KM and your business model.  Dilip Bhatt, takes a close look at the model developed by the European Foundation for Quality Management, and using the "hybrid skills" he has honed since serving as a geophysicist in the 70's and 80's, links knowledge management strategies directly to business policies and strategies. 

Bhatt is currently a Principal Consultant with ICL ltd. located in the U.K.  where he provides strategic KM consultancy to banks, government agencies, as well as to other business organizations.   He's actively assisting in developing ICL's own KM strategy and capacities associated with their cultural changes.   In his prior positions of information and product manager, training manager, business analyst he has been working on the KM front lines since the early 90's. While at Schlumberger Corp, where he was Information Manager from 1994 to 1998, he pioneered the use of the "Net" and was responsible for a sister company, Greco-Prakla's, (an oil exploration company of Schlumerger) group-wide implementation of their Intranet.

The author says, "Arm people with the right information, so they are able to make better judgements, smarter decisions and create environments in which to encourage innovation, in order to be able to provide a high quality service to its customers.  All this, by implication,  means a KM-centric company is a successful company."  In this article he tells you how to align this action with your own business model. 

Bhatt is someone others describe as being more of a Practitioner than a Consultant, as his clients say he, "practices what he preaches."  He can be reached at dilipbhatt@aol.com 

EFQM
Excellence Model and Knowledge Management Implications

by Dilip Bhatt

Introduction

In spite of all the discussions and publications about Knowledge Management, many business executives are still asking, “What does it mean?”  “How can it work in my organization?” “What benefits will it bring?" and  “What will it cost?" Without a doubt there is an inclination to believe in KM conceptually, but how it works in practice remains in question. 

The author has concluded that KM must be articulated in a given context. KM is unique to any given organization, just like a fingerprint. A solution suitable for one will most certainly not be appropriate to a another, even if the two companies have similar products, services and are the same size.  To help resolve the uncertainty of what KM is about and apply it in a given context, the author shows how to link KM implications to your business model.  The idea is to articulate the issues around business terms and not KM by itself. KM should be seen as a set of concepts that could be tailored to meet business needs.  

Please be aware, KM is not a substitute for a Quality system; it does not replace TQM but helps to achieve the objectives in a smart fashion. It does this by developing a certain mindset in the organization. It develops a different way of thinking, of working solo and as a team member, it helps to run a business dependent on the drivers and objectives. If the company is a product-based organization, then KM implementation is set accordingly; if it’s customer-based, a slight different approach is needed. KM supports and enhances the way the business operates.  It does not replace one's strategy setting, but the strategy itself will be flavored differently if one adopts a KM mindset. In time KM will became simply M, a way of managing the business. 

Typically most organizations will develop their strategy around a well-recognized business model. Therefore it would seem logical to map KM issues to a recognized business model, also.   For the purposes of this article, the business model used is the one developed by the European Foundation for Quality Management (EFQM) and refereed to as the Excellence Model.

EFQM Model  

European Foundation for Quality Management (EFQM) has developed a Model (fig 1) which is being widely adopted by thousands of organizations.  

 

 

 

 

 

 

 

 

Fig 1 - EFQM Excellence Model

 

Prior to discussing how KM can be mapped to the model, a clear understanding of the model components and fundamentals is required and highlighted in this section. 

Fundamental Model Concepts

Results Orientation

Excellence is dependent upon balancing and satisfying the needs of all relevant stakeholders (this includes the people employed, customers, suppliers and society in general as well as those with financial interests in the organization).

Customer Focus

The customer is the final arbiter of product and service quality and customer loyalty, retention and market share gains are best optimised through a clear focus on the needs of current and potential customers.

Leadership & Constancy of Purpose

The behaviour of on organization’s leaders creates a clarity and unity of purpose within the organization and an environment in which the organization and its people can excel.

Management by Processes & Facts

Organizations perform more effectively when all inter-related activities are understood and systematically managed and decisions concerning current operations and planned. improvements are made using reliable information that includes stakeholder perceptions.

People Development & Involvement

The full potential of an organization’s people is best released through shared values and a culture of trust and empowerment, which encourages the involvement of everyone.

Continuous Learning, Innovation & Improvement

Organizational performance is maximised when it is based on the management and sharing of knowledge within a culture of continuous learning, innovation and improvement.

Partnership Development

An organization works more effectively when it has mutually beneficial relationships, built on trust, sharing of knowledge and integration, with its Partners.

Public Responsibility

The long-term interest of the organization and its people are best served by adopting an ethical approach and exceeding the expectations and regulations of the community at large.

Overview of the EFQM Excellence Model 

The EFQM Excellence Model is a non-prescriptive framework based on nine criteria. Five of these are ‘Enablers’ and four are ‘Results’. The ‘Enabler’ criteria cover what an organization does. The ‘Results’ criteria cover what an organization achieves. ‘Results’ are caused by ‘Enablers’. 

The Model, recognizing there are many approaches to achieving sustainable excellence in all aspects of performance, is based on the premise that: 

Excellent results with respect to Performance, Customers, People and Society are achieved through Partnerships and Resources, and Processes. 

The arrows emphasize the dynamic nature of the model. They show innovation and learning helping to improve enablers that in turn lead to improved results.

Model contents structure 

The Model’s 9 boxes, represents the criteria against which to assess an organization’s progress towards excellence. Each of the nine criteria has a definition, which explains the high level meaning of that criterion. 

To develop the high level meaning further each criterion is supported by a number of sub-criteria. Sub-criteria pose a number of questions that should be considered in the course of an assessment.  

ENABLERS - how we do things

RESULTS - what we target, measure and achieve

LEADERSHIP - How leaders develop and facilitate the achievement of the mission and vision, develop values required for long term success and implement these via appropriate actions and behaviors, and are personally involved in ensuring that the organization's management system is developed and implemented.

CUSTOMER RESULTS - What the organization is achieving in relation to its external customers.

POLICY & STRATEGY - How the organization implements its mission and vision via a clear stakeholder focused strategy, supported by relevant policies, plans, objectives, targets and processes.

