Knowledge management: the new challenge for the 21st century

Knowledge management: the new challenge for the 21st century
Atefeh Sadri McCampbell, Linda Moorhead Clare, Scott Howard Gitters
The Authors
Atefeh Sadri McCampbell, Atefeh Sadri McCampbell is at the Florida Institute of Technology, Maryland, USA.
Linda Moorhead Clare, Linda Moorhead Clare is at the University of Maryland Medical System Information Technology Group, Maryland, USA.
Scott Howard Gitters, Scott Howard Gitters is at Lippincott Williams & Wilkins, Maryland, USA.
Abstract
This paper defines the newly emerging concept of knowledge management. The topics presented include: principles and practices of knowledge management, organization, distribution, dissemination, collaboration and refinement of information, and the effect on productivity and quality in business today. The technical applications and tools currently utilized within this discipline are also discussed. Case studies are included on the following firms: Teltech, Ernst & Young, Microsoft, and Hewlett Packard. These are analyzed to determine the effect knowledge management practices have on quality improvement and increased productivity. The authors have included a recommended strategy for implementation of knowledge management “best practices”. Finally, conclusions are drawn regarding the strategic direction of this new discipline and its effect on competition, productivity and quality for the business of tomorrow.
Article Type: Research paper
Keyword(s): Knowledge management; Information technology; Case studies; Implementation.
Journal of Knowledge Management
Volume 3 Number 3 1999 pp. 172-179
Copyright © MCB UP Ltd ISSN 1367-3270
Introduction
Knowledge management – an emerging discipline
The American Productivity & Quality Center (APQC), a nonprofit education and research organization which fostered the creation of the Malcolm Baldridge National Quality Award , defines knowledge management as “the strategies and processes of identifying, capturing and leveraging knowledge” to enhance competitiveness (Manasco, 1996).
According to Gartner Group findings for 1998, implementation of knowledge management systems has begun, and is currently being deployed by most large companies. One third of Fortune 1000 companies are now including knowledge management initiatives in their 1999 plans (Smalley-Bowen and Scannell, 1999).
According to a study of successful knowledge management projects, knowledge management was at least partially responsible for a major transformation of one large consulting firm. The transformation was extensive in terms of a marked improvement in financial results for the firm while engaged in knowledge management practices. Line consultants drew heavily from the firm’s centralized knowledge centers, accessing previous presentations to other clients, process and system design specifications, work plans and other project-oriented collateral and artifacts. Senior managers described knowledge management as the core of the consulting strategy and the concept was pervasive in the company’s internal and external documents (Davenport et al., 1998).
According to Yogesh Malhotra (1998), author of “Deciphering the knowledge management hype”:
Knowledge management caters to the critical issues of organizational adaptation, survival and competence in face of increasingly discontinuous environmental change … Essentially, it embodies organizational processes that seek synergistic combination of data and information processing capacity of information technologies, and the creative and innovative capacity of human beings (Malhotra, 1998).
The new world of knowledge-based industries is distinguished by its emphasis on precognition and adaptation, in contrast to the traditional emphasis on optimization based on prediction. Arthur suggests that the new world of knowledge-based business is characterized by a continuous redefinition of organizational goals, purposes, and an organization’s “way of doing things”. This new business environment is characterized by radical and discontinuous change and demands anticipatory responses from organization members who need to carry out the mandate of a faster cycle of knowledge creation and action based on this new knowledge (Arthur, 1994).
On a broader level, the study of knowledge management evolved from the need for companies to manage resources more effectively in a hyper-competitive, global economy. Ikujiro Nonaka (1991) stated in “The knowledge creating company”:
In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge… Successful companies are those that consistently create new knowledge, disseminate it widely throughout the organization, and quickly embody it in new technologies and products (Nonaka, 1991).
A recently published 1999 Executive Briefing, eBusiness Imperative, by The Concours Group concludes that the ability to deploy knowledge is the principal differentiator in the Information Age. The emerging twenty-first century information age enterprise is anything but linear, rather growing outwardly. Businesses are competing on the basis of business models with brief half-lives. Products and services are differentiated by knowledge and intellectual capital. It is clear, in the move from the industrial age to the technological age, intellectual property or knowledge impacts profitability.
