPDATE can be found at http://www.skyrme.com/updates/. I3 UPDATE is also available by email. See the administrative information page for how to join or leave the mail list.

David J. Skyrme
Managing Editor


The IRI Steps Up To The Knowledge Plate:
Bringing a Constituency up to Speed

Debra M. Amidon

Founded in 1938, the Industrial Research Institute (http://www.iriinc.org) has always been a professional organization dedicated to the creation, exchange and application of ideas (i.e., the innovation process). In fact, their mission "enhancing the effectiveness of innovation in industry" has been a leadership beacon for industrial organizations throughout the United States and now around the world. Their sphere of influence is well known in research circles:

"Industry recognizes that research and development are indispensable to the security and progress of a nation. Concern for improvement of the environment, conservation of resources, and a better life for all persons underlie the importance of research. A 130 billion-dollar enterprise, industrial research and development programs in the United States utilize the services of well over one-half million scientists and engineers."

What is not so well known is their simultaneous leadership in the knowledge field.

Two Knowledge Conferences - Almost a Decade Apart

It was 1992 in Vancouver, Canada, when the Institute convened its fall meeting of Fortune 500 Chief Research/Technology Officers where we explored the role of R&D in creating a knowledge system. At that time, Dr. Bill Miller, then Vice President of Research and Business Development for Steelcase (Grand Rapids, Michigan, USA) and EDS released the Proceedings of their Knowledge Productivity Conference. To my knowledge, it was the first US industrial-strength examination of the topic since the 1987 Digital Roundtable "Managing the Knowledge Assets into the 21st Century." By the way, Bill Miller (Email: wlmnet@aol.com) who was one of the original ENTOVATION colleagues - has recently released his own book Fourth Generation R&D: Managing Knowledge, Technology and Innovation (John Wiley & Sons).

In the fall, 7 years later the IRI held their annual meeting entitled: "Knowledge Management and the Innovation Process" in San Antonio, Texas. This meeting of attendees brought back over a dozen mavericks from the early years that understood the knowledge practice long before their peers. Many are already considered part of the ENTOVATION Network Dr. Peter Cannon (formerly Rockwell Industries), Col. Cy Betz, Dr. Robert S. Wood (Rohm & Haas) who chaired the program committee and Dr. Parry Norling (DuPont) who appears on the Global Knowledge Leadership Map. He is the current President of the IRI. It was a great opportunity to take a barometer reading of the progress of the movement.

In 1992, there was little talk of measurement. Case studies were virtually non-existent. Presentations were loaded with the quotes of others theorists, consultants and academicians at best. Definitions were non-existent. The focus was still on technological innovation and the audience was miffed. San Antonio was different!

At this meeting, a Knowledge Management sub-committee was responsible for the program and the upcoming Annual Spring meeting in Palm Springs. The co-chairman, Cecil Chappelow (Air Products & Chemicals, Inc) chappecc@apci.com and Ross Armbrecht (Witco Corp.) - armbrro@witco.com have more information on the progress and direction of the committee. In short, there were major addresses and carefully architected case study examples from John David Meyer (HP), Jeffrey E Stemke (Chevron), Jacqueline Michel (Monsanto), Deborah E. Dixon (Becton Dickinson) and Pamela A. Drew (Boeing) among others. I presented 'The Knowledge Millennium: An Innovation Compass' that described the concepts in the paper co-authored with Darius Mahdjoubi - http://www.entovation.com/whatsnew/atlas1.htm.

John Seely Brown - Contributions Old and New

John Seely Brown (Chief Scientist of Xerox PARC) received the Maurice Holland Award in recognition for his contributions to new management concepts and his work on operationalizing 'communities of practice' to structure collaboration is well known. Others may be interested in his more recent article "Sustaining the Ecology of Knowledge" that appears in 'Leader to Leader' (Spring 1999) where he outlines 3 fundamental economic shifts being driven from the generation of new knowledge, largely based upon digital technology:

  1. From conglomeration to demassification.
  2. From simply making products and services to making sense.
  3. From established rules of engagement to self-determined rules.