PEOPLE RESULTS - What the organization is achieving in relation to its people

PEOPLE - How the organization manages, develops and releases the knowledge and full potential of its people at an individual, team-based and organization-wide level, and plans these activities in order to support its policy and strategy and the effective operation of its processes.

SOCIETY RESULTS - What the organization is achieving in relation to local and international society as appropriate.

PARNERSHIPS & RESOURCES -How the organization plans and manages its external partnerships and internal resources in order to support its policy and strategy and the effective operation of its processes.

KEY PERFORMANCE RESULTS - What the organization is achieving in relation to its planned performance.

PROCESSES - How the organization designs, manages and improves its processes in order to support its policy and strategy and fully satisfy, and generate increasing value for, its customers and other stakeholders.

 

How it works 

Self-Assessment is a comprehensive, systematic and regular review of an organization’s activities and results measured against the Excellence Model. All sizes and types of organizations including local government, charities, the military, police forces, hospitals and private companies use it. Some organizations undertake Self-Assessment for the whole organization, others for a department or operational unit. Fig 2 shows the RADAR against which various assessments are made. 

RADAR is the method for scoring when using the Excellence Model - Results, Approach, Deployment, Assessment and Review   

Fig 2 – EFQM RADAR

THE BENEFITS 

Self Assessment against the Excellence Model allows an organization to identify clearly its strengths and those areas in which improvements can be made. It is also an effective means to co-ordinate an organization’s quality initiatives (e.g. ISO 9000, Investors in People, Process Re-engineering and Charter Mark) to form a cohesive and structured approach to business excellence. A recent survey of British Quality Foundation members who are undertaking Self Assessment identified the top benefits as:  

  • Development of clear, concise action plans

  • Clear and more focused leadership

  • Better and more focused policy and strategy

  • Process improvement enabling achievement of an organization’s objectives

  • Improved prioritization of resources

  • Greater motivation and satisfaction of an organization’s personnel

Knowledge Implications

Enablers 

The enabler element of the model is whereby issues related to successful implementation are determined, understood and implemented.  This section addresses each enabler and discusses associated KM implications.

Leadership 

LEADERSHIP - How leaders develop and facilitate the achievement of the mission and vision, develop values required for long term success and implement these via appropriate actions and behaviors, and are personally involved in ensuring that the organization's management system is developed and implemented. 

Knowledge Implications

Typically Leaders will set business direction based on influences and/or direct knowledge about customers needs, product trends, technology advances, competitors pressures, share holders objectives, financial performance and market share being the prime drivers. Leaders by themselves cannot change direction without the workforce. Often major changes in direction are required and without the support and the movement of the organization pulling in the same direction, vision’s will not be realized. Leaders are changing the way they lead, different styles and methods are being used to generate the movement required.  

To drive towards a vision, to which the whole organization can relate, requires considerations to the softer issues, which are primarily cultural. The entire workforce should be able to directly influence Senior Managers and Executives in direction-setting. People “at the coal face” are most likely to be in tune with customer needs, competitors status, business constraints, value-blockers, resource requirements and technology advances. It’s the people in the front-line who have the answers and who know where the potential solutions exist. The Executives need channels to listen to the staff and to tap into the vast knowledge base that exists. But the organization needs to go a step further. Staff should be encouraged to voice their opinion (good and bad), in the style of openness.  

A good example, is ICL Ltd. They have developed a ‘conversation for change’ program whereby all employees are asked to provide input in direction-setting. Keith Todd, CEO, invites all employees to participate in the program. In addition, Keith Todd and other Board Executives also use online chat sessions to discuss with staff issues in an open and non-judgmental environment. This style of openness generates a feeling of ‘wanting’ which can be very powerful in generating commitment and loyalty. Staff feels their views and opinions are wanted and whatever they say will influence the future vision. Every view is considered valid and important. This CEO has also set up a web space, whereby any questions asked of him are posted with replies for all to see. ICL is one example of many companies where leaders are changing the way they lead. These leaders are not simply providing lip service, but genuinely believe that knowledge is a key asset and that asset largely consists of the people in the organization. 

In the new economy the empowerment of the staff is a key issue and leaders are starting to understand the value and the power of openness. It can be messy at times, discussing issues in the open that have too long remained buried,  but in the long term it builds trust, commitment and loyalty. Everyone feels they play a part in the future direction and it is everyone’s responsibility to contribute. It is  not just ‘management’ to determine the future. 

For large organizations, developing a sense of oneness can be problematic. However, every effort should be made to engage people from different geographies and cultures. Use your technology to share and discuss company vision.   All parts of the organization can became a community using Teleconferencing and other collaborative tools; staff should not feel isolated due to being sited away from HQ. The engagement of the entire organization in conversation and dialogue in order to share and develop a company’s vision is vital and should be encouraged. 

On a wider issue, vision realization will only come about through getting into the people’s emotional side. Leaders will need to learn how to achieve that. Command and Control behavior does not operate when the objective it to develop a ‘common’ vision. Leadership will have to provide a vision by means of creating excitement, telling stories in order to entice, energizing and inspiring people towards a common goal.

In summary it comes down to the leaders listening to the workforce to determine a future vision, in addition to the other elements that typically influence vision setting. Open communications channels, fostering a no-blame culture, listening to all levels of the organization and individual of all grades are some of the key elements of a high performance organization. People in the organization must be able to share in the vision, believe in a common sense of direction, take ownership of shared objectives and feel they play a part in success (or failure) of the organization. Gain-share for the employees and staff will encourage them to feel they have a stake in the company and engage the staff in achieving the vision.  

Policy and Strategy 

POLICY & STRATEGY – How the organization implements its mission and vision via a clear stakeholder focused strategy, supported by relevant policies, plans, objectives, targets and processes. 