Principles and practices of knowledge management
Knowledge management is an emerging discipline which is a dynamic process. According to a study conducted by American Productivity & Quality Center’s International Bench-marking Clearinghouse, of 11 organizations participating in the arena of knowledge management: Arthur Andersen; Chevron Corporation; Dow Chemical Company; Hughes Space & Communications; Kaiser Permanente; Price Waterhouse; Sequent Computer Systems; Skandia AFS; Texas Instruments; USAA; and National Security Agency, the following was recognized:
The practice is dynamic, but often starts by creating, finding and collecting internal knowledge and best practices. Sharing and understanding those practices so they can be used. Adapting and applying those practices to new situations.
Also noted in this report was the direct reflection of top down management enabling, encouraging or undermining the process. Strong professional ethic and pride, supported by skills in cross-functional teaming, cultural support such as reward and recognition programs and CEOs as visible advocates for the sharing of knowledge and best practices, resulted in the promotion of success.
The most widespread strategy among the participants in the study was the transfer of knowledge and best practices in order to improve operations or to embed them in products and services. This includes systems and practices to obtain, organize, restructure, warehouse or memorize and distribute knowledge. Most of the firms also underscored the importance of:
teams; relationships; and networks.
These three elements are the basis for the effective transfer of knowledge. The study showed that the participating firms had taken part in a number of approaches to encourage collaborative knowledge transfer (Manasco, 1996).
The more common type of success in knowledge management involves operational improvements limited to a particular process or function. According to a study reported in the Sloan Management Review, the following factors lead to knowledge management project success:
Link to economic performance or industry value. Technical and organizational infrastructure. Standard, flexible knowledge structure. Knowledge-friendly culture. Clear purpose and language. Change in motivational practices. Multiple channels for knowledge transfer. Senior management support.
An impressive benefit from knowledge management projects involve money saved or earned. At Dow, for example, a key focus of the knowledge management initiative was better management of company patents. A goal was to lower taxes paid on patents that were no longer useful. This initiative saved the company $4 million in the first year. At Texas Instruments, a strategic focus was increasing revenues through licensing of patents and intellectual property. In 1995, Texas Instruments reportedly earned nearly $200 million from patent licensing. Ernst & Young measures the amount of knowledge it reuses in the form of proposals, presentations and deliverables and the contributions of its knowledge repository to closing sales.
Benefit calculations may also be indirect, like improvements in measures like cycle time, customer satisfaction, etc. Hoffmann-LaRoche has designed projects to significantly reduce time to market for new drugs in an industry where even a day’s delay can represent $1 million in lost revenues. Several knowledge management projects in the customer support process attempted to improve customer satisfaction by reducing waiting time for phone support, all factors which lead to higher productivity and quality within the organization (Davenport et al., 1998).
According to a study conducted for the Directorate of Military Programs, Headquarters, U.S. Army Corps of Engineers, knowledge work is the area that offers the greatest opportunity to increase productivity within the US workforce. Ongoing research at the US Army Construction Engineering Research Laboratories is developing the Knowledge Worker System, an integrated performance support environment designed to improve the performance of Army knowledge workers (Thomas et al., 1995).
Knowledge management is one of many components of good management. Sound planning, savvy marketing, high-quality products and services, attention to customers, efficient structuring of work and thoughtful management of an organization’s resources are all critical to compete in today’s marketplace. Knowledge management may help create the competitive edge in today’s global environment.
Knowledge management and information technology
The process of converting written word into association into idea will provide you with a range of decisions. The process is complicated further by accompanying data, images and environmental stimuli. Multiply that process thousands of times each day adding charts, graphs, presentations, voice mail, conversations and consider that typical management and employees face increasingly large amounts of information in more forms that must be processed, understood and acted upon. Unless that information can be transferred into knowledge to improve sales, operations, strategic planning and bottom-line results, it can only lead to information overload and confusion. In computer systems the weakest link has always been between the machine and humans because this bridge spans a space that begins with the physical and ends with the cognitive. Advanced software and hardware technologies are converging in machine-human interfaces that vastly extend knowledge transfer capacities (Lawton, 1999).