Brown outlines a 'New Law of Knowledge'. If knowledge (K) equals a warranted belief leading to action; learning is the rate of change of knowledge over time (L = dK/dt). Then where m represents the size of a firm, sustainable competitive advantage or the force of a firm is the differential rate of learning (F = dL/dt = md2K/dt2).

In other words, in a time when both the rate of change and the growth of knowledge keep accelerating, the more people you have who can learn more in a shorter period of time, the more competitive you will be. The real formula for success is less mechanistic; it requires the creative energies of everyone associated with an organization, as well as careful stewardship of an organization’s shared purpose and practices.

(Author’s Note: Imagine the power of the model when applied to building collaborative, not competitive advantage!)

Today, the mandate for measurement is clear…and it includes the value of intangible as well as tangible assets. We are not sure of the right indicators; but we are certain that it is possible and necessary. We now have solid case study examples from major firms of what works and what doesn't work. We now have taxonomy of terms evolving "Giving Words to Intellectual Capital" as reported in an earlier issue. The focus has shifted toward knowledge (not technological) innovation, the monitoring of knowledge flow and an appreciation for the imperative of knowledge strategy as one way to building sustainable advantage. People understand the imperative and a common language is emerging.

It’s a Long Way from Vancouver!

Debra Amidon
Email:debra@entovation.com


Personalization, Privacy and More Ps to Ponder

David J. Skyrme

In the last issue we finished our outlines of the 7Ps of Internet Marketing that started in issue No. 31 last July. Here is a reminder of the 7Ps:

Since we started we have become aware of additional Ps worthy of consideration. Here are some more to mull over.

Personalization

A great benefit of the Internet is that it allows marketers to focus relatively cheaply on the 'segment of one' i.e. an individual. Based on a user's use of a site, you can personalize offers and give email alerts when there are relevant items of interest. Amazon.com (we mention them a lot, but they have been very visible at the forefront of many developments in Internet marketing) personalizes in several ways:

  • 1-click ordering - once you have given your credit card and address details, you do not need to retype them in
  • Recommended books - based on your prior purchase patterns, your personal front page comes with suggested recommendations
  • Email alerts - when new books are published by authors (or on subjects) that you have specified.

From the marketer's perspective, if user patterns and preferences can be discerned by analyzing the interaction logs, then they are better placed to fine tune their products and make special offers. This can also impact on pricing, where more organizations are optimizing price according to demand patterns. For example, airlines and ferry operators do not publish price catalogues as much as they used to, but rely on sophisticated yield management systems, something induced by the way that surplus capacity is sold over the net. All in all, careful analysis of user behaviour gives much better customer knowledge, both as groups or customer segments, as well as individual customers. By providing email communication channels, you can gain valuable feedback direct from customers. You can also (e.g. through an affiliate model) use some customers to act as referrers (for a fee) and thus help personalize your offerings to their acquaintances.

While some aspects of personalization can be achieved automatically e.g. by using 'cookies' (bits of computer code placed on your PC by a web server), other aspects need holding customer profile information in databases, possibly merging data derived from their Internet interactions with you, with external geodemographic data. All these raise issues of privacy.

Privacy

A growing number of consumers are getting worried about the way that their personal information is used, once they divulge it, either explicitly or implicitly via the net. If you give your email address, how can you be sure that it will not be sold to bulk marketers and increase the amount of unwanted spam you get? European Data Protection directives (when embodied in national laws) offers some protection to European consumers, in that responsibilities are placed on information users to be more open on how personal information will be used and seek authorization as appropriate. There are also bans on its export (unless permission is explicitly given) to countries outside the EU. Thus it may be illegal in several circumstances to transmit databases of customer information to the USA - although there are plans to have recognized trading zones where national laws are at least equal in consumer protection to those of Europe.

