Leveraging Knowledge for Competitive Advantage
Leveraging Knowledge for Competitive Advantage
Presentation at the conferenceNew Times, New Challenges: Managing People in
the Knowledge OrganizationAthens, 12 April 2000
Gregoris Mentzas
G. Mentzas 12 April 2000 2
Overview of Presentation (1)
22 33
11 44What is Corporate
Knowledge?
ApproachesTo KM
ImplementingKnowledge
Management
ManagingKnowledge
G. Mentzas 12 April 2000 3
The need to focus on knowledge
Need to Focus on Corporate Learning Ability
DownsizingTaking vast knowledge
bases from organisations
Mobile WorkforceNeed for constant accessto know-how & interactive
on-line support
Rapid ChangesNeed to benefit from lessons-
learned and minimisecosts of reinventions
GlobalisationNeed to generate global-
wide practices and supportglobal collaboration
G. Mentzas 12 April 2000 4
Data, Information and Knowledge
ContextExperience
SkillsInsights
Access Assess Action
Ø StaticØ Independent of individualØ ExplicitØ DigitalØ Easy to duplicateØ Easy to broadcastØ Meaningless
Ø DynamicØ Dependent on individualØ TacitØ AnalogueØ Must be recreatedØ Face-to-faceØ Meaningful
Information KnowledgeData
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§ capability for effective action
Corporate Knowledge is ...
TO knowledge that:qsolves business problems
qproduces corporate value
qenhances competitiveness
FROM knowledge that is:q fragmented & dispersed
qdifficult to locate & share
q redundant & inconsistent
G. Mentzas 12 April 2000 6
Where is corporate knowledge found?
Corporate knowledge is createdby individuals and is embedded / embodied in:
Processes
Ø TrainingØ Documentation
Ø DatabasesØ Expert
Systems
Ø FormalØ Informal
Ø PoliciesØ Procedures
People Systems Networks
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Attributes of Corporate Knowledge
The value of corporate knowledge increases with use
(law of increasing returns)
Sharing enriches knowledge, the value of knowledge increases
with the number of people that use it
There is an inherentvalue in knowledge
Knowledge decays with time, timeliness of knowledge
is important
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Knowledge Types
§ Explicit KnowledgeØ formal and objectiveØ validated by managementØ can be articulated in
formal language • stored in databases,
libraries, etc.
§ Tacit KnowledgeØ informal and subjectiveØ developed through practiceØ embedded in individual
experience• communicated through
word-of-mouth or through informal communications
n Tacit and Explicit knowledge are mutually complementary
n Human knowledge is created and expanded through social interaction between tacit and explicit knowledge
Source: Nonaka & Takeuchi (1995)
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Tacit Knowledge Explicit Knowledge
FROM
TO
SOCIALISATION
INTERNALISATION
EXTERNALISATION
COMBINATION
The Spiral of Knowledge
TacitKnowledge
ExplicitKnowledge
Source: Nonaka & Takeuchi (1995)
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The need to manage knowledge
§ Knowledge management is absolutely critical to the success of my companyØ 60% of Chief Executive Officers surveyed in a 1998 CEO survey
sponsored by the World Economic Forum
§ Enterprises that lack KM programmes will lag KM-enabled companies by 30-40% in speed of deployment of new products and servicesØ Gartner Group (1999)
§ The average percent or revenue spent on KM in Europe is expected to increase to 5.5% in the next three yearsØ Which is more than European companies spend on R&D
G. Mentzas 12 April 2000 11
Overview of Presentation (2)
22 33
11 44What is Corporate
Knowledge?Implementing
KnowledgeManagement
ManagingKnowledge
ApproachesTo KM
G. Mentzas 12 April 2000 12
Corporate Knowledge Management is
the new discipline of enabling
individuals, teams and entire organisations
to collectively and systematically
create, share and apply corporate knowledge
to better achieve organisational efficiency,
responsiveness, competency and innovation
What is KM?
Not just water-cooler discussions, but planned ICT, processes &behaviours
Has been compared to OR!
Reuse corporate knowledge
Teams and communities are indispensable!
Marshall knowledge to respond to threats and opportunities
Improveemployee skills
Create and share new ideas
The tools and the fusion are NEW!