Karl Erik Sveiby, the author of The New Organizational Wealth: Managing and Measuring Knowledge-Based Assets, contends that the confusion between knowledge and information has caused managers to sink billions of dollars in information technology ventures that have yielded marginal results. Sveiby asserts that business managers need to realize that unlike information, knowledge is embedded in people, and knowledge creation occurs in the process of social interaction (Sveiby, 1997).
New design precepts are emerging as we accumulate experience. Participants interacting with the computer need to be able to interpret what’s happening on the screen in terms of the real world. A well-designed learning computer lab leaves its participants with the skill to communicate without depending on a computer (Senge, 1994).
The current business arena requires the need for a vast and complex interpretation of information outputs generated by computer systems. This variety is necessary to encompass the multiple global views of an unpredictable future. Brook Manville, Director of Knowledge Management at McKinsey & Company in Boston, views the implementation of these issues in terms of the shift from the traditional emphasis on transaction processing, integrated logistics, and workflows to systems that support competencies for communication building, people networks, and on the job learning (Malhotra, 1998).
It should be noted that a key enabler for the implementation of knowledge management is technology. IT’s role is emerging as an integrator of communications technology, rather than solely a keeper of information. The critical role for IT lies in its ability to support communication, collaboration, and those searching for knowledge and information, not static repositories of “best practices”, according to the American Productivity and Quality Center International Benchmarking Clearinghouse study (Manasco, 1996).
A lot of intellectual capital resides in the minds of IT workers. Companies such as Andersen Consulting, Ford, and Monsanto encourage employees to put “tacit” knowledge, the know-how in their heads, into “explicit” form, such as written reports or video presentations. This captured knowledge is then stored in repositories such as databases and intranet Web servers, all of which users can search. The ownership of intellectual capital has become a priority for many organizations, with several recent court cases having thrust this issue to the forefront. Wal-Mart Stores, Inc. filed a lawsuit last year against Amazon.com that alleges theft of trade secrets. Wal-Mart claims the defendants carefully recruited members of its staff who, as a group, have the knowledge to replicate information systems and business processes Wal-Mart has spent years and financial resources developing. A recent Supreme Court action affirmed that business methods linked with software can be patented. Savvy technology managers now use a combination of legal defenses and common sense to protect their companies’ most innovative IT systems and to retain their talented information technology staff (Hibbard, 1999).
Despite initial fragmentation, knowledge management technologies are quickly evolving and converging, spurred by requirements of top global organizations, attention by consultants and integrators and efforts by pioneering vendors (Mantelman, 1999).
Most knowledge applications have evolved from pre-existing types for managing documents, databases, workgroups and customers. Most explicit knowledge lives in documents, Web or PC files, paper or scanned images. Smart systems do more than track or store information. They help organizations manage content – in the context of what people know and need to know. These documents are now known as “smart documents”.
Knowledge management requires collaborative group support. Software tools are available which let people build communities and take part in virtual teams; brainstorm, develop, present and deliver knowledge; share documents or applications; discuss and manage projects; and coordinate activities.
Teltech: the business of knowledge management case study
Teltech was formed in 1984 and offers instructive lessons to companies wishing to better manage their knowledge and information assets. The company has built a successful business on helping companies gain access to external technical expertise and information. Teltech’s business model includes the following innovations: a hybrid environment of people and technology-based services; pointers to people with expertise; mapping of information sources; a structure and a set of techniques for categorizing knowledge; and focusing on the information behavior of customers.
Four basic services are offered to clients, primarily scientists and engineers, including:
(1) The Expert Network: a network of thousands of experts in technical fields. (2) Assisted Database Searches: access to over 1,600 online databases – assisted by Teltech knowledge analysts. (3) Vendor Service: a vendor search service conducted by knowledge analyst. (4) Technical Alert Service: weekly briefings for clients provided via computer of significant technical developments in their business arenas.
Teltech’s vision includes the view that purely technical approaches to information and knowledge provision will rarely add value such as the incorporation of the human element. The knowledge analyst assists in defining what information is desired, clarifies concepts and terms, interprets search results and knows when and where to seek further information.
A key premise of Teltech’s business model is that people are not only guides to information, but important repositories of expertise. A key focus of the firm’s product line development has been the development of software providing an integrated view of sources of information on a particular topic known as an integrated source map. It will present virtually all information that a customer may want on a particular topic in a matrixed environment (Davenport, 1997).