Knowledge Implications 

Top Management must stimulate not control. Its role is to provide strategic directive, to encourage learning and to make sure there are mechanisms for transferring lessons to demonstrate to people that they are capable of achieving more then they could achieve and they should never be satisfied with where they are now.”  John Browne BP 

To add to John Browne’s statement, the strategies being developed need to ensure the ‘people capital’ is utilized and the extract is imbedded in the polices and strategies of the company. Plus the strategies should have flexibility, so that they can be changed and adopted by new learning and new ideas emerging from the rank and file of the company. 

A key element of a KM concept is a requirement to address People, Process and Technology issues in tandem and not focus on any one element.  Fig 3 provides details of the sub-elements. 

 

 

Fig 3 – Knowledge Management Components and sub-elements

 

Most likely any strategic implementation will impact ALL the elements to some degree. Therefore careful consideration must be made to all implication of any strategic implementation. A holistic approach is needed in strategy setting. This is an area where many companies fail, whereby KM is seen as a technical implementation.  A typical example would be a strategic requirement to share knowledge. A company would implement, say an Intranet, and wait for the benefits to kick in. Sadly, the company will gain little from its investment. The Intranet is a powerful infrastructure element BUT it needs to be established with People and Process implications not just Technology and must be tied with a desired business objective. Change management considerations are paramount to the technology implementation. KM will yield maximum benefits only when all the implications are addressed. That does not mean to say technology is the least important of the elements. The point is ALL the elements are important; however, the Technology element is probably the easiest and quickest to implement.  

KM gurus often say that Technology is 10% of the effort required, Process is 20% and 70% being people/cultural issues. While technology is possibly the easiest and quickest to implement, tapping into cultural and people issues, at the other extreme, will most likely take longer and cost more. The true benefits will only be realized when people-related issues are addressed and kick in. However, there is no reason why small projects cannot be started, in manageable chunks to get the strategies rolling. Implement the classic case of “start small but think big.” 

The strategy should also address specific implementation issues, such as an awareness campaign, understanding skills required to maximize knowledge, developing a rewards scheme and developing measuring requirements. In other words, a full change management program must be developed and implemented. 

A wider policy implication would be to establish an innovation and learning culture within the organization. New products of tomorrow are residing in people's heads. Give them a channel to experiment. A learning environment is key to new learning that takes place in the company. People need time to reflect and question.  Attending a training course is only a small element of learning that takes place.  

Most learning takes place by the coffee machine or attending a seminar or a departmental meeting. Tacit to Tacit exchange is possible and is proving to be one of the most important aspects of learning. This needs to be considered when developing policies and strategies.  This should include softer issues such as considerations to family issues, working from home, leave entitlement, offering counseling services, etc. Stressed, over-worked staff members without the organizational support or time for family will not remain productive. Leave it to the staff to organize they way they work. 

In addition, a knowledge audit is required that aligns with the business strategy. Not only will the audit show gaps BUT also highlight areas where information which is currently being created in fact adds no value. Numerous times the author has questioned ‘Why is this report produced?" only to be told "Because we have always done it."  By eliminating no value information chains, a great deal of work can be scrapped and help to address the working balance and reduce the burden.  

Strategy should also include staff development with a wider scope.  In other words,  leave it to the individual to develop new skills and set career direction.  An organization can play a vital supporting role in staff development; this is particularly true in a ‘learning organization,'  where staff are encouraged to learn and accept that training courses are only a subset of learning. Learning has  many components and a right culture should be developed to foster learning.  

In summary,  KM strategies must be aligned with the business vision and management and must ensure that staff are clearly onboard. They must understand why knowledge is important, chiefs must practice what they preach.  They must have channels for discussion and allow a flow of ideas.   Feedback must be given and above all trust must be developed between the executive and the staff. Split the KM program into manageable units; think big, but start small.

Partnerships and Resources 

PARNERSHIPS & RESOURCES -How the organization plans and manages its external partnerships and internal resources in order to support its policy and strategy and the effective operation of its processes. 

Knowledge Implications 

The shift in forming partnerships is clear in the knowledge economy. These include suppliers, customers and even competitors. Dependent on the companies services and products, a value chain is an important element. Sharing of knowledge assets will lead to quicker and smarter customer solutions. Examples of partnerships are banks that offer cars for sale to general public, telecons and IT companies to develop WAP services, management consultancies and IT service companies to provide clients with ‘total solutions’, cable TV and leisure industry to provide interactive TV (Video on demand…etc). Why the partnerships?   In essence, to leverage on knowledge and to delivery a premium service. Clearly for such partnerships to flourish, knowledge needs to be transferred and be made available between the key parties. The greater the collaboration between the supplier and the client, the better the product/service, not to mention lower development costs. 

Beware of software single vendors that offer “complete out of the box solutions.”  It’s very unlikely that all KM issues can be addressed by a single vendor, in particular IT suppliers. The mindset should be:  deliver an appropriate solution and understand the knowledge/information chain required to meet the partnership requirements. A KM audit would be ideal at the early stage to understand  Where, What and How the knowledge exists and is used in the organization. The audit should be conducted for the full length of the information chain and not stop at organizational boundaries. By understanding the information requirements, processes should be modified to embrace the partnership and provide effective development of solutions.  CRM is one example of a service/product that could cut across organizational boundaries and provide/share customer information between the partnership organizations. 

Terms such as B2B (business to business) are becoming common place.  For example, companies want to link IT with their customers and suppliers not only to provide smart solutions, as mentioned above, but also to primarily reduce cost.  The B2B will use IT to include process integration, knowledge chains and product/service transfer where applicable. To achieve this, a clear knowledge audit is required to determine the requirements and integration with people, processes and technology.  

