Why Knowledge Management is So Important

CostNotKnowing2As most of you know, I recently spent ten years as CKO of a large professional services firm. I quit to start my own business — writing books and consulting mainly on business innovation and entrepreneurship. My reason for doing so was not that I believed knowledge management (KM) was no longer important. Rather, it was out of frustration over the widening gulf in attitude to KM between senior executives (caught up in the ‘cult of efficiency’ and shareholder demands) and those whose job it was to ‘make KM work’ in organizations: researchers and analysts, website and database managers and creators, community of practice facilitators, librarians, trainers and technologists etc.

Peter Drucker has identified improving the effectiveness of front-line knowledge workers as the “most important management challenge of the 21st century”. In so doing he pointed the way forward for KM: Work effectiveness and personal productivity improvement, personal content management, creating ‘simple virtual presence’, people-finders, expertise-finders and other know-who and know-how (rather than know-what) directories and resources. But despite this, and our growing awareness that knowledge sharing and collaboration is the key to business success (and perhaps even saving the world), we seem unable to articulate the value proposition for KM compellingly to those who set budgets and allocate resources in major organizations. So expenditure on KM is in long-term decline, and the knowledge ‘function’ is being deemphasized or folded back into other back-office groups in many organizations.

Things are the way they are for a reason, and this ‘appreciation gap’ in the value of KM is not that hard to explain. Just as progressives and conservatives can talk themselves blue in the face, futilely trying to explain their point of view to the other side, so too are the frames of reference of those in the corner offices of large corporations are very different from those of KM leaders and their ‘customers’, the front-line workers:

  • Business leaders must take a short-term focus, to meet the demands of shareholders, while KM leaders often feel that investment in knowledge, learning and technology needs longer to pay off.
  • Business leaders are accustomed to knowledge being transferred top-down (instruction and formal training programs) and information for decision-making being polled from the front lines. KM leaders believe that critical knowledge transfers are more often peer-to-peer sharing, coaching and facilitation.
  • Business leaders see their leadership role as critical to the organization’s success; their frame of understanding is hierarchical — they tend to believe that knowledge and value increases with experience and that rewards should go disproportionately to identified superstars and up-and-coming leadership candidates. KM leaders see contribution to organizational success as more egalitarian, and are more likely to believe (as Drucker says) that almost every employee today knows how to do his/her particular job better than anyone else (including the boss) — they may see large wage and reward disparities as demotivating and unwarranted.
  • Business leaders tend to see value in centralized repositories of ‘best practices’ and SOPs, and the reuse of knowledge collateral. KM leaders are more likely to see the value in context-rich conversations between peers, ‘pointers to people’, mining the content of front line people’s desktops, and tools that enhance collaboration and innovation.
  • Business leaders are likely to perceive the major ‘knowledge problem’ in organizations as being inefficiencies: ‘reinventing the wheel’ and underusing available knowledge ‘on the shelf’, and hence the perceived poor ROI in investment in knowledge, learning and technology. KM leaders are more likely to see the major knowledge problem as ineffectiveness: time wasted trying to find appropriate experts and knowledge (often on their own desktops), and ‘the cost of not knowing‘.

I am convinced that the current deemphasizing of KM is a tragic mistake that will have serious long-term consequences, for these reasons:

  1. Most of the critical problems in organizations could be solved if the right people with the right knowledge came together and collaborated just-in-time to address them.
  2. Most of the time spent by employees when they’re using computers is wasted. Some studies indicate that as much as 30% of employees’ time is spent looking for information.
  3. The Cost of Not Knowing is astronomical, and we’re just starting to realize how much more expensive not knowing is than the cost of knowledge. Enron, Mad Cow, Avian Flu, even 9/11 were essentially knowledge failures.
  4. The Wisdom of Crowds can allow organizations to make much better decisions at lower cost than reliance on management ‘gut feel’ or outside ‘experts’.
  5. In the next 10 years we are likely to see a major crisis of confidence in corporate conduct — more frauds, lobbying government for indemnity from outrageous behaviour, massive business failures (when interest rates spike and consumers get so deeply in debt they stop buying), inexcusable bailouts and subsidies, and the consequences of social (offshoring) and environmental (pollution and health issues) indifference etc. Only through KM can the issues that could precipitate this crisis be addressed and the reputation of business saved.
  6. In the next 20 years a combination of horrific US government debt (making massive corporate subsidies unaffordable) and the shift of power (itself knowledge-driven) from producers to consumers is likely to bring about a major shift from large corporate oligopolies to a ‘world of ends’ of networks of agile, entrepreneurial companies. Knowledge will power every facet of this transition, and companies that invest in KM are much more likely to survive it.
  7. If oil prices continue to rise steeply (and there’s evidence that, after some whipsawing over the next few months, they’ll head even higher), the cost of transporting businesspeople to meetings is going to become prohibitive. We will need ways to meet and share knowledge in real time, virtually, effectively and simply. Significant investment in knowledge, technology and learning will be needed to make this happen.

