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What is "knowledge" and what is "knowledge management"?
The awareness of
knowledge as a critical element for economic success, if not survival,
in a dynamic and intensely competitive environment has been apparent to
managers and businesses across all industries for some time. Concepts
like "Management of Core Competencies", "Resource Based Strategies",
"Learning Organization" and "Use of Expert Systems" are evidence of
this. Recently a new concept has arisen: the handling and deployment of
knowledge as a valuable business resource requires more than just
strategy and IT. Information technology does play an important role in
enabling the collection, distribution, and use of knowledge at any place
or time, even beyond the limits of the organization. That is why there
are an enormous number of conferences and probably hundreds, if not
thousands, of articles and books that deal with all kinds of approaches
to knowledge management.
However, many
questions still remain unanswered, and solutions become evident only
after the abstract concept of knowledge management is applied to the
realities of business. Such questions include: How and where should we
start? What knowledge is relevant to doing business? What is the
concrete economic value? How do we need to change our organization?
What’s the contribution of information and communication technology? How
can we use our combined knowledge to go beyond the value chain?
This article will
help to find answers to these questions. We cannot present a fail-safe
"recipe" for success, of course but we can highlight the characteristics
of successful projects based on our experiences with our customers and
with our company, IBM.
1.1 Knowledge
Firstly, we wish to
distinguish the term "knowledge" from the terms "data" and
"information", by using a comparison with the workings of a supermarket.
Data involves simple statements about facts or events. In our
comparison, this could be a data sheet with product numbers, quantity,
and price. This data is saved in the inventory control system of the
supermarket. When you give meaning to data it becomes information. A
piece of information is exchanged between a sender and a recipient
through a communication medium. In our example of the supermarket, it is
the sales slip that gives you information about your purchase and the
amount you paid.
Knowledge builds
upon information, enriching it with experience and context. After a
visit to the supermarket, you will know what the store looks like,
whether the cashier was friendly, whether the item you have purchased is
up to your expectations, and whether you have found what you were
looking for. These experiences and impressions determine whether you
will consider visiting this supermarket again (utilizing your
knowledge), or even if you will recommend it to your friends (sharing
your knowledge with others). Hence, knowledge controls actions and
decisions.
Let us consider the
same supermarket example from the supplier’s point of view. The
collected data, which on its own is useless, will be consolidated and
structured, resulting in information on business activity. We only talk
about knowledge when the recipient, evaluates the information and based
on all collected experiences, derives decisions. So, for example,
supermarket managers might decide on a new display, an adjusted market
approach, measures to reduce overhead costs, or a combination of these
elements. In alignment with this store's e-business strategy, this
knowledge will be distributed to the entire supermarket chain and shared
with important suppliers and customers.
1.2 Kinds of
knowledge
We differentiate
between explicit knowledge and implicit knowledge. Explicit knowledge
can be found in documents, plans, methods, process descriptions, check
lists, drawings, and expert systems. Because this knowledge is
documented, it can be saved in a database or an application and is
available immediately. With an appropriate IT infrastructure, it is even
available beyond enterprise borders.
The knowledge of an
individual, team, or entire business is far more than could ever be
written down within the confines of normal time and resources. "White
space" will remain in documented knowledge, and these areas will only be
explored when they are needed. We call this type of knowledge "tacit" or
"implicit" knowledge. It contains experiences, intuition and standards
of behaviour that influence our discernment and, therefore, our actions.
Implicit knowledge is usually richer and more profound than explicit
knowledge. Depending on the situation, one can access implicit
knowledge, reconfigure it, and enhance it more quickly.
1.3 Knowledge
management and e-business
To use this immense
knowledge as a resource in a business value chain, a systematic approach
is necessary for management to make the collected knowledge available
inside and outside of the enterprise. From a knowledge perspective, this
approach combines improvements in processes, organizational structures,
and the company’s culture, as well as its information technology.
E-business, which comprises the implementation of new business models
and corresponding business processes by using information and
communication technology, requires a similar approach.
Now, after having
formed the theoretical base, we will use a real case to show how the IBM
Consulting Group helped a customer on his way to managing knowledge.
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2 The Case
of Wellesley Ltd.
