Working Knowledge: Como Organizações Gerenciam o Que Sabem - Davenport e Prusak

title Working Knowledge How Organizations Manage What They Know author Davenport Thomas H Prusak Laurence publisher Harvard Business School Press isbn10 asin 0875846556 print isbn13 9780875846552 ebook isbn13 9780585056562 language English subject Organizational learning Information resources management Industrial management publication date 1998 lcc HD5882D38 1998eb ddc 658403 subject Organizational learning Information resources management Industrial management Page iii Working Knowledge How Organizations Manage What They Know Thomas H Davenport Laurence Prusak HARVARD BUSINESS SCHOOL PRESS Boston Massachusetts Page iv Copyright 1998 President and Fellows of Harvard College All rights reserved Printed in the United States of America 02 01 00 99 98 5 Library of Congress CataloginginPublication Data Davenport Thomas H 1954 Working knowledge how organizations manage what they know Thomas H Davenport Laurance Prusak p cm Includes bibliographical references and index ISBN 0875846556 alk paper 1 Organizational learning 2 Information resources management 3 Industrial manage ment I Prusak Laurence II Title HD5882D38 1998 658403dc21 9710781 CIP The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39491984 The title of this book is not related to the registered trademark WORKING KNOWLEDGE Page v Contents Acknowledgments vii Introduction ix 1 What Do We Talk about When We Talk about Knowledge 1 2 The Promise and Challenge of Knowledge Markets 25 3 Knowledge Generation 52 4 Knowledge Codification and Coordination 68 5 Knowledge Transfer 88 6 Knowledge Roles and Skills 107 7 Technologies for Knowledge Management 123 8 Knowledge Management Projects in Practice 144 9 The Pragmatics of Knowledge Management 162 Notes 179 Index 189 Other Books by Thomas H Davenport and Laurence Prusak 198 About the Authors 199 Page vii Acknowledgments Like all good knowledge products this one was not produced in a vacuum We are particularly grateful to the pioneers of knowledge management who gave us access to their progress and problems in the field Many of these firms were sponsors of a multiclient research program Mastering the Knowledge of the Organization or its predecessor program Mastering the Information Environment We thank these firms and the specific managers with whom we worked for supporting the research financially making their firms available as research sites and being a critical audience for our halfbaked ideas These programs were created under the auspices of Ernst Youngs Center for Business Innovation where both of us spent several years as researchers Several Center researchers and affiliates were participants in the knowledge research and their efforts pervade the book These include Mike Beers Dave DeLong Liam Fahey Al Jacobson Linda Kalver Dave Klein Chris Marshall Rudy Ruggles and Patricia Seeman Amy Fiore and Julia Kirby administered and marketed the programs respectively Two Center directors Bud Mathaisel and Chris Meyer were very supportive Don Cohen in his Center capacity and otherwise deserves particular recognition He served as editor researcher encourager and friend and the book would not have been written without him Several other consulting firms and individuals at them supported our work during the couple of years this project took They include Joe Movizzo Scott Oldach and David Smith at IBM Consulting Group Jeanne Harris and Barry Patmore at Andersen Consulting and Brook Manville at McKinsey Pete Tierney and others at Inference Corporation were very helpful in the area of knowledge management software Andy Michuda and Ron Helgeson from Teltech Resource Network were free with their ideas about knowledge management Others whose knowledge of knowledge management contributed to the book include Vince Barabba Leif Edvinsson John Henderson Abbie Page viii Lundberg Britton Monasco Tom Stewart and several anonymous reviewers for the Harvard Business School Press At the press we worked with several editors but Carol Franco got us started and Kirsten Sandberg got us finished Were appreciative of their interest persistence and feedback Its possible that we could have written the book without our families but what would be the point We gratefully thank and dedicate this tome to Brenda Kim and Ben Prusak and Jodi Hayes and Chase Davenport Page ix Introduction An investment in knowledge pays the best interest Benjamin Franklin Why all this sudden interest in knowledge Numerous conferences and hundreds of articles in scholarly and business journals have tried to get a handle on this elusive subject The growth of knowledge consulting and much buzzing and bustling within firms signal a growing conviction that knowing about knowledge is critical to business successand possibly to business survival One of the aims of this book is to explain this new emphasis on an ageold subject one that occupied Plato and Aristotle and a host of philosophers after their time Like Molières bourgeois gentilhomme who delighted in discovering that he had been speaking prose all his life managers have recently realized that they have relied on knowledge throughout their careers Even before the days of core competencies the learning organization expert systems and strategy focus good managers valued the experience and knowhow of employeesthat is their knowledge Recently though many firms have come to understand that they require more than a casual and even unconscious approach to corporate knowledge if they are to succeed in todays and tomorrows economies This understanding accords with a renewed emphasis among strategists and economists on ideas associated with a competency based or resourcebased theory of the firm 1 Traditional economics looked at the firm mainly as a black box and examined the resources going in the products coming out and the markets in which the firm participated Today theorists of many disciplines are turning their attention to one of the essential dynamics inside the box the knowledge embedded in routines and practices that the firm transforms into valuable products and services2 Multiple factors have led to the current knowledge boom This convergence of causes is one reason that thinking clearly about knowledge has become so important so quickly The perception and the reality Page x of a new global competitiveness is one driving force Rapid change and increasing competition for the dollars marks and yen of increasingly sophisticated consumers have led firms to seek a sustainable advantage that distinguishes them in their business environments Of course this search has its negative side Theories fads nostrums and silver bullets have been served up to American business as allpurpose solutions to the often intractable and subtle difficulties of managing competitively Some of these offerings have been incrementally quite valuable The quality movement for instance has produced undeniable benefits and has become part of the fabric of doing business But many highly touted management concepts have failed to keep their promises 3 Disappointment with them has led firms to look for something more basic something irreducible and vital to performance productivity and innovation As a result the management community has come to realize that what an organization and its employees know is at the heart of how the organization functions Although the knowledge movement will undoubtedly spawn its own fads and buzzwords knowledge itself is worthy of attention because it tells firms how to do things and how they might do them better The trend toward leaner organizations has also contributed to heightened interest in knowledge on the principle that you really understand the value of something once it is gone Experienced aerospace engineers encouraged to leave during downsizing periods took valuable knowledge out the door with them and in some cases had to be rehired so that essential work could continue Some expendable middle managers proved by their absence to have been key knowledge coordinators and synthesizers the loss to their firms went well beyond what their official job descriptions would suggest A specific example of this corporate amnesia can be found at Ford where new car developers wanted to replicate the success of the original Taurus design team But no one remembered or had recorded what was so special about that effort A similar experience occurred at International Harvester when Russian officials approached the company about building a new truck factory They contacted Harvester because it had built a plant in Russia twenty years earlier Alas there wasnt a single soul still in the organization who knew anything about the previous project Having made costly errors by disregarding the importance of knowledge many firms are now struggling to gain a better understanding of what they know what they need to know and what to do about it Page xi Some of these organizations mistakenly assumed that technology could replace the skill and judgment of an experienced human worker An important element of this book is a discussion of the relationship between knowledge and technology The assumption that technology can replace human knowledge or create its equivalent has proven false time and again Developments in technology on the other hand are among the positive factors fueling interest in knowledge and its management For example networked computing provides new ways for individuals to exchange information and knowledge within and outside their organizations Technologies such as Lotus Notes and the World Wide Web have made certain forms of structured knowledge easier to collect store in repositories and distribute to desktops The recent dramatic rise in Internet and intranet use is one manifestation of the expanding role of electronic technology in communication and knowledge seeking Firms are becoming aware both of the potential of this technology to enhance knowledge work and of the fact that the potential can be realized only if they understand more about how knowledge is actually developed and shared Our primary aim in this book is to develop a preliminary understanding of what knowledge is within organizations How does it look and sound in daily life and work How is it different from data and information Who has it Where is it Who uses it What do we talk about when we talk about knowledge Our second concern is what to do about knowledge What key cultural and behavioral issues must we address to make use of it What are the best ways to use technology in knowledge work What are specific knowledge roles and skills What does a successful knowledge project look like and how do you know if it has been successful What measures and milestones can we use to evaluate it Our answers to these questions provide at least the beginning of a response to the essential question asked about knowledge in organizations What do I do Monday morning to help make our organizations use of knowledge more effective efficient productive and innovative Our aim finally is to provide a general perspective on how firms work that will give managers a means of decisively improving performance The findings we present in this book evolved from extensive discussions with corporate managers about how knowledge functions in organizations Several years ago when we began a research program on new approaches to information management we brought together ex Page xii ecutives from about twentyfive client companies including HewlettPackard IBM ATT and American Airlines We asked them what they most needed to know that they didnt currently know and how we could best help them know it To our surprise almost all of those smart managers from successful firms admitted We have no real idea how to manage valueadded information and knowledge in our companies Now these were very sophisticated organizations Quite a few of them were among the hightech firms that had helped launch the information revolution they are the great institutions of the Information Age But they were admitting that they didnt have any effective methods and approaches for managing and understanding how to better use information themselves So for a couple of years we focused our research on information why it isnt managed well what managing information actually means and what kinds of specific improvements our clients could make in how they obtained and used it 4 As we worked with these firms and came to understand reasonably well how information worked and didnt work within them it became apparent that what our clients wanted as much as anything else were insights They were looking for best practices new ideas creative synergies and breakthrough processes that information cannot supply regardless of how well it is managed These kinds of results we became convinced could come only from making effective use of knowledge In addition it was clear that much of the knowledge they needed already existed within their organizations but was not accessible or available when required HewlettPackard CEO Lew Platt once said echoing a former head of HP Labs If HP knew what HP knows we would be three times as profitable expressing a belief in the potential value of knowledge shared by many other corporate executives Of course knowledge was being used and exchanged in these companies as it is in all firms What we eventually came to think of as knowledge markets with knowledge buyers sellers and brokers operate in every organization However they simply dont operate very efficiently Unrecognized disorganized local often discouraged rather than fostered by company culture these knowledge markets are deeply imperfect mechanisms for generating and exchanging insights The need to study how knowledge is managed mismanaged and unmanaged in organizations became evident to us Eventually knowledge became the new focus of our research and Page xiii discussions actually returned to focus wed studied it in graduate school in terms of intellectual history and the sociology of knowledge We knew intuitively that knowledge is centrally important in most organizations Economist Sidney Winter describes business firms as organizations that know how to do things 5 A company truly is a collection of people organized to produce something whether it be goods services or some combination of the two Their ability to produce depends on what they currently know and on the knowledge that has become embedded in the routines and machinery of production The material assets of a firm are of limited worth unless people know what to do with them If knowing how to do things defines what a firm is then knowledge actually is the company in an important sense Understanding the role of knowledge in organizations may help answer the question of why some firms are consistently successful When people technology products and the business environment change over time what is left What is the residual as economists ask What creates the continuity that allows particular firms to thrive over time We strongly believe that the way firms generate and pass on knowledge is an essential part of that continuity Were sure that future studies of organizational knowledge will make an important contribution to understanding the sources of longterm success At the time when we were turning our attention to knowledge Tom Stewart in a 1994 Fortune magazine article warned companies to focus less on what they own and more on what they know their intellectual capital Since then Peter Drucker has identified knowledge as the new basis of competition in postcapitalist society and Stanford economist Paul Romer has called knowledge the only unlimited resource the one asset that grows with use In 1995 two Japanese academics Ikujiro Nonaka and Hirotaka Takeuchi published The KnowledgeCreating Company a groundbreaking study of knowledge generation and use in Japanese firms That same year Dorothy LeonardBarton wrote a finely detailed study of the role of knowledge in manufacturing firms Wellsprings of Knowledge Several other books exhorting managers to manage knowledgewithout focusing much on how to do sohave appeared in the marketplace6 Firms such as Dow Chemical and Skandia and consultants such as McKinsey Ernst Young and IBM Consulting have appointed chief knowledge officers and directors of intellectual capital to oversee the knowledge resources of their firms They point to Page xiv savings improvements and productivity increases that result from managing knowledge Stories like these have become more and more common At HoffmannLaRoche the Swiss pharmaceutical firm a knowledge management initiative in 19931994 reformed the process of developing new drug applications the voluminous complex documents that must be submitted to the Federal Drug Administration and European regulatory authorities before any new drug can be approved and brought to market In significant measure because of the initiative applications and approval for several new products now take many months less than the usual time to complete at a savings of 1 million per day In 1996 teams of leading