The worldview of most CEOs is responsive, risk-averse, conservative, frugal and short-term focused. Here is what some of them have told me about each of the seven points above:

  1. “You may be right, but the problems we face today are not sufficiently critical or urgent to motivate us to expend significantly more on knowledge, learning and technology than we do today”.
  2. “That’s the employee’s responsibility. If they’re wasting that much time, it would seem more logical to fire those employees and bring in some others who are more technologically competent, rather than investing a bunch of money retraining non-performers.”
  3. “It won’t happen to us. We have good people, good risk management programs, good leadership and good systems.”
  4. “Don’t tell me, show me.”
  5. “Not my problem. Not my responsibility. Not going to happen.”
  6. “You’re overstating. Won’t happen that fast or to that degree. And 20 years in business is eternity. The world might end first.”
  7. “There is not and never will be a substitute for real-time face-to-face meetings. We’ll have to find some more economical way to transport people instead.”

I completely appreciate these senior management perspectives. I used to share them. But senior management is heavily buffered from the problems and frustrations of people on the front lines — they have people to do their ‘knowledge work’ for them, and subordinates are not rewarded for passing along front-line complaints to CEOs (they’re rewarded for solving them inexpensively or pushing back on them). And I’m increasingly convinced that this ignorance of the aggravation of people doing their best on the front lines — not being able to find the people, experts and knowledge they need (sometimes even when it’s on their own hard drive) to do their jobs properly is at the heart of problems as diverse as low productivity, lack of work-life balance, high turnover of ‘stars’ (and the need to pay them exorbitant sums, and everyone else inordinately less, to keep those stars), dissatisfied customers, employee burnout, lousy service and high employee illness rates.

It’s like the frustration we all feel when we have a straightforward repair job to do but don’t have (or can’t find!) the right tool to do it. Lots of time wasted looking for stuff (often fruitlessly) and work that’s ineffective (or stop-gap or work-around). Knowledge workers face this frustration constantly — and I believe it’s through no fault of their own.

That’s why I am convinced KM will play as crucial a role in the 21st century business world as automation did in the 20th. If only we can find a way to articulate its value to those who need to fund it!

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8 Responses to Why Knowledge Management is So Important

  1. Al says:

    Thanks for this post. I’m a data management professional for an environmental consulting firm and this reflects my situation and frustrations perfectly – its one of the main reasons I started blogging. I’m not sure if senior executives are even aware of the extent to which they have devalued knowledge management; they seemed to have convinced themselves that lip-service equals support and then pat themselves on the back for what a great job they’ve done marketing their technical wizardry. It runs so counter to what I perceive is “really” going on that it can make my head spin.

  2. Again, I agree on your prospective approach of KM. It’s at the core of 21st century’s biz world, for it deals with the *REAL* work activities, and not some kind of lousy financial anticipation based on ratios. It deals with what people do at work, what kind of data or stuff they need to do it properly and how they share it with others. It also deals with the corporate social and environmental responsibility of each company. As execs, negative externalities should be known due to refined KM tools and monitoring, let them be pollution (of both production and products/services), bad work environments (non-ergonomic material, mobbing, mental and physical injuries…), etc. Negative externalities should tend towards zero, in order to invest in eco-development and care about long-term reputation. When you think about human-centered economy, KM suddenly seems a bit more meaningful for it gives room for all employees to express their daily burden and needs. KM could then be seen as one of THE only ways to put “old-school” senior management perspectives back into earth, forcing vertical hierarchies to be redefined along with the reality of companies’ activities. For at the end of the day, execs are NOTHING without the work and sweat of each worker, including themselves. MBAs should not give execs the illusion that they’re worthier than any other worker. Companies’ activities and successes are the result of a complex interdependencies at work, that should be seen as a whole. Business is all about humans and systemic theories, not software or pure techniques.