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Measurement Culture
Leadership
Technology
Source: APQC
Apply
Create
Identify
CollectOrganise
Share
Adapt
CorporateKnowledge
Managing Corporate Knowledge means having …
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Poor Knowledge Management
n Reinventing the Wheelu Inability to access
knowledge in a timely/useful manner.
uHaving knowledge and expertise leave when people leave.
n Poor DecisionsuPotential useful
knowledge is ignored when making decisions
uTrying to apply old rules to new situations
n Knowledge HoardinguKnowledge is poweruKnowledge is job
security
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Indicative Successful Cases
• Buckman Labs• Monsanto• Xerox Corp. • Texas Instruments• EDF• Royal Shell• Chevron
• IBM• Ernst & Young• EDS• British Petroleum
• Hoffman LaRoche
• Hewlett Packard
• Microsoft
• Arthur Andersen
• ICL
• Dow Chemical
• Hughes Space
• Sequent
• Compaq
• Skandia AFS
• informed business decisions• improved customer service• less time spent for:
• recreating work• searching for information
• increased speed to market• high ROIs
• as high as 1700% • short payback periods
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Current state of the corporate KM market
§ SuppliersØ Management consultantsØ Software Vendors
• Intranets• Groupware tools• Search and retrieval tools• Document management • Agent and push technology• Corporate portals• Other (ERP, RDBMS, etc)
§ UsersØ Consultancy servicesØ ChemicalsØ Software companiesØ High-tech manufacturingØ Banks and financialØ InsuranceØ PharmaceuticalsØ Utilities
§ OVUM global market analysis (1999)Ø 1999 2000 2004Ø $3,100 $4,500 $12,000
Ø European S/W marketØ $200 $350 $1,500
Ø European Services marketØ $1000 $1,500 $4,000
Ø (numbers in $million)
G. Mentzas 12 April 2000 17
Overview of Presentation (3)
22 33
11 44What is Corporate
Knowledge?Implementing
KnowledgeManagement
ManagingKnowledge
ApproachesTo KM
G. Mentzas 12 April 2000 18
§ Proposition: knowledge can be represented as athing that can be located and manipulated as an independent object
• it is possible to capture, distribute, measure and manage knowledge
§ Proposition: it is only feasible to promote, motivate, encourage, nurture or guide the process of knowing
• the idea of trying to capture and distribute knowledge seems senseless
The “product” view The “process” view
§ Focus: on products and artifacts containing and representing knowledge
• usually, this means managing documents, their creation, storage, and reuse in computer-based corporate memories.
§ Focus: on KM as a social communication process
• which can be improved by various aspects and tools of collaboration and cooperation support.
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Strategic Implications of “Product” & “Process” Views§ Product View Ø competitive strategy:
• exploit organised, standardised and re-useable knowledge
Ø focus of KM strategy:• connect people with re-
usable codified knowledgeØ focus of IT strategy:
• heavy emphasis• develop document
management systemsØ focus of HR strategy:
• train in groups• reward for using and
contributing to databases
§ Process ViewØ competitive strategy:
• empower and channel individual and team expertise
Ø focus of KM strategy:• facilitate conversations to
exchange knowledgeØ focus of IT strategy:
• moderate emphasis• develop network
management systemsØ focus of HR strategy:
• train by apprenticeship• reward for sharing knowledge
with others
G. Mentzas 12 April 2000 20
§ Product View Ø competitive strategy:
• exploit organised, standardised and re-useable knowledge
Ø focus of KM strategy:• connect people with re-
usable codified knowledgeØ focus of IT strategy:
• heavy emphasis• develop document
management systemsØ focus of HR strategy:
• train in groups• reward for using and
contributing to databasesIntegration
Strategic Implications of “Product” & “Process” Views
§ Process ViewØ competitive strategy:
• empower and channel individual and team expertise
Ø focus of KM strategy:• facilitate conversations to
exchange knowledgeØ focus of IT strategy:
• moderate emphasis• develop network
management systemsØ focus of HR strategy:
• train byt apprenticeship• reward for sharing knowledge
with others
G. Mentzas 12 April 2000 21
IT Implications of “Product” & “Process” Views
Knowledge as a Process(knowledge transfer)
Knowledgeas a
Product(knowledge
storage)structured document
repositories
Full text retrieval
Knowledge maps
Intranet
File managementsystems
Semantic Analysis
Discussion Groups
Shared files
White-boarding
Real-time messaging
Push TechnologyNet Conferencing
Automatic Profiling
Integration
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The Know-Net participating companies
Greek Management Consultancy firm -Coordinator of KnowNet
International knowledge management and technology consultingorganisation
Institute of Communications and Computer Systems (ICCS) of the National Technical University of Athens
Research Center for AI, research institute in the field of innovative software technology
The Centre for Advanced Learning Technologies of INSEAD
The Credit Risk Valuation department of one of the world's leading financial services groups
A UK firm of Chartered Surveyors and Commercial Property Agents
The CIM-Zentrum Muttenz(CZM), a department of theFachhochschule beider Basel (FHBB)
FHBB
G. Mentzas 12 April 2000 23
Assets