heart surgeons from five New England medical centers observed one anothers operatingroom practices and exchanged ideas about their most effective techniques in a collaborative learning experiment The result a 24 percent drop in their overall mortality rate for coronary bypass surgery or seventy four fewer deaths than predicted At HewlettPackard and many other hightech firms the amount of product knowledge required to effectively use and support complex computer products has exploded over the past several years Customers with problems must be talked through to a solution that may involve interactions between hardware software and communications products all of which change constantly HP had difficulty finding enough good technical people to provide good customer support So in 1995 the company implemented a knowledge management tool called casebased reasoning to capture technical support knowledge and make it available to personnel around the world Results have been unequivocal and dramatic average call times have been reduced by twothirds cost per call has fallen by 50 percent and the company has been able to hire fewer technical support agents because of the help they receive from the system These are only a few of the many examples of knowledge management that we will describe in this book The companies whose knowledge management efforts we profile are listed below In addition we include several anonymous examples drawn from firms that did not wish to be identified More and more business leaders and consultants talk about knowledge as the chief asset of organizations and the key to a sustainable Page xv competitive advantage Knowledge workers the knowledgecreating company knowledge capital and leveraging knowledge have become familiar phrases Knowledge conferences and seminars are springing up everywhere There is tremendous excitement about the potential benefits of knowledge initiatives in the corporate world We believe the excitement is justified The core message of this book is that the only sustainable advantage a firm has comes from what it collectively knows how efficiently it uses what it knows and how readily it acquires and uses new knowledge Organization Examples Described in This Book Andersen Consulting McDonnell Douglas Boeing McKinsey Company British Petroleum Microsoft Buckman Laboratories Mobil Oil Chaparral Steel Monsanto Chase Manhattan Bank National Semiconductor Chrysler NYNEX CocaCola OwensCorning CSIRO Sandia National Laboratories DaiIchi Pharmaceuticals Sematech Dow Chemical Senco Products Ernst Young Sequent Computer Ford Skandia General Motors Teltech HewlettPackard Texas Instruments HoeschstCelanese 3M HoffmannLaRoche Time Life Hughes Space and Communications US Army IBM Young Rubicam IDEO Please rotate your phone and try again Page 1 1 What Do We Talk about When We Talk about Knowledge In the end the location of the new economy is not in the technology be it the microchip or the global telecommunications network It is in the human mind Alan Webber 1 Knowledge is neither data nor information though it is related to both and the differences between these terms are often a matter of degree We start with those more familiar terms both because they are more familiar and because we can understand knowledge best with reference to them Confusion about what data information and knowledge arehow they differ what those words meanhas resulted in enormous expenditures on technology initiatives that rarely deliver what the firms spending the money needed or thought they were getting Often firms dont understand what they need until they invest heavily in a system that fails to provide it However basic it may sound then it is still important to emphasize that data information and knowledge are not interchangeable concepts Organizational success and failure can often depend on knowing which of them you need which you have and what you can and cant do with each Understanding what those three things are and how you get from one to another is essential to doing knowledge work successfully So we believe its best to begin with a brief comparison of the three terms and the factors involved in transforming data into information and information into knowledge A Working Definition of Knowledge A word of qualification before we proceed with our definitions Were aware that some researchers identify more than the three entities of data Page 2 information and knowledgegoing on for example to describe wisdom insight resolve action and so forth Since weve noticed that firms have enough difficulty distinguishing among three related concepts however were not inclined to address more For practical purposes well lump higherorder concepts such as wisdom and insight into knowledge 2 And things like resolve and action while desirably pointing to the need to do something with knowledge wed put into a different category of things you do with knowledge rather than a variation on knowledge itself With that caution lets proceed to some definitions Data Data is a set of discrete objective facts about events3 In an organizational context data is most usefully described as structured records of transactions When a customer goes to a gas station and fills the tank of his car that transaction can be partly described by data when he made the purchase how many gallons he bought how much he paid The data tells nothing about why he went to that service station and not another one and cant predict how likely he is to come back In and of themselves such facts say nothing about whether the service station is well or badly run whether it is failing or thriving Peter Drucker once said that information is data endowed with relevance and purpose which of course suggests that data by itself has little relevance or purpose Modern organizations usually store data in some sort of technology system It is entered into the system by departments such as finance accounting and marketing Until recently it has been managed by central information systems departments that respond to requests for data from management and other parts of the company The current trend is for data to be somewhat less centralized and available on demand from desktop PCs but the basic structure of what it is and how we store and use it remains the same Quantitatively companies evaluate data management in terms of cost speed and capacity How much does it cost to capture or retrieve a piece of data How quickly can we get it into the system or call it up How much will the system hold Qualitative measurements are timeliness relevance and clarity Do we have access to it when we need it Is it what we need Can we make sense out of it All organizations need data and some industries are heavily dependent on it Banks insurance companies utilities and government agencies Page 3 such as the IRS and the Social Security Administration are obvious examples Record keeping is at the heart of these data cultures and effective data management is essential to their success Efficiently keeping track of millions of transactions is their business But for many companieseven some data culturesmore data is not always better than less Firms sometimes pile up data because it is factual and therefore creates an illusion of scientific accuracy Gather enough data the argument goes and objectively correct decisions will automatically suggest themselves This is false on two counts First too much data can make it harder to identify and make sense of the data that matters Second and most fundamentally there is no inherent meaning in data Data describes only a part of what happened it provides no judgment or interpretation and no sustainable basis of action While the raw material of decision making may include data it cannot tell you what to do Data says nothing about its own importance or irrelevance But data is important to organizationslargely of course because it is essential raw material for the creation of information Information Like many researchers who have studied information we will describe it as a message usually in the form of a document or an audible or visible communication As with any message it has a sender and a receiver Information is meant to change the way the receiver perceives something to have an impact on his judgment and behavior It must inform its data that makes a difference The word inform originally meant to give shape to and information is meant to shape the person who gets it to make some difference in his outlook or insight Strictly speaking then it follows that the receiver not the sender decides whether the message he gets is really informationthat is if it truly informs him A memo full of unconnected ramblings may be considered information by the writer but judged to be noise by the recipient The only message it may communicate successfully is an unintended one about the quality of the senders intelligence or judgment Think of information as data that makes a difference Information moves around organizations through hard and soft networks A hard network has a visible and definite infrastructure wires delivery vans satellite dishes post offices addresses electronic mailboxes The messages these networks deliver include email traditional Page 4 or snail mail deliveryservice packages and Internet transmissions A soft network is less formal and visible It is ad hoc Someones handing you a note or a copy of an article marked FYI is an example of information transmission via soft network Quantitative measures of information management tend to include connectivity and transactions How many email accounts or Lotus Notes users do we have How many messages do we send in a given period Qualitative measures measure informativeness and usefulness Did the message give me some new insight Does it help me make sense of a situation and contribute to a decision or the solution to a problem Unlike data information has meaningthe relevance and purpose of Druckers definition above Not only does it potentially shape the receiver it has a shape it is organized to some purpose Data becomes information when its creator adds meaning We transform data into information by adding value in various ways Lets consider several important methods all beginning with the letter C Contextualized we know for what purpose the data was gathered Categorized we know the units of analysis or key components of the data Calculated the data may have been analyzed mathematically or statistically Corrected errors have been removed from the data Condensed the data may have been summarized in a more concise form Note that computers can help to add these values and transform data into information but they can rarely help with context and humans must usually help with categorization calculation and condensing A problem we will deal with throughout this book is the confusion of informationor knowledgewith the technology that delivers it From Marshall McLuhans The Medium Is the Message with its assertion that television would bind humanity into a global village and end world conflict to recent statements about the transforming power of the Internet we have heard that information technology will change not only how we work but who we are One important point we will make in this book is that the medium is not the message though it may strongly affect the message The thing delivered is more important than the delivery vehicle Having a telephone does not guarantee or even Page 5 encourage brilliant conversations owning a stateoftheart CD player is pointless if you use it only to listen to polkas played by a kazoo ensemble In the early days of television many commentators said that the new medium would raise the level of cultural and political discourse in the nation a prediction that clearly did not come true The corollary for todays managers is that having more information technology will not necessarily improve the state of information Knowledge Most people have an intuitive sense that knowledge is broader deeper and richer than data or information People speak of a knowledgeable individual and mean someone with a thorough informed and reliable grasp of a subject someone both educated and intelligent They are unlikely to talk about a knowledgeable or even a knowledgefull memo handbook or database even though these might be produced by knowledgeable individuals or groups Knowledge derives from minds at work Since epistemologists spend their lives trying to understand what it means to know something we will not pretend to provide a definitive account ourselves What we offer is a working definition of knowledge a pragmatic description that helps us communicate what we mean when we talk about knowledge in organizations Our definition expresses the characteristics that make knowledge valuable and the characteristicsoften the same onesthat make it difficult to manage well Knowledge is a fluid mix of framed experience values contextual information and expert insight that provides a framework for evaluating and incorporating new experiences and information It originates and is applied in the minds of knowers In organizations it often becomes embedded not only in documents or repositories but also in organizational routines processes practices and norms What this definition immediately makes clear is that knowledge is not neat or simple It is a mixture of various elements it is fluid as well as formally structured it is intuitive and therefore hard to capture in words or understand completely in logical terms Knowledge exists within people part and parcel of human complexity and unpredictability Although we traditionally think of assets as definable and concrete knowledge assets are much harder to pin down Just as an atomic particle Page 6 can appear to be either a wave or a particle depending on how scientists track it knowledge can be seen as both process and stock Knowledge derives from information as information derives from data If information is to become knowledge humans must do virtually all the work This transformation happens through such C words as Comparison how does information about this situation compare to other situations we have known Consequences what implications does the information have for decisions and actions Connections how does this bit of knowledge relate to others Conversation what do other people think about this information Clearly these knowledgecreating activities take place within and between humans While we find data in records or transactions and information in messages we obtain knowledge from individuals or groups of knowers or sometimes in organizational routines It is delivered through structured media such as books and documents and persontoperson contacts ranging from conversations to apprenticeships Knowledge in Action One of the reasons that we find knowledge valuable is that it is closeand closer than data or informationto action Knowledge can and should be evaluated by the decisions or actions to which it leads Better knowledge can lead for example to measurable efficiencies in product development and production We can use it to make wiser decisions about strategy competitors customers distribution channels and product and service life cycles Well describe the characteristics of knowledgeintensive organizations later in this chapter and throughout the book Of course since knowledge and decisions usually reside in peoples heads it can be difficult to trace the path between knowledge and action Weve observed and analyzed over a hundred attempts to manage knowledge in organizations To the managers of most of them weve posed the question How do you make the distinction between data information and knowledge Many make no hard distinction in practice and most of these initiatives involve a mixture of knowledge and Page 7 information if not some data as well Many pointed out that they just tried to add value to what they hadto move it up the scale from data toward knowledge Chrysler for example stores knowledge for new car development in a series of repositories called Engineering Books of Knowledge The goal of these books which are actually computer files is to be an electronic memory for the knowledge gained by automobile platform teams The manager of one such book was given a series of crash test results for inclusion in the repository However he classified the results as data and encouraged the submitter to add some value What was the context of the resultswhy were the crash tests performed How about comparisons to the results of other models previous years and competitors cars What consequences did the results suggest for bumper or chassis redesign It may be difficult to note the exact points at which data becomes information or knowledge but its easy to see how to move it up the chain Knowledge can also move down the value chain returning to information and data The most common reason for what we call deknowledging is too much volume As one Andersen Consulting knowledge manager told us Weve got so much knowledge not to mention a lot of data and information too in our Knowledge Xchange repository that our consultants can