  3. Jon Husband says:

    Blogging is the best means I have seen yet for shuttling back and forth between tacit knowledge and explicit knowledge .. which I think is at the core of K*M* …. tacit knoweledge being the opinions, perspectives and pointage to other interesting and useful informmation, explicit knowedge being the organized, categorized (or not … perhaps accessible by searchable tags) and archived links that have been saved.Wikis, I think, don’t get the voice into the process all that well, and may miss out on some of the richness afforded by providing a range of points of view or alternative sources of information/knowledge.As the two posters above point out (and as I think is reasonably widely known in KM circles) the challenges are cultural and psychological (in terms of the structure of organization and the resultant dynamics).When those change my guess is people more often than not actually like and enjoy sharing information and building knowledge together, and contributing to the achievement of goals, good service and such.

  4. Jon Husband says:

    Oh, I meant to clarify that when I write *blogging*, I meantthe combined use of blogs and RSS feeds, stitched together in ways that facilitate cognitive effectiveness when looking at a screen (such as (perhaps) Dave’s previous experiments with Dave Allen’s Getting Things Done – though I don’t know where RSS feeds have been fitted into that framework). Evidently Dave Allen has developed software that supports his personal productivity model … I haven’t looked for it or at it yet.

  5. Mark May says:

    I am not surprised at the CEO comment, “If they’re wasting that much time, it would seem more logical to fire those employees and bring in some others who are more technologically competent, rather than investing a bunch of money retraining non-performers.”What that CEO and many executives fail to realize is that on average ALL of their white collar knowledge workers spend 20-25% of their time searching for information. They are intellectually curious people. They also need substantial information to do their jobs and will invest time looking for it. See this article from KM World several years ago – http://www.kmworld.com/publications/magazine/index.cfm?action=readarticle&Article_ID=1284&Publication_ID=71Whether the KM system saves time or not, the author argues that time savings is a poor metric to measure KM effectiveness. People will still spend time seeking/searching. He says that the justification for KM has to be grounded in better decisions and improved perfornace.

  6. Dave Pollard says:

    Thanks for these eloquent comments, all. Mark: Excellent link, highlighting the folly of pursuing ‘efficiency’ (while ignoring all externalities) instead of ‘effectiveness’.

  7. Thanks for the article which reconfirms why I have gray hair! The early euphoria about KM promises led to sudden mushrooming of too many top-down experts which led to some major projects and products with predictable less-than-expected business returns. Pity, really, that we are still struggling to get the executive acceptance. While the purists of KM may shudder my methodologies, I have found that the initially imperfect implementation of “what you have, from bottom up” is needed to demonstrate the value of KM. Rather than starting with funding requests for a top-down re-design of everyhting, which are likely to get a nix from the top floor, approaching the problem from the “end-user” perspective is more likely to succeed. Figuring out a way to bring the knowledge that you already have and the help needed to perform the tasks at hand in a “just in time” fashion for just one selected business process, will help you demonstrate and quantify the in-house benefits of the end results before embarking on the quest to change the world. It provides immediate benefit for the selected process, requires a much smaller cash layout, and gives you a good understanding of what the troops on the ground are really missing. Will it guarantee that your Grand KM Project gets funded? Absolutely not. But there is a high probablity that you do get funding to repeat your success for the next business process. And that will take you two steps closer to acceptance.

  8. I think Matti has hit the nail on the head. Changing the priorities and attitudes of a senior management team that makes decisions based on shorter-term and overtly tangible results is like maneuvering an oil tanker. If we are to make progres, we need to use the enthusiasm and organisational savvy of our people. The easiest way to do this is to start small, be creative in garnering time and resources (think about using training, Kiazen / Continuous Improvement, or support budgets), keep scope tight and manageable, use corporate politics (horse trade with other groups or managers who might stand to benefit) and maybe even encourage people to use some of own time to work on projects (ask – you may be surprised!). Alan Engelhardt makes an interesting comment on this topic at http://www.cybaea.net/Journal/KM_dead.html – he talks about how collegiate structures encourage innovation and knowledge sharing. Maybe by starting a few seed initiatives as I have described will help to establish informal collegiate, peer-to-peer mechanisms that will succeed despite lack of senior management attention.

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