However, the Internet is impervious to national boundaries and laws, and providers of web services cannot (although lawyers will say that they should) be cognizant of privacy laws in all countries they trade with. Therefore there is growing policy of providing privacy statements on web sites. These range from a few simple clear principles (e.g. the privacy policy at Sun), to broader explanatory pages e.g. 'how we use cookies" at HP) to those that run to several pages with a dose of legalese (e.g. the privacy policy of AltaVista). Whichever form is adopted, there is now clearly a greater need for explicitness and openness between provider and user on privacy, terms of use and copyright. I recently went to a talk on the A-Z of Internet law. There was a potential minefield (and lucrative lawyers fees!) for each letter of the alphabet! Often, I hark back to the days when using the Internet and providing a web site was a simple and straightforward affair before the 'men in suits' arrived!

Process

"P goes to process" is the view of Wyn Pugh, Process Manager at Symbian (http://www.sybian.com Email: e-mail: wyn@botic.demon.co.uk). He writes:

"Most e-organisations seem to bolt on their e-commerce facility from the technology stable without consideration of how to integrate into existing business flows or better: to consider how to re-engineer those flows for the "brave new world". This has always been the nature of introducing new technology, but as we know from the "Enterprise Change Model", without considering the other aspects of change (depending on which version of Galbraith's model you choose: Product/Services; Work/Processes, People/Competencies, Organisation/Responsibilities and Technology)."

Some Other Ps

Probably minor compared with the others, but think about:

  • Portability - adherence to standards means that your pages can be viewed on many different platforms and browsers (though too many browsers, including Netscape have still not implemented many useful features in HTML V4). But how trans-Portable is your site to WAP cellular phones (with perhaps only a half a dozen lines of text in each window)? Something to think about for the future.

  • Professionalism - are you treating your users in a professional way. The fact that a recent survey showed that about half of large sites do not respond quickly to email enquiries (and around a quarter did not respond at all) shows that many companies do not.

  • Psychology - a lot of marketing is to do with psychology and the Internet is no exception. 'Hooking' people with attractive content and offers, and making your site 'sticky' so they return again and again, is an important Internet marketing skill.

  • Personality - just because you are professional does not mean you have to be bland. Does your site come over with an interesting personality?

Well that's all the Ps for now - unless, of course, you know differently. If so send your suggestions to me at david@skyrme.com.


Marketing Knowledge:
The Vertical Connections

David J. Skyrme

I was recently invited to talk to NIMA, The Netherlands Institute of Registered Marketers (http://www.nima.nl), who have just kicked off a series of four meetings on knowledge management in marketing. I have often said that the Market Intelligence Centre that I created in managed in my former career would today be called the Marketing Knowledge Centre. Addressing the marketers at NIMA gave me the opportunity to revisit the connections between marketing and knowledge management. Here are the six that I regard as having significant leverage:

1. Business Intelligence - organizations are swamped with information, so it takes a combination of IT tools and market know-how and savvy to analyze patterns, filter and prioritize raw data inputs. Tools like Cartia's Themescape (http://www.cartia.com) add an interesting visual element. You can see it in action on current news sources at http://www.bicenter.com)

2. 1-Stop-Knowledge - bringing together all the disparate information about markets and customers into one place - such as a knowledge center or on a well organized intranet. Enterprise Application Integration (EAI) is one of the hottest IT areas at the moment. It needs to be. Recently I ordered some office equipment that was wrongly delivered to my old address "oh - that's on another database. Don't worry you will get invoiced at your new address"!! Research companies like Forrester estimate that as much as 30 per cent of IT spend goes on integration activities (linking those islands of information). Other forms of 1-stop-knowledge are the packaging of information into a marketer's or sales person's PC and the Call Centre. The trouble with the latter is that some 40 per cent still do not give the call handlers access to all the relevant customer information. And when they do, how well is it analyzed and turned into new products and services?