Knowledge management at Ernst & Young
Ernst & Young is one of the “big six” professional services firms which traditionally offered audit, tax and management consulting. In 1993, the operational vision for the consulting practice involved four key processes: sales, service delivery, people and knowledge. By 1995, the knowledge strategy had been formalized into an approach entitled Accelerated Solutions Environment which involved the rapid application of knowledge, models and approaches to client situations. Three internal business centers evolved with an interactive approach. The Center for Business Innovation created new knowledge, the Center for Business Technology structured knowledge into methods and automated tools and the Center for Business Knowledge gathered and stored the firm’s acquired and external knowledge and information. The firm created a position of chief knowledge officer with the following responsibilities: oversight of processes and technologies related to knowledge. Also, several high level committees were created to examine the direction of knowledge management within the firm.
Due to the scope and geographical distribution of the Ernst & Young knowledge base and its users, technology had to be used as an enabler for its knowledge workers. Lotus Notes was selected as the primary technological platform for capturing and disseminating internal knowledge. Thousands of databases as well as key documents, were in use for network and focus groups. In 1996, exploration began for use of a Web-based intranet. Infrastructure investment occurred which benefited knowledge management and technology (Davenport, 1997).
Microsoft knowledge management case study
For over 20 years Microsoft has maintained advantages over its competition because of the knowledge and capabilities of its employees. Microsoft employees have required a high level of competency due the fast changing technology marketplace. Microsoft’s IT group has invested time and resources into identifying and maintaining knowledge competencies.
Microsoft hired a program manager to take on the issue of knowledge competencies. The manager’s goal was to create an on-line competency profile for jobs and employees. The project was called “Skills planning development” or “SPUD”. SPUD is not focused on entry level competencies, but rather competencies needed to stay on the leading edge of the workplace. The five major components of the project were:
(1) Development of a structure of competency types and levels. (2) Defining the competencies required for particular jobs. (3) Rating the performance of individual employees in particular jobs based on competencies. (4) Implementing the competencies in an on-line system. (5) Linkage of the competency model to learning offerings.
Following is a detailed examination of each of the above components:
Development of a structure of competency types and levels
In developing the competency structure, Microsoft developed a four type hierarchy model which included:
(1) Foundation Skills-base level skills. (2) Local-advanced skills that apply to a particular job. (3) Global skills that are present in all employees within a particular function. (4) Universal skills present in all employees within the entire company.
Defining the competencies required for particular jobs
In gathering matches in jobs and competencies, Microsoft IT developed templates to measure competencies; the average template contained 40 to 60 competencies.
Rating the performance of individual employees in particular jobs based on competencies
The goal of the employee rating process was to build a competency inventory that could be used all across Microsoft. For example, a manager who was building a new team for a specific project could query an on-line database for the employees who were qualified for the project.
Implementing the competencies in an on-line system
SPUD involved building an on-line system that contained the competency structure, the job rating system and ratings database, and the competency levels for employees. The system had a Web front end for easy access through Microsoft’s intranet.
Linkages to education resources
Microsoft’s goal was to be able to recommend not only specific courses, but also even specific material or segments within a course that would be aimed at the targeted competency levels. Microsoft hoped to use the system to assess course demand on the basis of role descriptions and the competencies required.
Implementation of these knowledge management strategies proceeded on an international level involving a large number of employees and utilizing a cross-section of all job types (Davenport, 1997).
Knowledge management at Hewlett Packard
In mid-1995 there were several knowledge management initiatives at Hewlett Packard. The Chief Information Officer and Vice President decided to facilitate knowledge management by holding a series of workshops on the topic. The goal of the workshops was to bring together a diverse group of people who were already sharing knowledge or were interested in the topic.
The workshop objectives were:
sharing of knowledge through informal networking; establish a common language and management framework for knowledge management.
As a result of the workshops, HP discovered 20 sites for knowledge sharing. One example was a training database; an on-line knowledge database that contained training issues, topics and techniques.