no longer make sense of it For many of them it has become data Aeschylus made a similar point clearly twentyfive centuries ago Who knows useful things not many things is wise Because knowledge is such a slippery concept its worth reflecting a bit on some of its key components such as experience truth judgment and rules of thumb Experience Knowledge develops over time through experience that includes what we absorb from courses books and mentors as well as informal learning Experience refers to what we have done and what has happened to us in the past Experience and expert are related words both derived from a Latin verb meaning to put to the test Expertspeople with deep knowledge of a subjecthave been tested and trained by experience One of the prime benefits of experience is that it provides a historical perspective from which to view and understand new situations and events Knowledge born of experience recognizes familiar patterns and Page 8 can make connections between what is happening now and what happened then The application of experience in business may be as simple When firms hire experts theyre buying experience based insights as an old hands identifying a downturn in sales as a seasonal phenomenon and therefore no cause for alarm It may be as complex as a managers noticing subtle signs of the corporate complacency that led to problems in the past or a scientists having a sense of which new avenues of research will likely lead to useful results These experiencebased insights are what firms pay premiums for they show why experience counts Ground Truth Experience changes ideas about what should happen into knowledge of what does happen Knowledge has ground truth to borrow the phrase the US Armys Center for Army Lessons Learned CALL uses to describe the rich truths of real situations experienced close up on the ground rather than from the heights of theory or generalization For obvious reasons effective knowledge transfer is a critical issue for the army Knowing what to expect and what to do in military situations can be literally a lifeordeath matter Ground truth means knowing what really works and what doesnt Experts from CALL take part in real military operations as learning observers and disseminate the knowledge they gather through photos video tapes briefings and simulations Lessons learned in Somalia and Rwanda in the early 90s for example were passed on to the troops involved in the 1994 Haitian mission The experiences of the first units in Haiti that went from house to house looking for weapons were also videotaped to provide guidance to those who followed A key aspect of the armys success at knowledge management was its After Action Review AAR program This exercise involves an examination of what was supposed to happen in a mission or action what actually happened why there was a difference between the two and what can be learned from the disparities Enlisted soldiers and officers meet together in a climate of openness collaboration and trust Results from the AAR are quickly incorporated into army doctrine or its formally documented procedures and training programs The AAR program was developed not as a knowledge management vehicle but rather as a means to return to values of integrity and accountability These Page 9 values had suffered considerably during the Vietnam War and army leaders adopted the AAR and an orientation to ground truth to restore theminitially in training missions and later for all types of missions Over the past few years the army has realized that it had a knowledge and learning tool in the AAR Another breakthrough in the armys extensive knowledge experience grew out of the reflections of a senior officer who late in his career read Tolstoys War and Peace He was struck by the difference between Tolstoys depictions of Napoleonic War battles and the way those battles were taught in classes at military academies How rich true and grounded were Tolstoys descriptions he had actually interviewed veterans of those campaigns compared with the bloodless rational abstractions taught in the classroom The gap between ground truth and rational analysis prompted such innovations as CALL 4 We could make a similar distinction between how business strategy actually happens and how it is taught in business schools5 However we believe that managers recognize the importance of reallife knowledge or ground truth This is suggested by some of the language they use They exchange war stories and talk about life in the trenches In other words they share the detail and meaning of real experiences because they understand that knowledge of the everyday complex often messy reality of work is generally more valuable than theories about it Complexity The importance of experience and ground truth in knowledge is one indication of knowledges ability to deal with complexity Knowledge is not a rigid structure that excludes what doesnt fit it can deal with complexity in a complex way This is one essential source of its value Although it is tempting to look for simple answers to complex problems and deal with uncertainties by pretending they dont exist knowing more usually leads to better decisions than knowing less even if the less seems clearer and more definite Certainty and clarity often come at the price of ignoring essential factors Being both certain and wrong is a common occurrence In Sensemaking in Organizations Karl Weick observes that it takes a complex sensing system to register and regulate a complex object6 and elsewhere he remarks The illusions of accuracy can be created if people avoid comparison but in a dynamic competitive changing environment illusions of accuracy Page 10 are shortlived and they fall apart without warning Reliance on a single uncontradicted data source can give people a feeling of omniscience but because those data are flawed in unrecognized ways they lead to nonadaptive action 7 Knowledge is aware of what it doesnt know Many wise men and women have pointed out that the more knowledgeable one becomes the more humble one feels about what one knows Since what you dont know can hurt you this awareness is extremely important Recently a geneticengineering firm created a new tomato that farmers could pick and ship later than current varieties and that therefore would be more flavorful than the tomatoes available in supermarkets The firms scientists had all the expertise needed to develop the new tomato but didnt know enough about farming to know that there were essential things they didnt know For instance any farmer with experience growing tomatoes could have told them that any given single variety does not do equally well in all climates Their new tomato was derived from only one variety It grew successfully in some areas but not in others and their scientific triumph was a commercial failure Judgment Unlike data and information knowledge contains judgment Not only can it judge new situations and information in light of what is already known it judges and refines itself in response to new situations and information Knowledge can be likened to a living system growing and changing as it interacts with the environment When knowledge stops evolving it turns into opinion or dogma Of course everyone has met experts whose knowledge seems to consist of stock responses and who offer the same old answer to any new question every problem looks like a nail to a person who has only a single conceptual hammer in his toolbox We would argue that the expertise of these experts ceases to be real knowledge when it refuses to examine itself and evolve It becomes opinion or dogma instead Rules of Thumb and Intuition Knowledge works through rules of thumb flexible guides to action that developed through trial and error and over long experience and obser Page 11 vation Rules of thumb or in the language of the artificial intelligence community heuristics are shortcuts to solutions to new problems that resemble problems previously solved by experienced workers Those with knowledge see known patterns in new situations and can respond appropriately They dont have to build an answer from scratch every time So knowledge offers speed it allows its possessors to deal with situations quickly even some very complex ones that would baffle a novice Roger Schank a computer scientist at Northwestern University calls these internalized responses scripts Like play scripts or computer program codes they are efficient guides to complex situations Scripts are patterns of internalized experience routes through a maze of alternatives saving us the trouble of consciously analyzing and choosing at every step along the way Scripts can be played so quickly that we may not even be aware of them We arrive at an answer intuitively without knowing how we got there That does not mean the steps do not existintuition is not mystical It means we have so thoroughly learned the steps that they happen automatically without conscious thought and therefore at great speed Karl Weick calls intuition compressed expertise a phrase that vividly suggests how knowledge works and what it can do One researcher calls intuition compressed expertise The skill of an experienced driver provides an example of this kind of intuition She knows how to drive rapidly accomplishing a series of complex actions without having to think about them as a beginner would The veteran driver also develops an intuitive sense of what to expect on the road Hundreds of hours of driving have led her to know that another driver is going to pull out of a side street or change lanes without looking Experience has made her aware of minute signs that the beginning driver would almost certainly miss and that may be too subtle to verbalize Like an experienced businessperson she sizes up a situation quickly without going through a definable process or even being able to explain her reasoning Values and Beliefs It may seem odd to include values and beliefs in a discussion of knowledge in organizations Many people assume that organizations are objective and neutral their purpose is to create a product or provide a Page 12 service and that goal may seem unrelated to values In fact peoples values and beliefs have a powerful impact on organizational knowledge Organizations are after all made up of people whose values and beliefs inescapably influence their thoughts and actions The organizations themselves have histories derived from peoples actions and words that also express corporate values and beliefs Values and beliefs are integral to knowledge determining in large part what the knower sees absorbs and concludes from his observations People with different values see different things in the same situation and organize their knowledge by their values Someone who values the bustle of urban life may find energy and variety in a crowded city street Someone who prefers rural quiet may see only chaos and danger in the same scene A publishing executive who values risk and change may see a new opportunity in the same online technology that a competitor views as a threat to traditionally successful print products Nonaka and Takeuchi say that knowledge unlike information is about beliefs and commitment 8 The power of knowledge to organize select learn and judge comes from values and beliefs as much as and probably more than from information and logic Knowledge as a Corporate Asset People in organizations have always sought used and valued knowledge at least implicitly Companies hire for experience more often than for intelligence or education because they understand the value of knowledge that has been developed and proven over time Managers making difficult decisions are much more likely to go to people they respect and avail themselves of their knowledge than they are to look for information in databases Studies have shown that managers get twothirds of their information and knowledge from facetoface meetings or phone conversations Only onethird comes from documents9 Most people in organizations consult a few knowledgeable people when they need expert advice on a particular subject As we have said knowledge is what makes organizations go Knowledge is not new Explicitly recognizing knowledge as a corporate asset is new however as is understanding the need to manage and invest it with the same care paid to getting value from other more tangible assets The need to make the most of organizational knowledge to get as much value as possible from it is greater now than in the past Page 13 The Changing Global Economy Fifty years ago the United States accounted for about 53 percent of the world GDP The demand for American goods at home and abroad was so great that almost any product could find a market Today the US share of the world GDP is approximately 18 percent Although the pie is much bigger than it was American companies no longer dominate the world market There is fierce international competition for every marginal dollar of profit A rapidly globalizing economy unified by improved communication and transportation gives consumers an unprecedented choice of goods and services and an endless cavalcade of new and better offerings from global companies In short companies can no longer expect that the products and practices that made them successful in the past will keep them viable in the future Pricing pressures leave no room for inefficient production The cycle time for developing new products and getting them on the market is becoming more and more compressed Companies now require quality value service innovation and speed to market for business success and these factors will be even more critical in the future Increasingly companies will differentiate themselves on the basis of what they know A relevant variation on Sidney Winters definition of a business firm as an organization that knows how to do things would define a business firm that thrives over the next decade as an organization that knows how to do new things well and quickly In a global economy knowledge may be a companys greatest competitive advantage In their search for new efficiencies global corporations have outsourced much of the labor of manufacturing to countries where the cost of labor is still relatively low Clearly the knowledge based activities of developing products and processes are becoming the primary internal functions of firms and the ones with the greatest potential for providing competitive advantage 10 Product and Service Convergence Increasingly knowledge and related intangibles not only make businesses go but are part or all of the products firms offer Old distinctions between manufactured objects services and ideas are breaking down Not surprisingly distinctions between manufacturing and service firms Page 14 are disappearing too Alan Webber described the change in a 1993 article Not so long ago observers predicted with confidence the arrival of a postindustrial service economy where the central role played by manufacturing in the economy would be steadily replaced by new service industries and service jobs Now we know that the real impact of the information economy is to explode the distinction between manufacturing and services altogether 11 Fortune magazine recognized the same trend in 1993 when it replaced its separate Fortune 500 industrialfirm and servicefirm issues with a combined issue The decision to make that change resulted from an internal debate about whether Microsoft was an industrial or a service firm and furthermore whether it mattered The editors saw that it was no longer meaningful or even possible to decide which firms fit which category Software companies sell products that are essentially ideasintellectual propertyembodied in lines of code We can classify software as a service a set of functions delivered in digital form Its no wonder that Microsoft works so diligently to hire smart workers The software business is a new kind of knowledge based industry but even traditional manufacturing firms are increasingly both users and sellers of knowledge Oncetraditional manufacturing firms differentiate themselves from competitors by offering smart products ranging from automatic breadmakers to cars that sense driver habits and adjust to them Xerox calls itself the document company not the copierprinter company It sells solutions to business problems not just office machinery Ford focuses on quality IBM markets industrysolution units 3M calls itself a knowledge company and Steelcase the office equipment firm has placed fullpage ads touting itself as selling knowledge These selfdefinitions are not just market hype but a genuine recognition of the type of value these firms need to offer their customers These changes and pressures make knowledge vital to organizations As James Brian Quinn points out the intangibles that add value to most products and services are knowledgebased technical knowhow product design marketing presentation understanding the customer personal creativity and innovation12 The powers of knowledge that we have describedspeed complexity a sense of history and context judgment and flexibilityare precisely