2.1 Background
Wellesley Ltd. is a
European enterprise and a worldwide leader and pioneer in the industrial
sector. Its wide range of products appeals to consumers who demand
appliances customized to their specifications. The focus on
customization creates demanding requirements for Wellesley’s sales
staff.
Twenty-five
branches in Europe, America, and Asia, as well as a network of
representatives and distributors in various countries, form the
company’s global presence. Production is concentrated in five locations,
while marketing is decentralized. The customization of the end product
according to individual local or regional customer needs is at the
discretion of each respective corporate branch. Therefore it is
necessary to leverage specific skills and expert knowledge across the
company. Because business subsidiaries focus on different products for
their respective markets, specific knowledge is scattered all over the
world. Research and development, on the other hand, are centralized at
corporate headquarters.
2.2 Problems
with the flow of information and knowledge
Because of the
enterprise's decentralized structure and geo-global alignment, the flow
of information has always been an important topic. Headquarters mails
brochures, detailed product information and specifications, instructions
for customization, and criteria catalogues for the product of choice to
each subsidiary. The information that flows back to headquarters
consists mostly of customer complaints and product requests. More and
more, these old processes were not able to appropriately meet new
information demand. Since information was mostly paper-based and flowing
in only one direction, headquarters did not receive any feedback
regarding their subsidiaries’ and customers’ needs and problems. Also,
branches complained that they did not receive information on time.
A culture of
"knowledge sharing" did not exist in this enterprise. Knowledge about
innovative applications and "best practices" for customized solutions
were only exchanged informally, or literally, by accident. Due to the
large variety of the company’s products and varied customer needs,
answering customer inquiries took a long time. These problems with
information and knowledge exchange had a negative impact on the
company's activities. Below are some typical examples:
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The lack of
shared information and knowledge about products and applications,
and experiences regarding customization, led to "continual
reinvention of the wheel". This influenced product quality and
increased manufacturing and installation time, consequentially
increasing costs.
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Customer
satisfaction and company and product image suffered due to the fact
that different subsidiary corporations were offering multiple
products for the same customer problem, and customer needs were only
met after long delays.
2.3 The
Approach
Now we will outline
the approach and the critical success factors of the implementation. The
IBM Consulting Group chose a three-step approach that breaks down into
several sub-steps. In the first step we identified the knowledge
strategy, which was derived from the corporate strategy and the critical
success factors. We also examined the kind of knowledge that is needed
to support the core processes. In the second step we developed the
"Knowledge Management System" with applications, organizational roles
and responsibilities, and required processes. Finally, in step three,
the system is implemented. In the next sections we will outline the
implementation using the example of Wellesley Ltd.
2.4 Definition
of Knowledge Strategy
The initial
questions were: How can we apply knowledge as a resource and use it to
improve competitiveness? Which processes influence the application of
strategy, and which type of knowledge plays a role in these processes?
At the beginning of the article, we showed that successful knowledge
management builds directly upon the company's strategy. Therefore, we
conducted interviews with the CEO and members of the executive
management to uncover Wellesley's critical success factors. The
following factors could be identified:
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Offer high
quality products through customizing basic products with
sophisticated production technologies and skills.
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Maintain price
leadership
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Increase
attention to customer needs
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Be first in the
development of new products, the provision of goods to customer
requirements, and new application possibilities
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Increase
flexibility inside the organization to provide international range
of goods and to solve industry-wide problems.
In the next
sub-step we identified business processes that have the greatest impact
on these success factors. A core team with representatives from
corporate headquarters and important subsidiaries was established,
making it possible to include all the different requirements and points
of view that existed throughout the company as a whole.
Results of this
collaboration were four processes which had the greatest influence on
success factors: Logistics, product marketing, customization, and
after-sales service.
Next, the core team
defined the specific influence of each process on the business and the
knowledge necessary to exert this influence. If, for example, "product
marketing" should contribute to the success factors, the following
knowledge should be accessible:
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Experiences and
guidelines for choosing the best product for specific customer
applications
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Reliable
support for all international customers, with product
recommendations and offers that are consistent throughout all
subsidiaries
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Use of
experiences of subsidiaries in all countries to shorten development
time in new industrial sectors
2.5 Development
of the Knowledge Management System
The initial
questions were: How exactly can we infuse processes with existing and
future knowledge? Which business processes and what supporting company
culture need to be created?