Other Hewlett Packard knowledge sharing operations included a guide to human knowledge within HP’s laboratories. The goal of this database was to identify expert profiles, or guides to the backgrounds and expertise of individuals who were knowledgeable on particular topics. Hewlett Packard Product Processes organization developed three knowledge sharing products:
(1) competition information; (2) research information; and (3) marketing intelligence (Davenport, 1997).
Conclusions
The following conclusions can be drawn from each of the case studies.
Teltech’s efforts in creating a structure for knowledge management are instructive for not only external purpose, but internal practice. It is clear that if knowledge is to be leveraged, it must first be categorized. The thesaurus-based, matrixed approach used by Teltech may be the “best practice” since knowledge is usually communicated and sought in words.
Also, it is clear that Teltech’s operation is labor intensive, requiring employees with a high level of information skills and customer service. Also, the expense of maintaining the Expert Network, as well as development of the integrated source map are financial factors to consider. It is clear, since at this point there are no obvious competitors to Teltech’s operation, that the financial challenge exists. Teltech’s approach to knowledge management adheres to the framework defined earlier in this paper, an exception being that it is an actual external service for companies interested in acquiring knowledge from experienced knowledge workers.
Substantial progress has been made in Ernst & Young’s approaches to knowledge management, but several challenges remain, inclusive of: embedding knowledge in an ever changing technological environment; maintaining support with increased usage; and buy-in from front line staff. The knowledge management approach is a conceptual orientation, differing greatly from a history at E&Y of a pragmatic approach. To meet this challenge E&Y consultants were now evaluated, in part, on their contributions to, and use of, the knowledge banks.
Also, the task of measurement of return on investment is difficult at best. A “dashboard” was created assessing such topics as value delivered, reusable content created, thought leadership, presence of subject matter expertise and state of networking environment. It was noted that “some level of faith” was required to fully justify knowledge management investments. The revenues in the US consulting practice in 1995 rose by 44 per cent which surpassed all targets. Also noted was the embryonic phase of development this discipline was still undergoing and the understanding that many challenges and changes remain (Davenport, 1997).
In the case of Microsoft, it is evident that for a project to be successful it would require the involvement and teamwork by everyone in the organization. This is a model which is clearly valid in business practices, but essential to the discipline of knowledge management. Also evident was the fact that time and resources would be substantial to collect knowledge competencies and develop a competency model to rate employees.
The Microsoft case study reveals security issues pertaining to building a competency database which included access rights based on the nature of the data; “people data”. Also, there was the concern over the access to all data by department supervisors. Finally, the project was built to maintain employees competency in order to gain strategic advantage over competitors.
Hewlett Packard has recognized that there are several knowledge sharing initiatives, such as training techniques, marketing intelligence, etc., which can advance their position in a global marketplace. It is clear that the level of resource commitment in gathering data and dissemination of data is high, but the gain is important to remain a leader in quality and productivity (see Table I).
It is clear, upon analysis of these conclusions, that important aspects of this discipline are regarded in similar manner throughout the intellectual and business community. These aspects include a direct correlation between the implementation of knowledge management “best practices” and quality improvement, as well as increased productivity.
Recommendations
Several recent studies report results that solidly show knowledge management initiatives growing in large corporations, up more that 100 percent from 1998, encompassing more than half of all major enterprises (Petch, 1999).Table II, created by the authors, provides a detailed approach to the implementation of knowledge management strategies and practices within an organization.
Standards bodies, ranging from the International Accounting Standards Committee to The Conference Board, are making important progress on performance measurement methodologies (Petch, 1999). Performance measurement will be a key issue in knowledge management initiatives since there is little precedent upon which to establish ROI. As an emerging and dynamic discipline, the creation of a standard measurement of knowledge management reflected on the balance sheets, is still in the formation stage. Once achieved, the result will be a rapid response from global business leaders to implement knowledge management “best practices” in order to remain competitive.
Knowledge management implores you to look at informal networks and protocols, any and all approaches to sharing experiences and know-how, as well as any and all cultural, technological and personal elements that spur creativity and innovation in response to changing stimuli. The effects of knowledge management on quality and productivity are evident by an internal and external awareness of collective strength and the ability to respond and instantly organize to meet market demands and opportunities. Clearly, knowledge management is the new challenge for the twenty-first century.
Table I Knowledge management effects on quality and productivity
Table II Steps for implementing knowledge management strategy
References