those needed in a rapidly changing increasingly competitive global economy Page 15 A small but telling case in point The NEC factory in Honjo Japan has been replacing assemblyline robots with human workers because human flexibility and intelligence makes them more efficient at dealing with change Assembling a new model of mobile phone humans reached target efficiency after making 8000 units compared with the 64000 units robots needed and were 45 percent more productive than the machines after both reached peak efficiency The cost of a model change fell from 95 million to between 1 million and 2 million a significant savings given that NEC is making model changes every six months rather than every two years as in the past Tomiaki Mizukami president of NECs Saitama plant says Before we ended up using people as robots But now we must use their intelligence Using robots was good but now were discovering that using people is actually faster 13 Even assemblyline work often considered merely mechanical benefits from the experience skill and adaptability of human expertise Similarly firms that have replaced some accountspayable personnel with computers are finding that overpayments have increased because automated systems dont catch errors that would be obvious to experienced employees Although the financial cost of additional overpayments is in many cases more than offset by the savings in salaries and benefits the errors can cause strained relationships between firms and suppliers Again the human dimensionsthe knowledge dimensionsof a supposedly mechanical task become apparent when machines try to accomplish them Richard Loder president of Loder Drew Associates a payables consulting firm comments Payable clerks are blessed with intuition memory recognition and the ability to make educated guesses Computers are dumb and dumber in these areas14 Konosuke Matsushita founder of Matsushita Electric Ltd has said Business we know is now so complex and difficult the survival of firms so hazardous in an environment increasingly unpredictable competitive and fraught with danger that their continued existence depends on the daytoday mobilization of every ounce of intelligence15 Managers around the world have come to realize that they need to understand what they know how to do well and take advantage of that knowledge as effectively as possible Sustainable Competitive Advantage Centuries ago manufacturers and nations maintained commercial supremacy by keeping material and processes secret Guilds protected their special knowledge governments prohibited the export of economically Page 16 important skills France for instance made exporting lacemaking expertise a capital crime Anyone caught teaching the skill to foreigners could be put to death Today real trade secrets are a rarity There are a few wellknown examples like the formula for CocaCola and a few specialized ones the Zildjian cymbal company owned by the same family since its origin in alchemical experiments centuries ago still guards the formula for the exact composition of the alloy used in its cymbals For the most part though it is virtually impossible to prevent competitors from copying and even improving on new products and production methods fairly quickly in an era characterized by mobility the free flow of ideas reverse engineering and widely available technology Alan Webber the editor of Fast Company magazine has referred to this phenomenon as the selfcanceling technological advantage As technology transforms the logic of competition he explains technology disappears as a sustainable source of competitive advantage 16 Because essentially the same technology is available to everyone it cannot provide a longterm edge to anyone A global marketplace for ideas has developed and there are very few concepts and formulae that are not generally available Competitors can quickly duplicate most products and services When only Citibank and Chemical had automated teller machines they briefly had a significant advantage over their competitors offering a service that customers wanted and they alone could provide But ATMs soon became available throughout the industry and what had been a competitive advantage was simply a baseline requirement for consumeroriented banks There is no way to make the ATM or any other piece of technology a trade secret for longeven if you build it yourself as Citibank did The advantages of new products and efficiencies are more and more difficult to sustain VF the company that sells Lee Jeans and other apparel has experienced 20 percent annual growth for five years thanks in part to technical innovations These include an electronic market response system that informs both the companys shipping and manufacturing departments of every sale made within hours But Jerry Johnson VFs chief financial officer says The halflife of innovation is getting shorter and shorter A couple of years ago we thought we had established a definitive lead in service to our customers Now its become the industry standard17 Robert Stasey the director of quality improvement for Analog Devices another growing company expresses a similar Page 17 idea when he says that Analog is basically a new product engine Life cycles are short and we want to obsolete our own products before the competition does 18 A knowledge advantage is a sustainable advantage Knowledge by contrast can provide a sustainable advantage Eventually competitors can almost always match the quality and price of a market leaders current product or service By the time that happens though the knowledgerich knowledgemanaging company will have moved on to a new level of quality creativity or efficiency The knowledge advantage is sustainable because it generates increasing returns and continuing advantages Unlike material assets which decrease as they are used knowledge assets increase with use Ideas breed new ideas and shared knowledge stays with the giver while it enriches the receiver The potential for new ideas arising from the stock of knowledge in any firm is practically limitlessparticularly if the people in the firm are given opportunities to think to learn and to talk with one another Paul Romer who has worked at the leading edge of knowledge economics argues that only knowledge resourcesideashave unlimited potential for growth In a world with physical limits it is discoveries of big ideas for example how to make hightemperature superconductors together with the discovery of millions of little ideas better ways to sew a shirt that make persistent economic growth possible Ideas are the instructions that let us combine limited physical resources in arrangements that are ever more valuable19 And he goes on to say the number of potential combinations of the steps that make up processes or the components of a product is virtually inexhaustible Corporate Size and Knowledge Management At a time when firms need to know what they know and must use that knowledge effectively the size and geographic dispersion of many of them make it especially difficult to locate existing knowledge and get it to where it is needed In a small localized company a manager probably knows who has experience in a particular aspect of the business and can walk across the hall and talk to him Our studies have shown that the maximum size of an organization in which people know one another well enough to have a reliable grasp of collective organizational Page 18 knowledge is two hundred to three hundred people The stock of knowledge in a global enterprise with scattered offices and plants and a complex mix of products and functions is vast but that potential boon is part of the problem How do you find what you need The mere existence of knowledge somewhere in the organization is of little benefit it becomes a valuable corporate asset only if it is accessible and its value increases with the level of accessibility Managers in large corporations know how common it is to reinvent the wheel solving the same problems from scratch again and again duplicating effort because knowledge of already developed solutions has not been shared within the company This was one of Chryslers motivations in formulating its Engineering Books of Knowledge the company had forgotten some things it had previously learned about building cars If there is no system in place to locate the most appropriate knowledge resources employees make do with what is most easily available That knowledge may be reasonably good but in todays competitive environment reasonably good is not good enough Hence the attempts by many companies including one described below by the worldwide oil firm BP to apply technology to the problem of global knowledge transfer Computer Networks and Knowledge Exchange The low cost of computers and networks has created a potential infrastructure for knowledge exchange and opened up important knowledge management opportunities The computational power of computers has little relevance to knowledge work but the communication and storage capabilities of networked computers make them knowledge enablers Through email groupware the Internet and intranets computers and networks can point to people with knowledge and connect people who need to share knowledge over a distance Desktop videoconferencing and multimedia computing that transmits sound and video as well as text make it possible to communicate some of the richness and subtlety of one persons knowledge to another Wha t we must remember is that this new information technology is only the pipeline and storage system for knowledge exchange It does not create knowledge and cannot guarantee or even promote knowledge generation or knowledge sharing in a corporate culture that doesnt favor those activities The proverbial phrase if we build it they will come does not apply to information technology 20 The availability of Lotus Notes does not change a knowledge hoarding culture into a knowledge Page 19 sharing one alas 21 The medium turns out not to be the message and does not even guarantee that there will be a message A Case in Point British Petroleums Virtual Teamwork Program In 1993 BP Exploration the division of BP that finds and produces oil and gas organized its regional operating centers into fortytwo separate business assets BP Managing Director John Browne who oversaw the transformation of BPX into what he called a federation of assets wanted these units to have the freedom to develop processes and solutions appropriate to their particular problems The best and most adaptable local innovations could be used elsewhere in the larger company In effect BPX would be able to draw on the variety and creative power of fortytwo moderatesized companies This idea of a corporate federation is similar to the multilocal structure Nonaka and Takeuchi describe in The KnowledgeCreating Company as part of Matsushitas corporate aim of becoming a possibilitysearching company They remark on the importance of transcending the dichotomy between localization and globalization an apt description of Brownes aim22 Fully aware that the competitiveness of the global marketplace had made efficiency and innovation necessary for continuing success he wanted BP to combine the agility of a small company with the resources of a large one Browne understood that even giants will need to be light on their feet in the 1990s and beyond Planning The communication capabilities BPX needed to realize the idea of a federationand to create the possibility of local connections over distancewere provided by recent developments in cheap computing and related technologies As the result of a discussion of these technologies at an uppermanagement technology meeting late in 1994 BPX launched an eighteenmonth pilot project called the Virtual Teamwork Program Its purpose was to develop effective ways for members of teams to collaborate across different locations Although BPX managers did not explicitly label it a knowledge management project from the beginning the aims and operating principles of the program reflected an understanding of the importance of knowledge and the need to develop appropriate ways to share it The primary Page 20 aim of the initiative was to let knowledgeable people talk to each other not to try to capture or tabulate their expertise The Virtual Teamwork Programs goal was to build a network of people not a storehouse of data information or knowledge The hardware and software chosen for BPs Virtual Teamwork Program stressed richness of communication the Virtual Teamwork stations included desktop videoconferencing equipment multimedia email application sharing shared chalkboards a document scanner tools to record videoclips groupware and a Web browser The emphasis was on richness of communication on duplicating as much as possible the nuances variety and human dimension of facetoface contact The project team understood that the value of individual expertise resides largely in just those subtleties and intuitions which words alone cannot convey A key early decision made by John Cross head of Information Technology IT was that an independent group not the IT function should undertake the project He believed that the program would be less likely to fall into familiar IT patterns if a group drawn from different parts of the company ran it Also the intentional absence of IT control would make clear that the project was about communication business change and corporate behavior not technology for its own sake The idea of technology as a tool not an end in itself was reinforced by the coaching program developed by the Change Management Team a subgroup of the Virtual Teamwork Program Team This program showed participants how to use the technology and helped them understand how it could further their work Project leaders referred to coaching rather than training to emphasize that the process would be a personal interaction a coach working with players not a trainer presenting information to passive recipients The coaches and team members communicated with each other using the VT stations an ongoing reallife demonstration of the systems value as a tool for collaborative work and knowledge exchange Discussions between the Change Management Team and what eventually became known as the Knowledge Management Team kept the focus on the broad goal also suggested by the coaching metaphor of encouraging project team members to discover untapped potential in themselves and the system The emphasis was on persontoperson contact and human needs not on system requirements or an electronic knowledge repository Only 20 percent of the coaches time was designated for training in how to use the system The rest was Page 21 devoted to helping team members link their business objectives to the capabilities of the system and challenging them to consider the new ways of working that the VT equipment made possible Coaching meant not only how to but what and why The core team spent approximately half of the pilots budget on coaching Results The success of virtual teamworking in four of the five groups that took part in the pilot was demonstrated by volume of use participant enthusiasm and measurable savings in time and money Tellingly the single failure occurred in the Petrotechnical group whose members were mainly interested in exchanging data not knowledge the VT clients potential for delivering richly varied communication did not particularly interest them In addition that was the one group that for budgetary reasons did not have the benefit of coaching When equipment failure brought operations to a halt on a North Sea mobile drilling ship one day in 1995 the ships drilling engineers hauled the faulty hardware in front of a tiny video camera connected to one of British Petroleums Virtual Teamwork stations Using a satellite link they dialed up the Aberdeen office of a drilling equipment expert who examined the malfunctioning part visually while talking to the shipboard engineers He quickly diagnosed the problem and guided them through the necessary repairs In the past a shutdown of this kind would have necessitated flying an expert out by helicopter or sending the ship leased at a cost of 150000 a day back to port and out of commission for several days This shutdown lasted only a few hours This episode illustrates how virtual teamworking technology can get knowledge where it is needed Technology brought the expert and the situation that required his expertise together The VT clients allowed him to see the problem while talking to people who were actually on the scene His virtual presence gave the shipboard engineers the benefit of his skill and experience enabling them to understand and solve the problem quickly In this type of situation the persontoperson connection is a much more expedient way of transferring knowledge than trying to extract it from the expert and distributing it in a form that those already at the site would then have to interpret However it is not more efficient for a recurring problem so BP is also developing a repository of solutions to frequently encountered problems Another case in