Overview of the Know-Net framework
Strategy
Structure
Systems
Processes
KnowledgeManagementInfrastructure
Organisation
TeamInter-
organisation
Individual
Levels ofKnowledgeNetworking
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Knowledge Assets
Human Knowledge Assetsl Staff capabilities
l Staff experience
l Staff skills
l Creativity of staff
l Innovation of staff
Market Knowledge Assetsl Knowledge about Industry
l Knowledge about Customers
l Knowledge about Partners
l Knowledge about Competitors
Structural Knowledge Assetsl Patents, Methods
l Best Practices
l Administrative systems
l Training Seminars
l R&D Material
l Company standards/processes
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Building Blocks of the Know-Net Method
Aw
aren
ess Stage I:
PlanStage III:Operate
Measurement
Training
Stage II:Develop
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Stage I: Strategic Planning
Link KM to CorporateStrategy
PerformKnowledge
analysis
AssessRisk & Change
Readiness
Developthe KMCase
ObtainTop MngmtApproval
ProvideLeadership
Stage I Stage III
Measurement
Stage II
§ Goals of Stage I: Ø Align Knowledge strategyØ Assess Change ReadinessØ Define KM Business Case
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Stage II: Developing the K.Org Stage I Stage III
Measurement
Stage II
Analyse Leverage
Knowledge in Business Processes
Knowledge in People Networks
Information Technology Systems
Integrate theKM
Architecture
Develop Knowledge Asset Schema
§ Goals of Stage II: Ø Leverage Knowledge Process/People/TechnologyØ Define Knowledge ObjectsØ Integrate the KM Architecture
G. Mentzas 12 April 2000 28
MarketAssets
StructuralAssets
HumanAssets
Stage I Stage III
Measurement
Stage IIMeasuring knowledge assets
§ Focus on key knowledge assets
§ Distinction between stocks and flows
§ Must be linked to strategyØ Both business
and KM strategyØ Company-specific
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Measuring the Performance of KM initiatives
Indicators for:
Financial Value Intangible Assets
Market Assets Structural Assets Human Assets Growth • Partner
equity Growth • Fee Growth
• Fee share from Image enhancing clients
• % time on maintaining existing clients
• Big job ratio %
• Fee share from organisation enhancing clients
• Average grade
• Share postgraduates of employees
Renewal • Share of Fees from High Margin clients
• Investment / depreciation
• Fees from new clients as % of fees
• % time on developing new clients
• % time on developing new clients
• Share of fees from new concepts / services
• % time on R&D
• % time on training courses
• Training time /total fees
Efficiency • ROE
• Gross Margin • Win/Loss Tender
index
• Satisfaction index of old clients
• % time on proposals
• Average size of jobs
• Fees per Support Staff
• % Support staff utilisation
• Satisfaction Index of support Staff
• Capacity Utilisation
• Deficiency rate
• Satisfaction Index of consultants
• Valued added per consultant
Stability • Solidity
• Liquidity
• Share fees from 25% most satisfied clients
• Share fees from 25% least satisfied clients.
• Support Staff turnover
• Median age support staff
• Rookie Ratio
• Seniority of consultants
• Consultants' turnover
• Median age of consultants
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For moreinformationvisit the site:www.know-net.org
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Overview of Presentation (4)
22 33
11 44What is Corporate
Knowledge?
ApproachesTo KM
ImplementingKnowledge
Management
ManagingKnowledge
G. Mentzas 12 April 2000 32
KM: Discipline and art
§ KM as a management disciplineØ Processes can be defined and implemented to capture the
knowledge to make it available to workersØ Techniques can be defined, taught, learned, customised and applied
to yield outcomesØ Technology can be harnessed as a key enabler
§ KM as artØ Evolving people’s attitudes and work behaviours to effect new types
of collaborationØ Changing people’s value paradigm from “information is power”, to
“sharing is power”Ø New incentive systems, performance metrics
G. Mentzas 12 April 2000 33
Concluding remarks
§ We have entered the knowledge economy in which knowledge is the basis of competitive advantage.Ø Potential benefit areas are
• increased innovation potential, • improved staff morale and • better decision-making and communication
§ Knowledge management is common sense§ but it is not yet common practice.Ø Most companies still have to go a long way in building a truly value-
based knowledge organisation as they recognise that they insufficiently master essential knowledge-based competencies
The task of leadership is to create the environment for managing for knowledge. It’s not about managing hired hands, it’s about setting context and energizing hired minds.
Our challenge is to manage the stage, so to speak, for the human spirit to thrive and create in the emerging knowledge society.
Paul Allaire, CEO, XeroxKeynote presentation in the Conference “Knowledge in International Corporations”, 1997
The task of leadership is to create the environment for managing for knowledge. It’s not about managing hired hands, it’s about setting context and energizing hired minds.
Our challenge is to manage the stage, so to speak, for the human spirit to thrive and create in the emerging knowledge society.
Paul Allaire, CEO, XeroxKeynote presentation in the Conference “Knowledge in International Corporations”, 1997