BP Exploration is perhaps one of the best examples of internal resources put to good use in a large corporation. Virtual Team Network project launched in 1995, used Videoconferencing and collaboration technology and information systems. Virtual teams were able to work on problems with the team members distributed globally and consisting of not only internal staff but also third party contractors. This is an excellent example of tacit to tacit knowledge transfer. New processes were introduced, new technology was used effectively. Utilization of the ‘right’ people to resolve challenges being the prime objective. A key to the project was the early realization that people will need to work differently. They realized working practices and behaviors would need to change. BP felt that having a network in itself meant little and could not be forced upon the staff. However, as people were showed the benefits, the project just took off. BP estimates, the Virtual Network produced at least $30 million in value in its first year 

Army’s After Action Review (AAR) is another example of a excellent process that ensures that lessons are learned after the event. BP have introduced a version of this plan, whereby prior to undertaking a large project, they learn before, learn during and learn after. Major costing savings have been realized by introducing learning processes. Another example would be Chevron.  They introduced a simple learning tool for their drilling operations. Every time they drill in a particular area lessons are recorded. Next time drilling takes place in a similar area, lessons learned during the last drilling operations are available. This results in fewer errors and less reinventing the wheel. Again, Chevron have recorded waste savings in their drilling operations. 

People 

PEOPLE - How the organization manages, develops and releases the knowledge and full potential of its people at an individual, team-based and organization-wide level, and plans these activities in order to support its policy and strategy and the effective operation of its processes. 

Knowledge Implications

To enable people in knowledge-centric organizations is possibly the hardest task of all. Changes required will impact most likely deep- rooted cultural mindsets. The approach suggested is based around recognition of individual contribution to the organization.  Motivation not only comes from the wage packet but also recognition of individual contribution. If staff can see that they make a difference, then they feel part ownership of the organization’s successes (and/or failure). Therefore, it is suggested that a strong engagement of people is required in maximizing on people’s ability to learn and bring about change. 

Early adopters of KM have realized the power of knowledge and the rewards due to staff empowerment. Most organizations have recognized that it’s the individuals that are the key contributors to success. It’s due to people that new learning takes place, new processes are developed and old ones enhanced, and new products/services developed through the culture of  innovation and experimentation. It’s the individual that brings about change and the organization acts as the supporting mechanism. 

Vast savings have been recorded by various organizations through exchanges of tacit knowledge.  The key to success is the cultural mindset of the organization regardless of the key business drivers, be it time to market, operational excellence or new product’s. It’s the people that will drive the change. The method and leadership of mobilizing the people’s knowledge will determine the speed of transformation in the knowledge economy. The faster the company can develop and adapt to change then the chances of survival are increased. Vast knowledge typically exists in any organization in both the explicit and tacit forms. If people can NOT trust or perceive a benefit for sharing this knowledge then the organization is doomed for failure. 

The cultural issues also relate to organizational makeup, some of the most successful companies foster an environment, which maximizes on staff development and on recognition that the staff are key to maximizing the company’s intellectual property. Key cultural issues  include:  

  • Deliver awareness and/or direct training relative to impact of practices/tools/processes.

  • Allow experimentation and time for learning new ways of working.

  • Develop "out of the box" thinking.

  • Encourage feedback to on company performance and issues that people feel strongly about.

  • Foster learning environment, allow staff time to reflect to improve skills but also to create an environment for creation of ideas and innovation. Focus should be on people rather then systems. Workgroup should believe they can change the environment they work in and not wait for the ‘management’ to establish it.

  • Accept failures and exchange best practices and lessons learned.

  • People have a massive capacity to generate ideas and innovation, encouragement and freedom to explore is key. These ideas are the products and services of tomorrow, some will work others not, and yet some will leap us into the higher plane of profits and competitive strengths.

  • Take a holistic approach to problems; do not focus on narrow or short-term fixes.

  • Encourage open communications up and down the hierarchy of the organization. Foster a no-blame culture. Shared commitments, aims and a common language are vital elements of a learning organization.

  • People working within a framework of Trust, Co-ordination and Corporation are the corner stones of team-working. Self regulated teams, with team leaders that act as mentors and stewards are fundamental to knowledge sharing community.

  • Knowledge and learning are inter-related; knowledge leads to learning and evaluating. Learning is far bigger then training alone.

  • Allow for variation; don’t impose a standard blanket. Listen to the needs of individuals, groups, organization level and to external parties. There is no such thing as wrong information, unless it is inaccurate. 

As can be seen, learning or knowledge acquisition is a complex arena with a spectrum of ‘soft’ issues that must be considered. These ‘soft’ issues are also difficulty to implement and will take time before the benefits are evident. However, it is clear in the knowledge economy that individuals’ knowledge has capital value.  Each person has know-how and know-why which must be utilized to gain competitive advantage, operational excellence and to create the products and services needed tomorrow. Intellectual knowledge is now seen as an asset, just like the Personal Computer or a building. Financial Analysts are working towards attaching a value to the knowledge of the organization, which includes knowledge in people’s heads. These figures in time will be reported in annual reports. Fig 4 shows the elements that constitute market value of a company.  

 

 

 

 

 

 

 

 

 

 

 

 

Fig 4 – Market Value Components  

Larry Prusak in an article in Ground Work titled "American Accounting Association Wrestles with Intangibles," Oct 1996) comments: "Common account measures captures only 20-30 % of the real worth of the company."   As we have seen in the dot.coms the market value is high even though financially most are not making any money (as yet.)

Continuous skills development is required as technologies and/or customer requirements change.  Flexibility to learn and adapt to new ideas will be the characteristics of the workers in the knowledge economy. KM organizations use people’s ability to change and enhance business objectives,  to develop standard processes to capture ‘best practices’ in order to codify the knowledge and technology and to enable the practices and process to happen. Care must be taken not to became too formalized or control-centric. 

There is a strong need to recognize that one of the best practices for sharing knowledge is human interactions itself. These take place in the coffee room, in the staff restaurant or in the hallways. The social aspects are very important for Tacit to Tacit exchange and is a key element of learning and knowledge creation. Knowledge-intensive companies should, in fact, encourage dialogue and conversation, encourage staff to talk freely up and down the chains of command. These informal structures must be insured as a part of the company’s ethos and policy. Some of the knowledge-centric companies have or are designing office buildings that foster informal structures. 