which virtual teamworking proved its effectiveness Page 22 was the Andrew Project a joint endeavor by BP Brown and Root a design and engineering firm based in Houston with an office in Wimbledon and Trafalgar House a construction company based in Scotland to build a new oil platform in the North Sea Andrew team members took advantage of the applicationsharing feature of the VT clients to write joint memos in just ten or fifteen minutes These previously involved hours or days of sending drafts back and forth by mail Virtual meetings and VT work sharing led to quantifiable benefits on the Andrew Project including significant reductions in travel costs and expenses associated with bringing vendors on site There were also measurable productivity improvements related to more efficient information searches and issue resolution and reductions in duplication and wasted travel time Virtual teamworking contributed significantly to the projects meeting its target date to lower offshore costs and to a much lower total cost of bringing forward first oil a key milestone in the development of a new field The technology did not eliminate the need for personal meetings which BP employees still required to establish mutual trust and understanding and to hash out important issues that involved large numbers of team members Once they had met in person though participants found that videoconferencing maintained a sense of trust and direct personal contact that phone calls email or memos could not match One indication of the difference was that participants honored commitments made electronically facetoface using the VT stations much more consistently than commitments made by phone or mail BP managers tend to downplay the importance of incremental efficiency gains They are more interested in the changes in how work is done and the explosions of creativity that they believe virtual teamworking can help spark VT station users have also begun communicating across projects Members of the Andrew Project in Aberdeen for instance are connecting with members of the offshore Miller Team to apply their experience on the mature Miller oil field in the North Sea to the emerging Andrew field This type of collaboration inspired the core teams imaginary headline Scottish oil discovered in Alaska to suggest the potential of virtual teamworking to nullify distance and create a team out of widely scattered individuals BP has also instituted what it calls Virtual Teamwork Business Networking Centers which are used once a week for virtual coffee breaks Up to twenty people at eight separate locations have joined in video Page 23 conversations with no set agenda Like coworkers around the water cooler or Japanese RD people in the talk rooms provided by their companies they discuss current work and describe problems theyve been struggling with or ideas theyve come across Their hopeand British Petroleumsis that the conversations will pay off in serendipitous ways Two participants might discover a surprising useful connection between their projects or a suggestion from an unexpected source might help solve a difficult problem The conversations may simply give participants a better sense of whats happening elsewhere in the company but that too is beneficial Openness to the unexpected was one of the operating principles of the project since the creative innovations BP is looking for are by definition unforeseen At the end of the pilot program BP executives approved plans to expand by a significant number of new units in 1996 Initiatives are under way to apply VT technology and knowledge principles to better understanding the joint ventures and drilling firms skills in processes In particular the VT technology will now support BPs entire senior management team Project staff expect that the technology and coaching will lead to a more collaborative culture of executive decision making across the organization In recognition of the fact that the VT project is about sharing knowledge the Knowledge Management and Change Management teams have been combined into a single group called Knowledge and Teamworking Services The core team hopes to provide virtual teamworking equipment to a high proportion of BPs professional staff by the end of 1997the critical mass needed to transform the farflung company into a closeknit federation of business units and workers Their goal and Brownes is to create a collaborative learning organization with the agility and creativity to thrive in the new century They view shared knowledge as a key factor in innovation and productivity Lessons Learned British Petroleums experience with its Virtual Teamworking project illustrates some of the characteristics of knowledge and the principles and benefits of knowledge management that we have described in this chapter It also points to topics and concepts that we will tackle systematically later in this book By way of summary and preview here are the important features of the program and the principles they reflect Page 24 BPs Virtual Teamwork Program Knowledge Management Principles Members of knowledge communities were identified then linked by technology Knowledge originates and resides in peoples minds Relationships were built through actual and virtual facetoface meetings Knowledge sharing requires trust Technology was used for communication and collaboration training emphasized goals not hardware and software Technology enables new knowledge behaviors Training and uppermanagement support emphasized the importance of new behaviors Knowledge sharing must be encouraged and rewarded Upper management initiated the project and authorized funds and the core team Management support and resources are essential Five test groups allowed for variety and clear limited goals Knowledge initiatives should begin with a pilot program Savings and productivity increases were quantified expanding VT use and participant enthusiasm were qualitative measures Quantitative and qualitative measurements are needed to evaluate the initiative In addition to having specific goals the project left room for the unexpected Knowledge is creative and should be encouraged to develop in unexpected ways Page 25 2 The Promise and Challenge of Knowledge Markets Grace is given of God but knowledge is bought in the market Arthur Hugh Clough Rapidly or slowly usefully or unproductively knowledge moves through organizations It is exchanged bought bartered found generated and applied to work In contrast to individual knowledge organizational knowledge is highly dynamic it is moved by a variety of forces If we want knowledge to move and be utilized more effectively we need to better understand the forces that drive it We believe market forces power its movement working similarly to markets for more tangible goods There is a genuine market for knowledge in organizations 1 Like markets for goods and services the knowledge market has buyers and sellers who negotiate to reach a mutually satisfactory price for the goods exchanged It has brokers who bring buyers and sellers together and even entrepreneurs who use their market knowledge to create internal power bases Knowledge market transactions occur because all of the participants in them believe that they will benefit from them in some particular way In economists jargon they expect the transactions to provide utility People search for knowledge because they expect it to help them succeed in their work Knowledge is the most soughtafter remedy to uncertainty We all try to reach knowledgeable people when we see the need to deliver a solution to a problem When we supply knowledge we expect to benefit too Within organizations cash is usually not involved in these transactions but that should not disguise the fact that a market price system exists and payment is made or assumed The knowledge market like any other is a system in which participants exchange a scarce unit for present or future value Page 26 Understanding that there are knowledge markets and that they operate similarly to other markets is essential to managing knowledge successfully in organizations Many knowledge initiatives have been based on the utopian assumption that knowledge moves without friction or motivating force that people will share knowledge with no concern for what they may gain or lose by doing so Companies install email or collaborative Dont expect software to solve your knowledge problem software and expect knowledge to flow freely through the electronic pipeline When it doesnt happen they are more likely to blame the software or inadequate training than to face a fact of life people rarely give away valuable possessions including knowledge without expecting something in return This may be especially true in our current business climate Even if only partially mindful of doing so people make choices about how to spend their limited time and energy and base those choices on perceived selfinterest We dont expect a car salesman to sell us a car at cost sacrificing his commission simply because we want to pay less Nor does the salesman expect us to hand him money and walk out of the showroom without a vehicle No one believes that such onesided transactions happen in the marketplace or in most of lifeeven social transactions are generally based on some sort of exchange as many sociological studies in exchange theory have shown Just because the object of exchange is intangible does not mean that the market forces are less strong Knowledge initiatives that ignore the dynamics of markets and of course human nature are doomed to fail The first step in any knowledge initiative is recognizing that there are markets for knowledge We will describe these markets for knowledge in organizations and develop a preliminary taxonomy of that market We believe the only way to have a market that works well is first of all to recognize that market forces exist second to try to understand how it functions and third to make it more efficient By talking about knowledge market inefficienciesand diseconomieswe can get at some of the problems that inhibit knowledge exchange and the transformation of corporate knowledge into value and can sketch the outlines of a more efficient market Page 27 The Political Economy of Knowledge Markets There really are no such things as pure marketsmarkets that can be understood solely in economic terms As analysts from John Stuart Mill to Karl Marx to Thorstein Veblen to James March have argued every market system is embedded in and affected by social and political realities The value of anything exchanged depends strongly on the context of the transaction Someone who pays 20000 for a wristwatch no more accurate than a 20 Timex is obviously not buying a mechanism for telling time The value of the 20000 watch is mainly social it buys the owner status in a society that looks up to or envies people who can afford to purchase and display such items Sociologist Harrison White has said that sociology economics and political science are the three lenses needed to see organizations fully no one discipline can capture their whole meaning 2 We strongly agree that social economic and political realities must be taken fully into account to understand markets for knowledge If the political reality of an organization is such that calculating and secretive hoarders of knowledge thrive then potential knowledge buyers will have no currency valuable enough to tempt them to share their expertise Knowledge exchange will be minimal If it is considered a sign of weakness or incompetence within the culture of an organization to admit to a problem you cant solve on your own then the social cost of buying knowledge will be too high Once again the knowledge market wont operate well At Mobil Oil where disapproval of bragging is embedded in the culture the efficiency of the knowledge market was reduced because knowledge owners are reluctant to advertise their knowledge and were distrusted by their colleagues if they did Similarly a Hewlett Packard vicepresident who transferred from the United States to Australia found it difficult to encourage people to advertise their individual expertise in a democratic culture of mateship that discourages calling attention to individual performance While these cultural norms can have positive impacts too they inhibit internal knowledge markets We will look first at the players in the knowledge market the buyers sellers and brokers who take part in knowledge transactions and drive knowledge markets An individual can perform all three roles in a single day and sometimes plays more than one role simultaneously It is quite common for instance to be a knowledge buyer seller and broker during Page 28 the same conversation To ensure clarity in the following discussion we will look at the roles separately Buyers Knowledge buyers or seekers are usually people trying to resolve an issue whose complexity and uncertainty precludes an easy answer Clearly asking for the GNP of France or a list of the twenty largest US banks is not a knowledge search it is a request for data Knowledge seekers are looking for insights judgments and understanding They want answers to questions such as What is this particular client like or How did we manage to win that sale that require complex answersanswers imbued with all the emotional subtexts so important to our sensemaking They seek knowledge because it has distinct value to them It will help them make a sale or accomplish a task more efficiently it will improve their judgments and skills and help them make better decisions In short it will make them more successful at their work 3 This task of searching for knowledge accounts for a fairly substantial part of what many managers and executives do A recent informal study done at Hughes Aerospace by Arian Ward estimated that between 15 and 20 percent of managerial time is spent specifically in knowledge search and responding to requests for knowledge Sellers Knowledge sellers are people in an organization with an internal market reputation for having substantial knowledge about a process or subject They may sell their knowledge by the piece or more likely in a bundle in exchange for a salary Although virtually everyone is a knowledge buyer at one time or another not everyone is necessarily a seller Some people are skilled but unable to articulate their tacit knowledge Others have knowledge that is too specialized personal or limited to be of much value on the knowledge market Some potential knowledge sellers keep themselves out of the market because they believe they benefit more from hoarding their knowledge than they would from sharing it In many organizations of course this is a rational belief If knowledge is power then the owners of knowledge have power that may dissipate if other people come to know what they know This is a reality of knowledge politics that managers need to deal with in designing knowledge initiatives One of the challenges of knowl Page 29 edge management is to ensure that knowledge sharing is rewarded more than knowledge hoarding 4 Brokers Knowledge brokers also known as gatekeepers and boundary spanners make connections between buyers and sellers those who need knowledge and those who have it5 According to a study we developed for a client about 10 percent of managers across industries are boundary spanners and therefore potential knowledge brokers They enjoy exploring their organizations finding out what people do and who knows what They like to understand the big picture which puts them in a position to know where to go for knowledge especially if it falls outside their official area of responsibility Librarians frequently act as covert knowledge brokers suited by temperament and their role as information guides to the task of making peopletopeople as well as peopletotext connections For instance when someone in a hightech firm asks the corporate librarian to do research on the next generation of reduced instruction set chips the librarian is likely to say Did you know that John Smith has been asking about the same subject You might want to talk to him Corporate librarians can be indispensable knowledge brokers Because corporate libraries often serve the whole organization librarians are among the few employees who have contact with people from many departments In the course of their work they come to understand a great deal about the various knowledge needs and resources of the company Traditionally librarians value customer service and have highly developed techniques for finding out what they dont already know All of these factors make them natural knowledge brokers One of us had a consulting experience that vividly illustrates the contribution of corporate librarians in this area About eight years ago NYNEX decided to develop benchmarks for all major technical and managerial functions and asked for help in identifying which library activities should be compared to those in other firms The director of the corporate resource center developed a list of the most valuable services the library provided Between us we had twentyfive years