3. Knowledge Networks - providing effective knowledge sharing forums for all stakeholders in the marketing process e.g. customers with marketing planners, end-users with design engineers etc. etc. A well known innovator - 3M - has a knowledge transfer centre that aids such networking. Best Practice Clubs (by industry or profession, such as the e-Procurement Best Practice Network at http://www.buyitnet.org), expertise directories, Communities of Practices, discussion databases (forums) and similar practices all help make the right connections, as well as (hopefully) stimulating the flow and development of knowledge.

4. Customer Knowledge - this has been featured many times in these columns, starting with the ground-breaking article illustrated with a Moebius strip 'Customers - A New Twist on Knowledge Management (perhaps even more relevant today) written by Debra Amidon in I3 UPDATE No. 5 in Spring 1996, as perhaps more relevant today than when it was written. The watchwords are the 4Is - Integration (see 2 above), Individual (see Personalization in the previous article), Interaction and Intelligence. Too often, there is a tendency to automate customer interaction and thus lose sight of added value human intelligence.

5. Customized Knowledge - using individual customer knowledge and customizing responses according to customer needs. This is an important bridge between customer knowledge in the round and CRM. What proportion of your products and services are customized or exploit customized knowledge?

6. iCRM - Intelligent Customer Relationship Management. Too frequently, this is erroneously viewed as simply providing an automated response systems. I've sent too much time in voice mail jail, poorly executed programs ("sorry - system error, please try later) and taken 7 minutes to answer a simple query, compared to 30 seconds in the 'good old days'. Marketers must learn to develop more intelligent systems and using customer knowledge be more intelligent in how they respond (media, methods and messages) rather than the one system suits all. Perhaps, most of all, recognize that intelligent human are often preferable to intelligent response systems.

In my experience (from both a marketing and knowledge management perspective) these connections are often tenuous at best. If marketers and knowledge managers would collaborate on just these six themes, then these somewhat virtual connections could become more intensive, intelligent and create interesting innovations in marketing. What do you think?

Email: david@skyrme.com


A Reality Check for Virtuality

David J. Skyrme

Well. It finally happened. Those stratospheric prices on dot.com stocks have finally come down to earth - with a bump. Some have labelled the hype around dot.com IPOs as dot.con! Several times in these columns we have said that the market valuations of many of these companies were not sustainable (e.g. see I3 UPDATE / ENTOVATION International News No. 31). Why should a company that is losing investors a lot of money, and even makes a loss on every sale in its drive for market be worth several times that of well established and highly profitable companies? The answer, according to investors, is that Internet is the future. But what about the costs of entry. Although bricks and mortar companies have been slow to respond, many are now taking on the challenge with serious investment, while every new concept is usually quickly copied. As a consumer - provided the company you deal with has integrity and does not go out of business - things are good. For example, you can buy many books at Amazon.com, which according to their publishers, is less than what they get paid. In other words, Amazon, like many dot.coms deliberately sell some of their stock as loss-leaders to gain market share. You can only do this if you have a sustainable business model.

What is a sustainable business model? Ones that seem to work are where:

  • There is some uniqueness that is difficult to emulate - Amazon, for example, are vigorous at defending its intellectual property, whether it is their 'look and feel' or patents for fuzzy pattern matching on book searches.
  • It is an offering that is entirely web-based, and therefore has low overheads or unique features that are difficult for traditional suppliers to match. Yahoo, for example, is such an offering, and has recently reported that it is now making a small profit on its European operations. Some of the emerging B2B electronic marketplaces (such as i2i) come into this category.
  • You basically have a profitable traditionally sold product but the web gives you greater marketing reach, with lower selling and distribution costs.
  • You are building up intellectual capital or content (i.e. using brains and minds rather than bricks and mortar) that potentially has high resale value. The world's most popular soccer site (http://www.soccernet.com), started by a UK schoolboy and his father is an example of this. Unfortunately they did not appreciate the value of their content, since they sold out to a media company for a few thousand UKP, which then afterwards sold 60 per cent of it to Disney - for UKP 15 million. Let's hope the Hadfields get more value from their next venture - an educational portal site (http://www.schoolnet.org.uk).