Knowledge leaders of tomorrow will not lead teams but support them; a whole new way of working is required in a knowledge-centric organization. Emphasis is moving away from the old style command and control into more support and develop. Wages today are based on length of service, age, scope of responsibility but likely tomorrow the reward will be on know-what and know-how, the ability to handle a wide range of job, range of skills learned and amount of knowledge shared. Organizations are introducing knowledge-sharing incentives in various shapes and forms. They recognize that knowledge-sharing should be rewarded just like when someone’s spends extra time at work and is paid overtime for the extra hours. 

Be prepared to re-engineer organizational cultures and working models, and beware that the hierarchical structures will not necessarily yield the highest benefits. People working in communities of products, services, skills, experiences and/or interests will be required to maintain a competitive edge. New models will mean new networks of specialist experts working in teams, not the structures we are all used to. 

ICL Ltd. has changed its entire organization into communities. These fall into two types: Professional and Interests. All employees belong to a Professional community dependent on their function (Sales, Project Management, Consultancy, etc) and any employee can also belong to any one or more communities of Interest (KM, Quality Improvement, etc). For example, a Consultant will belong to a Professional Community of Consultants and work and develop within the consultancy framework. The Consultant can also specialize in KM and therefore belong as a member of the KM Community. S/he is able to discuss, share and develop in the KM field. The KM community, for example,  meets at regular intervals, guest speakers are invited to the meeting, lots of tacit exchange takes place. It develops into a true community spirit. The Interest community will typically regulate itself and have an administrator to facilitate the web space and other co-ordination activities. 

Speed of solutions, products and services will be key to success in order to maintain the competitive advantage. People will need to react fast to changing environments and will require tools and support to meet the demands. New skills in problem solving and team working will be required. Reward systems for knowledge sharing should be developed, whereby staff are rewarded for sharing tacit and explicit knowledge. The sharing of knowledge as well as the transfer needs to recognize all parties as providers and recipients. 

Appraisal systems that measure knowledge-sharing need to be developed. The rewards can take many forms from bonus payments to free training on any subject they desire, to extra days' holidays. Suggested reading on this complex issues is Frances Horibe's book Managing Knowledge Workers (1999.)  It discusses key issues related to managing people in a knowledge-centric company. 

A case example where a process has became a core element of an organization is, perhaps, Xerox, where they implemented a system for technicians to share knowledge. Technicians share tips on service repairs on their Web based system. Xerox have commented that their service costs have been reduced by 10%; it seems clear that any help given to technicians to increase their tacit knowledge and make it available will be worth the cost. Xerox have also extended the system to include customer questions. The systems holds hundreds of thousands of customer questions, which allow Xerox to track common questions and split them into categories. They are then able to track patterns and resolve issues accordingly. 

In summary, people-development issues are largely cultural. Systems, processes and technology can all enable but they can’t make change happen. Only with the appropriate cultural climate will staff flourish and maximize upon their own potential. 

There is only way to get any competitive advantage and its not by having smarter people then anybody else. If you can get your people to interact in fundamentally better ways than other organizations then you have something that is absolutely cannot be copied” John Old,  Texaco 

Q, What are the three critical factors in KM?

A, Culture, Culture, Culture.  Bob Buckman, President and CEO of Bulab Holdings

Process

To determine the KM implications related to processes, it may help to revisit the strategy and determine the following:

  • Identify processes that implement strategy.

  • What are the information requirements for the process both in terms of input and output?

  • How are processes ineffective due to information fragmentation?

  • What needs to be done to improve the fragmentation?

  • Does the process chain include partner and suppliers?

  • develop a plan for process improvements. 

In addition to the process/knowledge audit, questions could be asked, such as:

  • Are we differentiating by using our knowledge?

  • Do have a smarter way of working?

  • Are we leveraging on the knowledge of the organization?                 

Key fundamentals:

  • Determine and understand key information requirements of the organization. but beware that knowledge will mean different things to different people.  What is key to one is not key to another; do not judge what is important at a global level, but leave that judgement to the individual. Keep in mind there are varying needed levels of detail.  A sales person will require detailed knowledge about client organizations and its key contacts; the marketing people will need a different level of detail, and a VP may require a summary only. The key is to conduct a knowledge audit and determine what information does the company need to do its business, and then establish the source of the information. Fig 5 shows a table that could be used to determine knowledge requirements at the process/function levels. 

Fig 5 Function/Process - Assessment toolkit  

  • Knowledge will exist in people’s heads, in company procedures and in information islands either geographically and/or organizational levels. It will exist in a form of Tactic or Explicit knowledge, it may have a short life span or be long term. But above all it must have value to the reader. This is a tricky problem to address: how does the person that shares knowledge know the value the recipient attaches to it?  Ask the recipient.

  • Information can be classified: some is mission critical, other highly confidential and some open knowledge. 

  • Information will exist in variety of sources, formats and devices. It will be found anywhere from people’s heads, databases, Intranets, Partners, Clients…etc.

  • Ownership and legal requirements: information is generated and owned by an author; understand that people have rights (data protection) as to what is shared, organizations have legal requirements dependent on the company type. 

The KM process strategy, needs to therefore consider the following elements: 

  • Information share, usage, flow requirements. To assist with maximizing information usage.

  • Need to map knowledge sources, dependencies, owners and targets audiences, which will help to determine knowledge gaps, highlighted areas of frequently and infrequently used information, show mission critical information paths, provide an inventory of information.

  • To maximize on best practices, share ideas and exploration. Extract expert knowledge and share widely.

  • Foster environment for learning and improve Training. New skills are needed in the knowledge economy, such as how to work in team environments, ability to problem solve, experiment and mentor.

  • Maximize on IC and improve business intelligence

  • Determine key information requirements for mission critical functions and ensure as a minimum these are maximized in term’s process, people and technology. 

  • Understand the knowledge transfer process has recognized elements see Fig 6. All these elements must be considered in developing processes for information/knowledge transfer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fig 6 – KM Transfer Process

Processes should be global wherever possible; they should reduce the risk of re-inventing the wheel and also introduce best practices in the organization. Processes should follow standard practices and procedures and conform to the company’s business model and quality system. An example of one KM-type process is the Problem Solving Process within Rank Xerox. Rank has a group-wide single process for problem solving, used for all sorts of purposes and at all levels of the organization. 