of experience in library and information science so we should have been able to figure out what libraries do We came up with eight activities and sent the list to a diverse group of NYNEX library Page 30 users asking if these were truly the most valued library activities To our astonishment we had omitted the single most valuable function knowledge brokering We had left it out because it was informal and undocumented but it was the service that people cared about most Librarians were key players in creating efficient knowledge markets in helping buyers and sellers find each other Firms often do not realize the importance of librarians roles as knowledge workers and managers and their status and compensation seldom reflect their real value to a firm In fact knowledge brokers of all kinds are frequently underrated though they play an essential role in the knowledge market Because of their broad boundaryspanning interests rationalminded analysts may view them as unfocused or undisciplined or even nosy or gossipy 6 Making knowledge connections mainly by talking to people they are sometimes criticized for spending their time chatting rather than doing real work Since they are facilitators of other peoples success their contribution may not be visible to managers who think in terms of traditional productivity The merits of their activities are never measured or captured by human resource systems based on how many people they direct It is much harder to measure the profit they help generate than the cost to the company of their salaries and benefits One of the first things firms do when they cut costs and one of the last things they should do is close the corporate library7 They see it as pure expensethe cost of staff space books periodicals and online subscriptions They have no familiar ways to quantify the benefits of the library as an information source and knowledge marketplace Even though they know value exists there their inability to express it in traditional accounting or financial terms makes them behave as if it didnt Some informal knowledge brokers are really knowledge entrepreneurs They intentionally set out to become experts on who has knowledge and how to exploit it They then sell this expertise not for money but in exchange for future favors and repute In effect they develop an internal knowledge business The Price System All markets have a price system so that value exchanges can be efficiently rendered and recorded What is the price system of the knowledge Page 31 market What sort of currency do participants exchange What are the necessary market conditions When firms buy knowledge from outside their organizations they frequently though not invariably pay with cash A lawyer an investment banker or a consultant can make several thousand dollars per day because the client company perceives that his or her special knowledge is worth that much Within organizations the medium of exchange is seldom money but there are agreedupon currencies or entities in the language of exchange theory that drive the knowledge market As we have said sellers as well as buyers exchange knowledge because they believe they gain from the transaction Look at this example a common experience for knowledge sellers Its six oclock on a midwinter evening and snowing again If I leave my office now I can be home by seven Thats when my family expects me Im looking forward to a quiet evening at home a nice hot dinner maybe a fire in the fireplace As Im putting my coat on the phone rings Its a consultant from another area of the companynot someone I know well I met him once or twice at meetings He apologizes for calling at the last minute and says hes just been told he has to fly out to see a major company client in the morning He knows Ive worked with this client in the past Would I tell him about them Who are the best people to talk to What is the company culture like What do they value What are they looking for from us My caller wants knowledge not data or even information so I cant answer him in just a few sentences or merely direct him to an online repository While these gestures might help him they wouldnt be sufficient It will take me at least half an hour to give him a useful response If I choose to stay in my office and talk to him delaying my return home and possibly ruining a pleasant evening what do I get in return How does the silent auctioneer in my head weigh considerable inconvenience against possible help to a fellow consultant What sort of payment could I receive for sharing my knowledge that would make it worthwhile for me to extend my long day and disrupt my personal life This scenario raises the question of what kinds of payment exist in the knowledge market We have come to the conclusion that there are at least three factors at work In order of significance from greatest to least they are reciprocity repute and altruism We will discuss each of these factors briefly then consider the vital importance of trust without which no knowledge market can operate effectively Page 32 Reciprocity A knowledge seller will spend the time and effort needed to share knowledge effectively if he expects the buyers to be willing sellers when he is in the market for their knowledge This is what Tom Wolfe calls the favor bank in Bonfire of the Vanities I may choose to miss my dinner and help my fellow consultant if I believe that the caller has knowledge that I may need to elicit in the future If the caller knows nothing that could possibly be of use to me in the future I may claim that I have no knowledge to offer and decide to go home instead Time energy and knowledge are finite They are very scarce resources in most peoples workdays In general we wont spend scarce resources unless the expenditure brings a meaningful return As nice a person as I may beas much as I might like to help a colleague who has a problemI dont have the time or strength to respond to every knowledge request that comes my way The choices I make will usually depend on my perceived selfinterest Reciprocity may be achieved less directly than by getting knowledge back from others as payment for providing it to them In firms structured as partnerships knowledge sharing that improves profitability will return a benefit to the sharer now and in the future Individuals who have significant stock options in a firm are in a similar position Whether or not a knowledge seller expects to be paid with equally valuable knowledge from the buyer he may believe that his being known for sharing knowledge readily will make others in the company more willing to share with him That is a rational assumption since his reputation as a seller of valuable knowledge will make others confident of his willingness to reciprocate when he is the buyer and they have knowledge to sell His knowledge credit is good I may stand in my office with my coat on and talk to my colleague to enhance my own reputation as a knowledge seller Perhaps that will make it more likely that people throughout the company will respond in kind when I need their knowledge So reciprocity and repute are related Repute A knowledge seller usually wants others to know him as a knowledgeable person with valuable expertise that he is willing to share with others in the company Repute may seem intangible but it can produce tangible results As we have suggested having a reputation for knowledge sharing Page 33 makes achieving reciprocity more likely being known as a knowledge seller makes one a more effective knowledge buyer Having a reputation as a valuable knowledge source can also lead to the tangible benefits of job security promotion and all the rewards and trappings of a company guru Although a seller does not receive cash directly he may receive a higher salary or bonus from sharing knowledge with others In many consulting firms consultants bonuses are tied to demonstrated knowledge generation and transfer In any organization however the value of repute in the knowledge market will depend on the political and social structures of the organization Knowledge sharing has no fixed or universal market value but has rather a range of measures from penalties for wasting time talking to people instead of working to significant advancement based mainly on knowledge contributions In businesses such as consulting investment banking and entertainment success hinges on repute In most businesses today the importance of repute is increasing as the old social contract between firm and worker based on length of service and loyalty erodes As the promise of continued employment in exchange for long loyal service fades workers at all levels feel considerable pressure to heighten their individual repute for their demonstrated knowledge skills and competencies In our winter evening case the hope of enhancing our reputations may lead us to stay late at the office and answer our colleagues questions If this consultant tells others how helpful and knowledgeable Prusak or Davenport is especially via the firms informal networks that may enhance our reputations It may also lead to further requests for knowledge sharing one of the potential drawbacks of being a successful seller If our company formally tracks and rewards knowledge sharing the likelihood of our cooperation leading to some future tangible benefit will increase Altruism It is possible of course that a knowledge sharer may be a nice guy who wants to help whether or not he gets anything beyond a thank you in return Or he may be so passionate about his knowledge that he is happy to share it whenever he gets a chance Such people do exist Many knowledge sharers are motivated in part by a love of their subject and to some degree by altruism whether for the good of the firm or based on a natural impulse to help others We all know individuals who simply like helping Page 34 Mentoring is a form of knowledge transfer based in part on altruism Erik Erikson among others has pointed out that people go through a generative stage usually in later middle age when it becomes important to them to pass on what they have learned to others Firms cannot create this impulse but they can encourage or discourage it Formally recognizing mentoring relationships giving managers time to pass on their knowledge and understanding that experienced employees have valuable knowledge are ways to foster mentoring Many firms ignore the contribution that older workers can make to their younger colleagues because they have no way of evaluating or efficiently capturing exactly what it is that the older worker knows Weve mentioned an interesting exception at Chrysler Corporation where knowledge managers understand that master mechanics and engineers have a stock of productive knowledge that is essential to the firms viability The Engineering Books of Knowledge they developed serve as a kind of formalized mentoring tool Contributing to the books is based at least in part on altruism Chrysler is encouraging the formation of the trust and relationships that lead to altruism by creating tech clubs for engineers with similar backgrounds and orientations Knowledge altruism is real and can be encouraged It flourishes in organizations that hire nice people and treat them nicely We constrain it though by increasing demands on the time and energy of employees and by cultural factors CB MacPherson argues that our national culture is one of possessive individualism It clearly doesnt make sense to depend entirely on goodwill to cultivate something as important as knowledge sharing Trust Trust can trump the other factors that positively affect the efficiency of knowledge markets Without trust knowledge initiatives will fail regardless of how thoroughly they are supported by technology and rhetoric and even if the survival of the organization depends on effective knowledge transfer 8 For the knowledge market to operate in an organization trust must be established in the following three ways 1 Trust must be visible The members of the organization must see people get credit for knowledge sharing They must directly experience reciprocity There must be direct evidence of trust a declara Page 35 tion of the importance of trust in the corporate mission statement is not sufficient 2 Trust must be ubiquitous If part of the internal knowledge market is untrustworthy the market becomes asymmetric and less efficient 3 Trustworthiness must start at the top Trust tends to flow downward through organizations Upper managements example can often define the norms and values of the firm If top managers are trustworthy trust will seep through and come to characterize the whole firm If they cynically exploit others knowledge for personal gain distrust will propagate throughout the company Their values become known to the firm through signals signs and symbols Personal contact and trust are intimately related The US Army recognizes what it calls face time as an essential element in building trust within groups and measures it as one of the determinants of successful treatment In addition to being a necessary condition for knowledge exchange trust can be a product of it as well British Petroleums Virtual Teamworking project succeeded because of the atmosphere of mutual trust established by management the VT project team and the participants Faceto face meetings among participants established rapport The frequent videoconferences during which participants exchanged knowledge raised the level of trust and led to measurable improvements in honoring commitments to meet the delivery dates of promised work A firms knowledge market must be founded on mutual trust Trust is an essential condition of a functioning knowledge market as it is of any market that does not depend on binding and enforceable contracts Of course even transactions bound by written contracts entail some degree of trust But the knowledge marketwith no written contracts and no court of appealsis very much based on credit not cash The word credit means to believe or to trust and mutual trust is at the heart of knowledge exchange When we sell knowledge within an organization our receiving adequate payment now or in the future depends on the trustworthiness of the buyer and of management In most cases we will gain repute for a knowledge transaction only if the buyer gives us credit for it If he pretends the knowledge was his all along we gain nothing If someone claims our research results as his own we are no more likely to make further knowledge Page 36 available to him than we are to offer our house to someone who stole our car A buyer who fails to give credit and recognize his debt to us is also unlikely to reciprocate when we need knowledge Similarly management that pays lip service to the value it attaches to knowledge sharing but rewards employees who hoard knowledge will not create the level of trust needed to make the knowledge market effective The role of trust in knowledge transactions helps explain why knowledge initiatives based solely on the belief that infrastructure creates communication seldom deliver the expected benefits The impersonality of groupware allows anyone to post information and invites anonymous access to that information However it does not create the same confidence in the quality of knowledge that personal acquaintance and reputation can inspire The promise of reciprocity in such a system is also weak The buyer who downloads an item from a server does not feel the same obligation to the provider that he would if he got the same material through a phone call or meeting This is why the most successful groupware systems are moderated to assure that posted material is accurate and timely Some even have mechanisms for metering the use of posted items and crediting the suppliers Knowledge Market Signals By market signals we mean information that indicates both where knowledge actually resides in the organization and how to gain access to it Accessibility is another way of looking at cost since it is a measure of the time and effort that buyers must expend to get knowledge and the kind of return the seller expects There are formal and informal signals in knowledge markets The informal ones are generally more accurate guides to where knowledge can be bought but they often require personal interaction Position and Education Title or position is the most common formal signal indicating who has or should have valuable knowledge If we need to learn about a particular research project it makes sense to go to the project manager if we need to know what is happening in marketing why not ask the director of the marketing department This commonsense approach can work but not consistently In fact the organizational chart is generally not an effective guide to company knowledge The project director may be Page 37 unwilling to share his knowledge or he may have had no direct involvement with the aspects of the project we need to understand It may be that the marketing director once knew a lot about marketing but now knows mainly about the politics of running a marketing department Clearly advancement within a firm is not