Whatever your concept, a core element has to be some certainty that you can make profitable revenues at some time in the not too distant future, or be creating a highly valued intangible asset. The dot.coms that seem to have suffered the most are those that have hyped and promised a lot, yet do not have a unique way of building profitable revenues, and are more dependent that others on the varying whims of consumers. Another lower risk strategy is not to be a dot.com at all, but be a supplier of some of the essential infrastructure and services that they all need to use, such as ecommerce software (e.g. Actinic catalogue), search software (Verity, Inktomi etc.), or financial transactions services (e.g. WorldPay).

And while this has happened to dot.coms, a not unrelated scenario is playing itself out in the bidding for the next generation mobile communications licences in the UK. There are five parts of the radio spectrum for sale to cellular operators, which will host the next generation of mobile phone services (3G UMTS), including Internet based services, using the WAP protocol (e.g. news, flight information, banking, shopping etc.). Like the stock market, what drives the price is less the business fundamentals, but more the balance of supply and demand, psychology, the gambling instinct and the desire not to get left out in the cold. While the UK government expected to get around UKP 3 billion from the sale of these licences, after over 115 rounds of bidding (there are several rounds a day that you can track at http://www.spectrumauctions.gov.uk/auction/auction_index.htm), the original field of 22 is down to 6, but the total value of the highest is now over UKP 22 billion! Each operator is therefore paying several tens of thousands of dollars for each potential subscriber. Will people sign up and buy services at the volumes needed for the spectrum licence holders to get their money back? Perhaps those left out in the cold will have time to rethink their strategies and find more profitable ways of carving out a niche in this burgeoning m-commerce (mobile e-commerce) market than the licence winners?


Relaunch of Knowledge Connections

After too long a delay, we are pleased to announce the relaunch of the Knowledge Connections web site at David Skyrme Associates (http://www.skyrme.com) as "The place to gain insights into the networked knowledge economy and help in creating successful knowledge management and Internet commerce strategies".

Regular readers will have noted that we started on this work last Fall, and have not kept the original site updated since then. Although the new site is not as complete as we would like it to be (the Knowledge Shop is yet to become fully operational - expected by 1 May), we have had so many requests for back issues of I3 UPDATE /ENTOVATION International News that we could delay its launch no longer.

The main additions and improvements are:

plus a Triva Quiz - to test your knowledge about knowledge - with prizes of a book and 'knowledge packs'. We hope that you find the revamp of the site worth waiting for, and that we can continue to achieve the recognition given in an earlier site appraisal by Knowledge Management Review that this site is "a valuable bookmark in an area that is becoming heavily overloaded with irrelevant information".

Enjoy. And please send comments to:
webmaster@skyrme.com

P.S. - There is also an associated website (http://www.skyrme.com/knet/index.htm) for the book - Knowledge Networking: Creating the Collaborative Enterprise. This gives chapter by chapter updates and additional commentary.


Readers Reply

Re: There is No Knowledge Economy

"In Bo Buma's thought-provoking piece: 'There is no Knowledge Economy?' (Issue No. 38), I think he may be making the mistake of inexact definitions - a common problem that I see in many other examples of writing on the subject of knowledge and knowledge management. In our paper 'Harnessing Corporate Knowledge for Competitive Advantage: The IT Director's Agenda' (on our website: www.buyitnet.org) we introduce a 'cascade' definition of corporate knowledge that was originally derived from ICL. I think it might help to clarify where Bo is going wrong:

  • Data is only noise without meaning. Add meaning and it becomes Information
  • Information is of no relevance without understanding. Add understanding (the 'relevance' filter) and it can be called Corporate Knowledge
  • Knowledge is of no value if it not applied. Apply it and it can provide Competitive Advantage

A lot of the confusion arises from a lack of rigour in the use of these terms. In particular note that knowledge does not really 'exist' in any meaningful way in isolation from the people who understand and apply it. So when Bo says: Having knowledge will be nothing. There will be so much of it, that the exchange of it will have no price. Helping finding it and helping applying it might be worth something...