On a wider issue, with the advent of data warehousing and neural networks, companies are able to develop new processes to take advantage of new technologies. But be aware that while these data- rich applications can perform pattern recognition, they still require human intellect to make a judgment in terms of the value of the newly generated knowledge. 

Mapping the knowledge chain will help to determine the process required. Some elements of the process can and should be automated by use of workflow technology.   However, any process design and implementation must be flexible enough such that it does not require high costs and time to re-engineer as the requirements change. Bespoke application and closed systems are typically barriers to information flow, but in some cases it is recognized that those barriers cannot be avoided.

Results 

Operational performance can be measured in a variety of ways. Most companies will use statistical tools in some shape or form. The tools themselves are not discussed here but mainly what needs to be measured.

Customer 

CUSTOMER RESULTS - What the organization is achieving in relation to its external customers. 

Knowledge Implications

Key indicators to success are positive financial results but wider issues can also indicate success, larger market share being one. One key KM requirement is to ensure company performance is measured using several indicators not just financial. 

Knowledge-centric organizations are using detailed customer information (using CRM) to collect client information. Information collected is both tangible and intangible, in order to develop products and services that the customers will need tomorrow. Customers can play a key role in determining business strategy; however, clearly, we need learn and develop accordingly. Partnerships and strategic alliances are common-place today. Service providers have learned that customers are sources of value and in more then just revenue terms. 

As mentioned by Dr Karl-Erik Sveiby, “In a world where customers are more interested in the knowledge and the intangible benefits you provide them with than the tangible product, the customer relations become partnerships and your product delivery becomes a co-creation of solutions. Knowledge flows both ways; you learn as well as the customer. Customers bring more than financial revenues, they also bring intangible revenues: product ideas, competitive intelligence, feedback, referrals, etc. You know this, of course. But have you ever tried to measure the intangible revenues? To manage them consciously? To put them in the strategic plan?


If you do, you will take the first steps towards making your organization more knowledge focused. To be knowledge focused is to take the intangibles seriously, to see your organization as if it consists of nothing but intangible assets and the flows of knowledge between them.  

They provide training for employees, they can act as references, they talk to each other and so spread the word and the image, and their demands encourage the development of new products. Revenues arising from intangible assets take intangible forms. Most companies use customer projects to develop new methods. As anyone who has worked in sales will tell you, projects undertaken successfully for "high-profile" customers are, irrespective of how profitable they are, invaluable aids in selling, because they attract attention and can be used as "reference accounts" for years afterwards." 

As Sveiby points out, customer relationship is an important element. But be careful, he says,  not to rely on CRM based systems alone. Visit customer sites, watch them as they use your products, involve them in the development and project management processes. 

As well as specific process, companies should also introduce wider policies/processes in terms of measuring customer and employee satisfaction and exit interviews. This is in addition to the quality management systems in place. 

Society  

SOCIETY RESULTS - What the organization is achieving in relation to local and international society as appropriate.  

Knowledge Implications

The main issues center around participation and information. Society in general will have expectations, in particular for ‘public’ organization, Governments, Public agencies. Society will expect these organization to adhere and understand environmental standards and issues. They will also expect to be able to voice their opinions,  to feel they are participating and that they form listening culture. Organizations are also expected to adhere to international HSE and occupational standards within their organizations. Audits are performed to ensure compliance. 

On a wider issue,  society expects companies to work under a caring culture where family values are part of the company’s ethics and values. The caring extends to partners and suppliers, but also towards the environment. That may include issues from waste disposal to building design. It might also include design of products that are environmentally and ergonomically friendly.  Society will also expect organizations to support the local community and environment and ensure compliance to global, regional and local regulations and rules. 

Information access with regards to all these regulations and policies is important and  sources of which will reside with the policy making bodies.  Therefore,  links (through the Internet and/or direct) should be established with these organizations. Furthermore, the company should publish its successes and failures, progress and policies for public view via the company’s Intranet. 

People  

PEOPLE RESULTS – What the organization is achieving in relation to its people. 

Knowledge Implications

In our new knowledge world, the  managers' power base is their relative level of Knowledge. The role shifts from supervising subordinates to supporting colleagues. 

As well as traditional training and skills development that most organizations have in place, a new emphasis is now required. Measures could include, competence utilization, value added, knowledge flows, customer image and staff attitudes. The old indicators of, for example,  staff retention and numbers trained is not enough. New measures could include, new ideas proposed, processes/service/products improvements due to staff feedback, sharing of knowledge, skills acquired. 

A good example of positive results achieved by using its intellectual capital is the smart use of people’s capability to improve and innovate by Texas Instruments Inc. By using people resources to improve productivity and hence increase capacity, T.I. were able to save $500 million in building another fabrication plant by increasing capacity in two existing plants. See the article "Measuring up Intellectual Capitalism" in  CIO Magazine, May, 1998. 

3M encouraged a culture of innovation and experimentation and is able to continually develop new products. In fact the company has over 60,0000 products and constantly maintains a 30% revenue on new products ratio. That is 30% of total revenue comes from products less than four years old. This high turnover of products requires an effective knowledge transfer and sharing culture. 

In the end it comes down to the cultural mindset of the organization. People should be encouraged at all levels and at all disciplines. Just because you work in, say HR, does not mean you have no channel to pursue an idea or suggest a product improvement. ALL should play a part in product development and if necessary the person should be given time and resources to develop the idea further. Once an idea has been validated. then there is no reason why the ‘inventor’ can not play a key role in commercialization of that product. 

At 3M, all the employees are subject to a 15 percent rule.  They are encouraged to spend 15% of their work time to develop new ideas and generally think about process improvement. According to Geoffrey Nicholson, one of the 3M’s VP’s, says "Some people take more than 15 percent; others less. But it's not the ‘15’ percent that’s important. It’s a message that it’s OK to dream." 