based solely on knowledgeeven tacit or social knowledgebut influenced by other key variables such as drive ambition energy intuition judgment ego or lack thereof and luck The expert who knows exactly what we need to learn and would be willing to tell us may be sitting in one of the cubicles we pass on the way to the directors office The trick is to know which one Similarly education is a formal market signal that may or may not be helpful If Lorraine has a PhD in a subject we need to find out about it is logical to go to her she is a subjectmatter expert and has the credentials to prove it Credentials like credit comes from a root meaning to believe She may have just the knowledge we want but it is possible that Lorraine hasnt learned anything new since she defended her thesis a couple of decades ago Or her knowledge may be too academic to apply usefully to a practical situation Or again she may not be willing to tell us what she knows Informal Networks Probably the best knowledge market signalsthough they are still imperfectflow through the informal networks of practice that develop in organizations Within these webs people ask each other who knows whatwho has previously provided knowledge that turned out to be reliable and useful If the person you ask where to go for specific knowledge doesnt know an appropriate seller she probably knows someone else who does know Much of the work that goes on in firms gets done because people continually ask one another through informal networks who knows how to do things The informal networks of buyers brokers and sellers move knowledge through the organization Knowledge markets cluster around formal and informal networks so providing information about these networks is a good way to make knowledge visible Informal networks have the benefits and drawbacks of their informality Because they function through personal contact and word of mouth they engender the trust that is an essential engine of successful knowledge exchange A recommendation that comes from someone we know and respect within the firm is more likely to lead us to a trustworthy Page 38 seller with appropriate knowledge than would a cold call based on the organizational chart or corporate phone directory Such informal networks are also dynamic Because they consist of people more or less continually in communication with one another they tend to update themselves as conditions change People share information about who has left the company or moved to new projects who has recently become surprisingly useful sources of knowledge and who has become unexpectedly reticent If this sounds a lot like gossip it is Most corporate gossip is a form of knowledge transfer about internal processes As the eminent organizational expert James March has noted gossip in the workplaceoften What sounds like workplace gossip is often a knowledge network updating itself considered wasted timeis the way the companys knowledge network updates itself More formal systems such as printed or electronic repositories of employee skills and interests begin to get stale as soon as they are established They also generally lack the interactivity that makes informal networks work The main disadvantage of these networks is that by being informal and undocumented they are not readily available to all who need them Their viability depends on chance conversations and local connections that sometimes work well but other times do not happen at all Imagine that information about new cars or restaurants came only through similar informal networks and there were no advertisements articles or reviews We would have to rely entirely on advice from acquaintances The informal network may help us avoid some bad decisions but it would not give us the full spectrum of choices in our area To get even a reasonably wide range of recommendations we would have to spend a good deal of time following the branches of personal undocumented connections Such searching can be slow and the results often unreliable Communities of Practice Sometimes coworkers who have complementary knowledge will form a group Often called communities of practice these self organized groups are generally initiated by employees who communicate with one another because they share common work practices interests or aims 9 If their communications prove useful over time they may formalize the arrangement giving themselves a group name and establishing a regular Page 39 system of interchange For example a number of BP scientists and engineers with a shared interest in water produced as a byproduct of drilling formed themselves into a group that eventually communicated through email newsletters and occasional meetings The ProducedWater Group later became one of the Virtual Teamwork pilot groups and used VT videoconferencing technology to enrich the closeness of their interaction Similarly the people involved in Citibanks commercial lending activities in the Southeast Asian region organized themselves into a group so they could pool expertise and solve problems together Academics with common interests have been forming such groups for yearsoften with the help of the Internet Managers shouldnt underestimate the value of talk Managers should regard communities of practice as company assets and look for ways to preserve them Too literal an application of reengineering principles with their emphasis on efficiency has weakened some of these informal knowledge networks and groups Some companies have driven out the slack necessary for such groups to function well A reengineered organization is likely to have eliminated the jobs of some of the knowledge brokers whose role is not recognized as essential to the firms work though they hold the knowledge networks together By focusing on measurable work and underestimating the value of talk reengineering can discourage the conversations and self forming groups in which so much of the firms knowledge work is done Knowledge Market Inefficiencies In efficient markets buyers and sellers find each other and exchange their goods readily A clear pricing system enables them to agree on the value of the goods being sold with the least possible friction They have identical or similar ideas of the value of the currency used to buy the goods In practice efficient markets generate the most good at the least cost Markets for knowledge however are notably inefficient in most organizations The right seller is often hard to locate and can be hard to reach even if we know her location It is also difficult if not impossible to judge the quality of knowledge before we purchase it Both the knowledge value and likelihood of eventual payment are uncertain To get a feel for the inefficiencies of the knowledge market compare Page 40 it to the market for new cars In the car market we can easily get information about the sellers and products The Yellow Pages list all car dealers Newspapers regularly print information about what cars are available where to buy them and what they cost Consumer Reports and a host of other publications provide detailed independent evaluations of cars and reveal dealer costs In many cases a buyer will have a choice of vendors for the same product The shopper has opportunities to examine and test cars before buying one A written contract defines what is being bought and how much we must pay for it Warranties and laws protect the buyer if the product is defective Sellers have legal recourse if the buyer fails to pay Knowledge markets are obviously much murkier The value of the knowledge is rarely as tangible or explicit as the value of a car There are no Consumer Reports articles on knowledge sellers and brokers As our discussion of the price system makes clear payment is much less certain and less tangible than in the new car market Information about where knowledge resides in the organization is highly imperfect Much of the current interest in knowledge management derives from the fact that organizations lack good information about where their knowledge is and therefore have difficulty getting it and making use of it Three Key Factors Our studies show that three factors in particular often cause knowledge markets to operate inefficiently in organizations the incompleteness of information about the knowledge market the asymmetry of knowledge and the localness of knowledge Incompleteness of Information Remember that much of the interest in knowledge management arises when firms realize they do not know where to find their own existing knowledge The lack of maps and Yellow Pages both of which we will consider later to guide a knowledge buyer to a seller is a fundamental problem The absence of explicit information about the pricing structure is also a source of inefficiency with knowledge transactions inhibited by uncertainty about what the likely return on shared knowledge will be Asymmetry of Knowledge There often is abundant knowledge on a subject in one department of an organization and a shortage somewhere else Marketing may have extensive knowledge about a particular set of Page 41 customers that Sales needs but lacks Strategic knowledge that resides at the top may not be available to the middle managers who need to implement it A certain amount of asymmetry must exist in any market As we have said markets cannot exist without scarcity But strong asymmetry prevents knowledge from getting where it is needed Buyers and sellers wont meet There are always knowledge feasts and famines in organizations As is true of other kinds of famines the problem usually has more to do with information patterns purchasing power and distribution systems than with an absolute scarcity Localness of Knowledge People usually get knowledge from their organizational neighbors The knowledge market depends on trust and individuals generally trust the people they know Facetoface meetings are often the best way to get knowledge and as we have said reliable information about more distant knowledge sources is usually not available Also mechanisms for getting access to distant knowledge tend to be weak or nonexistent People will buy whatever knowledge the person in the next office may have rather than deal with the effort and uncertainty of trying to discover who in the company may know more Simon and March use the term satisficing to describe the human tendency to settle for the knowledge or information that is good enough for their purposes Knowledge initiatives will run into problems if they are based on the assumption that individuals will go to considerable lengths to get the best possible knowledge since this is rarely borne out in practice 10 High search cost for optimal knowledge is probably the biggest constraint to a completely efficient knowledge market within a firm especially in large organizations Localness adds to market inefficiency because it causes people to make do with less than optimal knowledge while a much better product goes unsold and unused The distance between buyer and seller prevents a transaction from taking place A Case in Point Javelin Development Corporation Javelin Development Corporation a real but disguised engineering and construction company developed a plan to make knowledge available across projects in hopes of reducing construction time and costs The idea was to apply existing design solutions to new situations The centerpiece of the initiative was an online knowledge warehouse that engineers could draw from as they developed their designs A year after Page 42 implementation began less than 5 percent of the planned features were in place and support for the initiative seemed to be fading We can analyze these disappointing results in terms of knowledge market inefficiencies Chief among them was the lack of a clear price paid to individuals who shared their knowledge Having been through a period of layoffs and fearing that more were coming employees saw their unique knowledge as a source of job security and felt that sharing it would weaken their position Like many engineering cultures Javelins also valued the creation of new knowledge over the reuse of existing designs Although management supported knowledge sharing in a general way its actions did not communicate assurance that sharing knowledge was genuinely important and would be rewarded For instance employees were expected to learn on their own time not during office hours a company norm that implied that acquiring knowledge wasnt real work The knowledge initiative had verbal support but managers did not back it up with a sufficient investment of money and personnel Some designated knowledge facilitators spent only 10 percent of their time on the project No one created a mechanism for evaluating knowledge sharing in performance evaluations As a result of all these signals trust in the genuineness of corporate commitment to knowledge exchange remained low In addition Javelins knowledge warehouse was a bust as a marketplace Potential sellers felt they gained little from adding to the stock of online knowledge Potential buyers did not like the organization of the warehouse content Project designers had favored a rather loosely structured organization so that knowledge would not be forced into old categories But the engineers who were the intended users of the system favored a hierarchical system that would make it easy for them to find just the information they needed to solve a specific problem With uncertainty and skepticism about the value of offering or acquiring knowledge lukewarm management support and a marketplace poorly matched to the habits of potential buyers the knowledge market at Javelin could not function efficiently The companys serious localness problem was perhaps best exemplified by the experience of a very senior executive who had recently joined the firm In his previous position at another organization he had been the primary champion for a very successful knowledge management initiative yet the organizers of Javelins knowledge project knew nothing of his interest and expertise Overall the company has not yet begun to see the benefits it hoped to get from its knowledge project Page 43 Knowledge Market Pathologies Some knowledge markets have deep flaws that we call knowledge market pathologies distortions that drastically inhibit the flow of knowledge The pathologies described below overlap to some extent but the distinctions suggested by the analogies to external markets may help identify and explain serious knowledge market problems in organizations Monopolies If only one person or group holds knowledge that others need a knowledge monopoly exists The effect is similar to that of monopolies in the market for goods and services the knowledge will come at a high price because there is no competition to moderate it Everyone who has worked in an organization knows individuals who have exclusive control of key corporate knowledge and use that fact to establish a position of power Such a person may rent his expertise to accomplish a task or solve a problem rather than sell his knowledgeeven at a high pricesince his monopoly will cease to exist once his knowledge is genuinely shared In this regard a knowledge monopoly is different from a monopoly on goods or services The drawbacks for the organization are obvious Important knowledge locked in a monopoly will not always be available when and where people need it to benefit the company It will also not benefit from the interplay of knowledge that can generate new knowledge According to Nonaka and Takeuchi one of the conditions that encourages knowledge creation is redundancy They describe redundancy as shared information that allows individuals to invade one anothers boundaries and offer advice and a new perspective 11 The idea of redundancy which we will consider in more detail in the next chapter is clearly the antithesis of monopolistic thinking Artificial Scarcity A knowledge monopoly is one form of artificial scarcity In general a corporate culture in which knowledge hoarding is the norm creates scarcity Knowledge becomes very expensive not because it doesnt exist but because it is hard to get Departments and groups may lack the knowledge they need to work effectively because the hoarding culture keeps it scarce Downsizing can also create knowledge scarcity by eliminating employees whose absence shows them to be owners of essential knowledge The cost of losing this knowledge is high leading to failed processes or Page 44 the expense of luring back the laidoff workers or buying the equivalent of their knowledge from outside sources In the post Cold War retrench Knowledge often walks out the door during downsizing ment of the defense industry for example many aerospace companies offered buyout packages as part of their downsizing programs They saw knowledge walk out the door with employees who took the offer and had to rehire often at higher consulting rates the same people they had encouraged to leave To prevent this kind of brain drain from jeopardizing the American thermonuclear weapons program Sandia National Laboratories in New Mexico undertook a knowledge