I say yes, of course! That has always been the case. Without the right people to understand, select and apply it, what he calls knowledge is only information. Worthless!"

Regards
Peter Duschinsky
Email: peter@itworld.demon.co.uk


Re: The Trapeze Parable

"Hi Debra,

I was reading your parable story and got interested in the way you said about the change. I certainly do feel that this new millennium will be termed as a millennium of knowledge economy and will be transposed into a knowledge base economy from the traditional economy where information and knowledge seems to be at a distance. But for a moment its true that even though this century will head towards a knowledge economy its still the question of whether we can achieve it or not. The question of "To be or not to be" and vacillating to the two extreme of knowing and not knowing will certainly act as a hindrance to this change.

As there is also an article of India stating that there are remote villages which does not have any telephone connections will have Internet facilities running with the help of TV. The question is will it really help these rural Indian people who does not have even four square meals a day and who primarily lives below the poverty line.

These questions merits lot of answers before changing the economy to a knowledge base one. The mass needs to be educated in tune with the world and that not taking place at the moment. There are lots of other social, political issues which needs to be clarified. Certainly the economy is in the line where it is in between releasing one trapeze bar and holding on to another and its quiet possible that it might slip or might not slip. The consequences we do not know since the unknown is yet to be discovered and invented.

But it will be invented in due time. That's for sure."

Regards
Soumit Sain, Department of Media Management, University of Cologne
Email: soumit28@hotmail.com


Snippets

NUA Knowledge News - a weekly digest and summary of articles - perhaps a bit technically oriented, but good for regular updates none the less. See http://www.nuaknowledgenews.com where you can register to receive it by email.

'Developing Knowledge-based Client Relationships' This book was mentioned in last months' Snippets. The author Ross Dawson tell us: "I actually have the introduction and two chapters of the book available for download for free at the book website at http://www.ahtgroup.com/book.htm; please feel free to let anyone know or provide links."


Events

Just a few hand-picked ones from some of the less widely publicized events.

18-19 May 2000. Knowledge: Management, Measurement and Organization, New York. Ross Institute of Accounting Research, Stern School of Business, New York University.
http://www.stern.nyu.edu/ross/ProjectInt/upcoming.htm

22-25 May. Succeeding with Knowledge Management. Series of one and half day workshops by David Skyrme. Adelaide, Melbourne. The Concordia Group.
Email: concordi@tpgi.com.au

10 June 2000. From Thinking Skills to Thinking Organisations. Stroud, Glos, England (in the beautiful Cotswolds). Presenters: Jerry Rhodes, Bob Garratt, Ian Wigston, Kathleen O¹Sullivan. Celebrating 25 years of pioneering work in effective thinking skills.
http://www.effectiveintelligence.com


© Copyright, 2000. David Skyrme Associates Limited and Authors - All rights reserved.

This newsletter is copyright material. In the interests of dissemination of information, forward circulation is permitted provided it is distributed in its entirety including these notices, that it is not posted to newsgroups or distribution lists and that it is not done for commercial gain or part of a commercial transaction. For other uses please contact the publisher.

I3 UPDATE / ENTOVATION International News is a joint publication of David Skyrme Associates Limited and ENTOVATION International Limited - providers of trends analysis, strategic advice and workshops on knowledge management and knowledge innovation®

Email: info@skyrme.com    debra@entovation.com
Web: http://www.skyrme.com    http://www.entovation.com

® Knowledge Innovation is a registered trade mark of ENTOVATION International.