Specifics to people-results ensure staff surveys are conducted regularly. These can be in a form of company-wide satisfaction surveys, conducted six monthly or yearly. The results should be published for all to see and be part of the balanced scorecard measurement (see below). To supplement the company surveys, staff should have an opportunity to provide 360-degree feedback of their Managers' performance. These could be done during annual appraisal whereby both parties discuss performance of the other. This is a sensitive issue and most staff would feel reluctant to appraisal their direct Manager. As with the subordinate appraisal, if performance is based on facts and evidence then there is no reason why the Manager will not accept the subordinate's feedback. 

Key Performance  

KEY PERFORMANCE RESULTS - What the organization is achieving in relation to its planned performance. 

Knowledge Implications

Key issues to consider are organizational performance measures, which should be more than just financial. Bottom-line figures are traditionally seen as indicators of success. The emphasis in the knowledge centric organization has shifted to a much wider arena. New indicators are now considered based around, customers, processes, people and use of technology. 

Wider issues

Whatever the measures, they must go down to the individual level; individuals must be able to gauge how they are performing in the framework of the overall and/or specific strategy. These measures also evolve with time.  What is considered important to measure today may not be the case tomorrow. The organizational dynamics, people-contribution, services/products, suppliers, partnerships and customers’ base will determine what should be measured at a given point in time. Although financial figures provide important indications of performance of the company to, say shareholders, and CEO’s are hired and fired based on these indicators, to the individual working on the ‘shop floor,' financial indicators are a source of information only and often they are not able to perceive their own contribution to the overall success nor have any direct contribution. And often they don’t have direct responsibility for achieving or managing financial targets/results. Therefore, at certain levels, non-financial performance improvements should be established. 

People who actually do the work (as opposed to a Manager) have important intimate knowledge; they know competitors and customers very well. They understand processes and practices of their work environment. The key is to tap into the knowledge and allow staff to consider process/service/product improvements. The management task is to listen to the shop floor. As improvements are suggested and implemented, they should be recognized and rewarded accordingly. Managers will also need to consider if these ideas/suggestions may have wider implications and possibly could be adopted in other areas of the company. Some new ideas could also mean new products and services. 

Each business function within the organization has to be part of any measures introduced. These indicators could be consolidated at the group level as appropriate. However, measures must be marketed with care; the indicators should be used to determine areas of improvement and not to be used in a political game. An example of two business units providing the same client service/product can have completely different performance levels. Allowance must be made for local influences and practices; therefore,  it is critical to derive several indicators for each business unit. A set of indicators will provide a wider prospective and each business units will not feel prejudiced by being measured on only one indicator. 

One of the key hot topics right now is Balanced Scorecards to measure intellectual capital. Many organization have balanced scorecard initiatives in place or are working on one. As stated above, financial measures are not sufficient to gauge performance. Balanced Scorecards devised nowadays address the issues of deriving measures for elements that impacts the company’s strategy. In fact, Balanced Scorecards are meant to be designed to put in place the company’s strategy and then measure against it. The scorecards will measure at group, sub-group and individual levels. 

Other key element of performance measures can include better use of patents and maximizing revenues on licensed products 

Details of performance measures are discussed in the next section.

Measures

This section provides a framework for self-assessment. The RADAR framework provides an indication of results achieved for each element. However, direct measures will be required in order to form an assessment and the concept of using balanced scorecards is also discussed below to supplement the RADAR. 

Balanced Scorecards

As we have mentioned, one of the key topics of today is Balanced Scorecards (BS) which provides an ability to measure intellectual capital and not just financial indicators. As stated above, financial measures are not sufficient to gauge performance and certainly give very little indication of the know-how of the company. BS addresses the issues of deriving measures for elements that impacts the company’s strategy. Therefore, BS should be designed so that they aid in measuring a set of indicators which provide an indication of the company’s movement in terms of strategy. The scorecards will measure at group, sub group and individual levels. 

An example of balanced scorecard (edited) is highlighted below, as devised by Michael S. Malone, from an article A New Age. Other scorecards also exist devised by Karl Svieby 1997 and Kaplan & Norton 1996. As can be noted the various indicators are presented for all the main business functions. The list below is by no means the complete set, each business needs to determine their own based on the specific strategy and business drivers. 

F I N A N C I A L   

CUSTOMERS

Total assets ($)

 Market share (%)

Total assets/employee ($)

Number of customers (#)

Revenues/total assets (%)

Annual sales/customer ($)

Profits/total assets (%)

Customers lost (#)

Revenues resulting from new business operations ($)

Average duration of customer relationship (#)

Revenues/employee ($)

Average customer size ($)

Profits/employee ($)

Customer rating (%)

Revenues from new customers/total revenues (%)

Customers/employee (#)

Market value ($)

Field salespeople (#)

Return on net asset value (%)

Satisfied customer index (%)

Value added/employee ($)

IT investment/salesperson ($)

Value added/IT-employees ($)

Support expense/customer ($)

Investments in IT ($)            

 

H U M A N

RENEWAL & DEVELOPMENT

Leadership index (#)

Competence development expense/employee ($)

Motivation index (#)

Satisfied employee index (#)

Empowerment index (#)

Marketing expense/customer ($)

Number of employees (#)

Share of training hours (%)

Employee turnover (%)

Share of development hours (%)

Average employee years of service with company (#)

R&D expense/administrative expense (%)

Number of managers (#)

Training expense/employee ($)

Average age of employees (#)

Training expense/administrative expense (%)

 Share of employees less than 40 years (%)

Share of employees below age 40 (%)

Time in training (days/year) (#)

IT expenses on training/IT expense (%)

Number of full-time or permanent employees (#)

R&D resources/total resources (%)

Annual turnover of full-time permanent employees (#)

Average customer income ($)

20. Percentage of full-time permanent employees (%)

Average customer duration with company (months) (#)

Per capita annual cost of training, communication, and support programs ($)

Training investment/customer ($)

 