2.5.1
Prioritization, design and development of applications
Previous knowledge
should be pooled into applications that enable its retrieval. For the
existing process of "product marketing", this means a supported
application that provides timely and exact information on criteria for
product use, product data sheets, product brochures, and technical
support. We will call this application "marketing support".
We used the two
criteria, "influence on business" and "implementation efforts", to
prioritize all possible and required applications (for all business
processes). In this analysis, developmental costs and time were not the
only two fundamental issues. In addition, our experiences showed that
for project’s success, quick wins are also necessary to prove at an
early time, the value of the project applications to the entire
enterprise. This will facilitate not only development but also
subsequent implementation.
Through
prioritization, we found out that the "value chain" application will
have an immense impact on business success. However, the general
implementation and rollout of such an application would have required
the migration of the existing standard application system. Due to the
extensive implementation time and financial efforts this would have
required, the implementation of this application was put further down on
the priority list.
On the other hand,
applications with low influence but ideal implementation requirements
were rated as high priority. To get a complete picture, this procedure
was discussed at length with executive managers of subsidiary
corporations and a core team from corporate headquarters.
2.5.2
Definition of knowledge processes, roles and responsibilities
During this
sub-step we determined the principles for gathering, using and enhancing
knowledge. As initially mentioned, information is the foundation for
knowledge management. Only experience in dealing with information
enables effective knowledge management. Definite rules for dealing with
information must be established to avoid the danger of having to rely on
obsolete information that is inaccurate and, ultimately, useless.
Without a superior information base, knowledge management has no
foundation whatsoever.
2.5.3 The
Knowledge Management System of Wellesley Ltd.
At Wellesley Ltd.,
knowledge is generated along processes, evaluated, structured, and
registered. Only then it is available for users. Knowledge experts are
responsible for the quality of this process. In a subsequent stage of
expansion, customers and suppliers can be integrated into the system.
2.6 Critical
Success Factors for Implementation
The implementation
of knowledge management systems requires the similar number of processes
as the implementation of other systems. That's why we will discuss only
a few features of the present project here.
2.6.1 Top-Down:
Leadership
Without the strong
leadership of the sponsor, knowledge management will remain a project
among many, and will not develop to its full potential value. In the
present case, the CEO himself was the executive sponsor. His integrated
role, as well as his active communication, was of crucial importance
because of the decentralized organization of the corporation. Resistance
could be effectively thwarted. For example: chain store managers
complained about the time and effort that it would take to "feed" the
system, and were afraid that their control over information flow would
be threatened. The necessary investments in server, network, and support
infrastructures also met with resistance. With CEO’s support and a few
"change agents", as well as the launch of an information blitz, these
barriers were overcome and a more positive basic attitude was generated
among employees.
2.6.2
Bottom-up: Integration of Users
Beginning with
project launch, users from across the organization were integrated into
development activities. This was a radical change from the usual
one-sided practice of predetermining business unit needs at corporate
headquarters. During the workshops, users were enthusiastic about
joining in. They made decisive contributions to system design, and
infected the rest of the organization with their enthusiasm. The
politics of "do it first, ask questions later" would have doomed the
project to failure.
2.6.3 User
Scenario Marketing
The information
process described earlier required additional time requirements for
users during the initial stages. To market the system internally, we
developed day-to-day scenarios for every application, which demonstrate
the project’s usefulness to daily work. Those scenarios contained three
elements for each application: The problem, the possible solution of the
day’s problem without the knowledge management system, and the solution
using the system. The scenarios were developed together with users
during system design.
2.6.4 IT
Support
Smooth system
operation, as well as quick and competent system support, increases
motivation for system use. We integrated the day-to-day scenarios into
the training platform, and were able to prove that the project is much
more than just another IT System. The local help desks, serving a
combined total of 1,500 users worldwide, also provided support for the
new system. This met internal customer as well as cost requirements. To
provide for further system expansion, we included the IT infrastructure.
We made sure that the scalable platform would be able to handle system
growth and further applications.
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