New market development investment ($)

Company managers with advanced degrees: business (%), science and engineering (%), liberal arts (%) 

Ratio of new products (less than 2 years old) to product family (%)

P R O C E S S      

R&D invested in basic research (%)

Administrative expense/total revenues (%)

R&D invested in product design (%)

Cost for administrative error/management revenues (%)

R&D invested in processes (%)

Processing time, outpayments (#)

Average age of company patents (#)

Contracts filed without error (#)

Patents pending (#)

Function points/employee-month (#)

 

IT expense/employee ($)

 

IT expense/administrative expense (%)

 

Change in IT inventory ($)

 

Corporate quality goal (#)

 

Corporate performance/quality goal (%)

 

 

KM implications for measurement and assessment will require a framework of processes that will determine and support the measures. Plus technology is needed to gather and consolidate the data into performance indicators. The measures will vary from simple to more complex indicators, each of which needs to be developed with a clear business purpose. Be aware that Business Scorecards are not suitable for every business case, and implementation can be a costly exercise. Another consideration is the number of indicators; clearly, more indicators that require tracking and reporting will increase the cost of administration. The purpose is to keep the numbers to a minimum and to remain focused on measuring the effectiveness of the business strategy. 

Transformation

Now that we have discussed the main KM implications, the next step is to formulate a movement for change. Developing a transformation plan towards being a knowledge–centric organization is a complex task. Careful preparation and planning are vital to success. The exact nature of the transformation will be dependent on the urgency and the organization type. However, there are some fundamentals that apply. Six steps described by Beer, Eisenstat and Spector (1990) are relevant in the context of KM. The steps are as follows: 

  • Mobilize commitment to change through joint diagnosis of business problems.

  • Develop a shared vision of how to organize and manage change for competitiveness.

  • Foster consensus for the new vision, competence to enact it and cohesion to move it along,

  • Spread revitalization to all functions and departments

  • Institutionalize revitalization through formal policies, systems and structures,

  • Monitor and adjust strategies in response to problems in the revitalization process. 

The steps described above are referred to as the ‘bottom-up’ approach to transformation in the Strategy Safari, H Mintzberg, B Ahlstrand and J Lampel (1998). As often mentioned, people involvement is key in a knowledge organization. The deeper and wider the involvement, the faster the change. 

It is also recommended that any transformation be in a shape of a program within the organization. Do not create a KM department; it will act only as another silo. Everyone is responsible for knowledge and sharing it, not just a new formed KM department. Developing a KM ‘program’ will assist the organization through the transformation process. Plus the transformation should be seen as a ‘change/benefit for the staff’ and not something imposed from the executive. Buy-in and commitment will come through the staff themselves developing and implementing the transformation for change.

onclusions 

Knowledge implications applied to the Excellence model are applicable to all types of organizations. Some fundamentals are addressed in the document, some will be inherent in current practices while others will be new. Simple messages that could be emphasized are that cultural and process issues are critical for KM success. Implementing an Intranet, although important in itself, is not sufficient. Often cries are heard, “My intranet does not get used!”  Why?  Because it was not developed in the context of business objectives or staff needs. Most likely, it does not address the way people work and/or the processes that should be implemented to support the Intranet. This may be a simplistic conclusion and the reasons for failure are probably far more complex, but the point being any implementation MUST address people, processes and technology NOT in isolation to each other but holistic. 

Organizations tend to do the ‘easy’ aspects first. Implementing technology is relatively simple compared to changing the whole organizational culture(s). This is not to say that technology plays a second fiddle; no, certainly not. Technical issues can be very complex and problematic to resolve and this needs to be understood before even considering implementation issues. However, full benefits and return on investment will only be realized when People, Process and Technology issues are addressed. However, be cautious;  “Think big but start small,”  being the right attitude to adopt. Pilots and proof concepts are needed to demonstrate and get buy-in. Grand campaigns are fine as far as awareness is concerned but not when it come to implementation. KM by definition is complex and dynamic; it  requires great attention to detail, and attention to the dynamics of change. Unexpected changes will occur, education will be slower then anticipated, new working practices will be foreign to many. KM implementation is an art form. 

However, realistic expectations must be set.  Issues like cultural change can and will take a long time to implement but the vision once set should be followed through. Holistic strategy is suggested which will embrace all aspects of the organization towards the transformation into a knowledge-centric organization. The change will be less painless if KM is inherently adopted as part of the business model. It should not be implemented in isolation or as a silo function in the company. Leaders will be pivotal, led by example and develop a strategy such that ALL feel they have contributed. Benefits will be slow but sure. 

Tap into the intangible assets and empower people to maximize their potential. And,  finally, let us  return to the question:  “ Why KM?”
In the end,  it all means one thing:  arm people with the right information, so they are able to make better judgements, smarter decisions and create environments in which to encourage innovation, in order to be able to provide a high quality service to its customers.  All this, by implication,  means a KM-centric company is a successful company. If a company does not recognize some of the issues raised,  then don’t be surprised if one day a competitor sails passed carrying your client base. KM is not a fad; we have been doing it for years,  but now the focus has changed. Knowledge is a valuable asset and one needs to use to gain that edge. Even if the company does a lot to change cultures and foster knowledge sharing, in the end it comes down to one thing: unless the knowledge is put into action, there is no reward, only pain.

Acknowledgements

I would like express my sincere thanks to Karen Speerstra for her editorial help and guidance whilst developing this document. My thanks also goes to the EFQM organization for the permission to use some of their material. 

References 

Knowledge Mapping, A Practical Overview, Denham Grey, March 1999,

Intangible Revenues, Dr Karl-Erik Sveiby, August 1998

Leverage your Knowledge, Dr. Karl-Erik Sveiby 2000-01-27

Working Knowledge, T Davenport and L Prusak, 

Strategic Safari, H Mintzberg, B Ahlstrand and J Lampel (1998)

If Only We Knew What We Know, C O’Dell and C. Grayson JR (1998)

Managing Knowledge Workers, F Horbie (1999)