preservation program at a time when many of its weapons experts were nearing retirement It videotaped the experts in wideranging conversations about their knowledge and then created transcripts Though they hope that the United States will never need the knowledge again Sandias managers feel that they could transfer it to a new generation of researchers if necessary Trade Barriers A variety of trade barriers hampers organizational markets The hoarding that characterizes monopolies and artificial scarcity is a barrier erected by the possessiveness of the hoarding individual or department The notinventedhere mentality that refuses to accept new knowledge is a mirror image of the barrier created by hoarding a refusal to buy knowledge rather than a refusal to sell it A variation on knowledge hoarding and the notinventedhere barrier is what we might call a class barrier an unwillingness to give knowledge to or accept it from people in the organization who have relatively low status A barriereven a trade banis sometimes established by an executive who has the power to enforce a corporate orthodoxy by banning subjects that threaten it In the early 1980s Ken Olsen the founder of Digital Equipment Corporation insisted that the word personal computer and the concepts behind it could not be discussed at Digital This blanket edict largely closed off the possibility of work in an area that should have been getting attention Rather than face the challenge of microcomputer open systems Olsen tried to pretend that it did not exist and by doing so damaged his company Digital employees were powerless to respond to a threat that they could not publicly discuss Trade barriers can also arise when companies lack a good knowledge Page 45 transfer infrastructure or effective market mechanisms An obvious example is the lack of an effective computer network or communications system Without the technology needed to codify knowledge and make it widely available knowledge transactions will be limited and local The absence of virtual and real places for buyers and sellers to meet is an infrastructure problem as is the shortage of time for knowledge seeking knowledge generation and knowledge exchange Both downsizing and reengineering which tend to reduce the time available to look for and share knowledge are likely to damage the knowledge market infrastructure Developing Effective Knowledge Markets There are a number of ways firms can overcome the inefficiencies and pathologies of their knowledge markets We will discuss these steps in detail in later chapters but here are three areas in which initiatives are particularly important Using Information Technology Wisely Technological developments and innovations have the potential to change market dynamics dramatically In 1400 Western Europe was a commercial backwater compared with the rich active markets of the Chinese Islamic and Indian empires It was Europes development of the armed ship that forced open markets for them and shifted the balance of power so that by 1600 market dominance had shifted to the West 12 There are many pitfalls and limitations in using information technology for knowledge worktrying to force fluid knowledge into rigid data structures for example or focusing too much on the system and not enough on content But networks and desktop computers with their ability to connect people and store and retrieve virtually unlimited amounts of content can dramatically improve knowledge market efficiency They can provide an infrastructure for moving knowledge and information about knowledge as well as for building virtual knowledge marketplaces Some organizations have developed electronic knowledge Yellow Pages to provide better information about where knowledge resides in the firm and how to get it British Petroleums Virtual Teamworking project is in effect an effort to expand the definition of local by linking team members electronically A coworker you can reach and Page 46 talk to and see by clicking a button on your computer monitor may seem more local than someone three floors up in your own building although he is physically a thousand miles away Building Marketplaces Recognizing knowledge exchange as a market leads to commonsense strategies that can make the market more robust One step which we will consider in more detail in our discussion of knowledge transfer in is to create marketplacesphysical and virtual spaces dedicated to knowledge exchange The rationale is the same as for the sale of goods and services buying and selling are human activities and people need a place to meet so they can carry them out The ancient Greek Agora and Roman Forum were places of assembly for political discussion and decision sharing the days news and buying and selling goods They are striking archetypes for the public space thats essential for a society or an organization to function Tellingly NationsBank gave the name Project Agora to an internal knowledge project Many Japanese firms including DaiIchi Pharmaceuticals have established talk rooms where researchers are expected to have a cup of tea and spend twenty minutes or half an hour discussing one anothers work There is no agenda set for a talk room and no conference table only an expectation that discussion among colleagues will benefit them and the company Talk rooms are formalized and sanctioned locations for conversation that in American companies occurs more often at the water cooler coffee machine or cafeteria Several organizations have held knowledge fairs at which knowledge sellers display their expertise and buyers can search for what they need or serendipitously find knowledge that they did not know they needed but can use Like a trade show or farmers market a knowledge fair is a temporary gathering of sellers that attracts potential buyers One of the authors visited a Share Fair devoted to the sharing of best practices knowledge held by Texas Instruments in Dallas The energy generated by workers and managers interminglingin many cases for the first timewas palpable Perhaps the most frequently heard comment was I didnt know we had people doing that Corporate universities and live and electronic forums that bring people together to consider subjects of mutual interest are other examples of knowledge marketplaces Although typically more structured than knowledge fairs successful forums leave time and space for participants Page 47 to talk informally As much or more valuable knowledge exchange is likely to happen in the hallway among participants as in the auditorium during official presentations Electronic knowledge markets such as the Internet intranet discussion groups and groupware discussion databases have much the same advantages and drawbacks as commercial electronic shopping The pluses are convenience and choice with desktop access to a vast variety of material The downside is variable quality and a lack of personal contact which tends to reduce trust and commitment In the electronic homeshopping industry the result is a lot more browsing than buying In the electronic knowledge market it is likely to mean a devaluing of online knowledge which will probably be ignored or treated with suspicion unless it has been evaluated and edited by a respected on line broker Members of an organization must be given time to shop for knowledge Implicit in building a marketplaceeven an electronic oneis the need to give members of the organization enough time to shop for knowledge or to sell it A Catch22 of the corporate world is that employees are too busy working to take time to learn things that will help them work more efficiently Engineers may spend weeks or months solving a problem because they cant find the time to ask if anyone else in the company has dealt with it before If a companys most influential employees are the very ones who are too busy to attend a knowledge fair or forum then the knowledge market is not working well Creating and Defining Knowledge Market Value As the Javelin case demonstrates the absence of reliable information about the apparent value attached to sharing knowledge or evidence that the value is low will stifle market activity The surest way of establishing value is through empirical means direct evidence of employees being recognized promoted and rewarded for sharing knowledge proves that value exists We have found that firms get what they pay for in creating knowledge rewards Shortterm trinkets such as frequentflyer miles or ice cream bars may motivate a single use of a knowledge management system One office of a professionalservices firm handed out mouse pads to acknowledge use of a knowledge sharing systembut later realized that the firms professionals used laptops without mice To establish a consistent culture of knowledge sharing Page 48 you need to use valuable currency substantial monetary rewards salary increases promotions and so forth A firms investment in knowledge exchange is another kind of empirical signal that it genuinely values knowledge Putting highly regarded people in knowledgeenabling jobs rather than making those jobs the parttime responsibility of employees who dont have much else to do holding wellattended fairs and forums and giving people time to learn and exchange knowledge are forms of commitment that have much more power than a mission statement Put your money where your mouth is or walk the talk is appropriate advice for developing a healthy knowledge market A number of consulting companies have made knowledge sharing one of the basic criteria of the performanceevaluation process which is yet another concrete method of paying a reasonable market price for knowledge These companies are also practicing good motivational psychology realizing that recognized and rewarded behaviors will flourish while those that are ignored or penalized will wither Knowledge evangelists can also help establish a thriving knowledge market Enthusiastic talented managers who are committed to knowledge work and can effectively make the case for it to senior management can have an important impact When knowledge management is essentially a personal crusade however its existence may be precarious especially at the beginning If the manager leaves or is assigned to a new demanding task the knowledge project may well collapse The Peripheral Benefits of Knowledge Markets The direct benefits of an efficient knowledge market accrue to both the firm as a whole and its employees as individuals When knowledge flows freely its potential value becomes actual Productivity increases and innovations spring from the timely application of existing knowledge and the generation of new ideas in the knowledge marketplace Knowledge buyers sellers and brokers get the knowledge they need to do their work well and get appropriate payment for knowledge they share in the form of recognition and advancement A thriving knowledge market also creates benefits that are peripheral to the principal market aim of making knowledge available when and where it is needed These gains which we call nonmarket benefits also contribute to the success of the firm Page 49 Higher Workforce Morale A healthy knowledge market means that employees see that their expertise is valuable and know that others in the organization will cooperate with them when they need expert assistance They may be more satisfied with their work and work harder than those frustrated by lack of communication wasted effort and uninformed decision making Employee cynicism This company never does anything right They never ask the people who really know The empty suits get the promotions can have a devastating effect on corporate success Greater Corporate Coherence 13 An active exchange of information and ideas in an atmosphere of openness and trust enables employees at all levels to understand what is happening in the company James Walsh and Geraldo Ungson two academics who have researched the idea of organizational memory in part define an organization as a network of shared meanings14 A shared awareness of corporate goals and strategies gives individuals cues for directing their own work toward a cooperative goal and makes them feel that their work is meaningful as part of a larger aim Nonaka and Takeuchi touch on this point when they talk about the importance of making individuals aware of an overall organizational intention15 Kao Japans largest household and chemical products maker values corporate coherence so highly that any meeting in the company including topmanagement meetings is open to any employee Thanks to this policy every meeting at Kao potentially functions as a productive knowledge marketplace As Nonaka and Takeuchi remark Through this practice top management can acquire insights from those most familiar with the issues at hand while employees can gain a better understanding of the general corporate policy16 Richer Knowledge Stock Knowledge markets are unlike markets for goods in that every sale increases the total stock of knowledge in the organization The seller both keeps his knowledge and gives it away more importantly the transaction itself often generates new knowledge Newly acquired knowledge interacts with existing knowledge to spark ideas that neither buyer nor seller has had before One of the major sources of new knowledge discussed further in our next chapter on knowledge gen Page 50 eration is fusion bringing together people with different ideas to work on the same problem A thriving knowledge market continually tests and refines organizational knowledge A knowledge transaction especially a facetoface exchange tests the validity of the knowledge thats offered Buyers seldom receive knowledge passively They evaluate it and test it in action since they made the purchase to meet a specific need An active knowledge market thus continually validates and refines organizational knowledge Stronger Meritocracy of Ideas A genuinely open knowledge market will test official beliefs and expose the flaws of the faulty ones before they can do much damage If Ken Olsen had not been able to dominate the knowledge market at Digital the companys response to changes in the computer industry probably would have come sooner and been more effective At Polaroid Edwin Lands insistence that Polavision an instant movie film would be a marquee product inhibited discussion almost to the point of crippling that company Dr An Wangs tight control over knowledge about the future direction of the computer industry had a similar effect at Wang Labs Knowledge markets tend to break down or circumvent hierarchies much as the emerging middle classes in Europe began eroding the power of the church and aristocracy in the sixteenth century They follow networks of knowers not the architecture of a reporting structure Usefully knowledgeable people exist at all levels in organizations The knowledge market has its own shifting hierarchy based on who knows what and how helpful they are A healthy undistorted market is a meritocracy of ideas Talking about Apple Computer during its most creative years Steve Jobs said It doesnt make sense to hire smart people and then tell them what to do we hired smart people so they could tell us what to do Thinking in Market Terms Even familiar markets for material goods are complex and difficult to analyze and influence The knowledge market less tangible and until recently not even viewed in market terms is no easier to understand Page 51 But applying what we do know about markets to knowledge exchange in organizations helps ground us in the reality of why exchange does and doesnt happen In giving us a clear framework for understanding knowledge transfer it gives us the means to improve it We believe all knowledge management can be fruitfully seen as an effort to increase the efficiency of knowledge markets The three chapters that followon the generation codification and transfer of knowledgeare devoted to the process of knowledge management Any firm that wants to excel at managing knowledge will have to perform these three subprocesses well Although generating codifying and using knowledge are rarely analyzed in process terms the activities that take place under those banners can all be viewed as attempts to make knowledge markets work more efficiently and effectively These chapters will also explore some of the constraints firms have to contend with to turn corporate knowledge into corporate value We will consider the market realities that drive knowledge exchange how people generate knowledge the requirements and limits of knowledge codification and how knowledge isand is nottransferred and made use of in organizations We will also look at the relationship between knowledge and technology specific knowledge roles in organizations and summarize a variety of knowledge projects Page 52 3 Knowledge Generation Bad times have a scientific value These are the occasions a good learner would not miss Ralph Waldo Emerson All healthy organizations generate and use knowledge As organizations interact with their environments they absorb information turn it into knowledge and take action based on it in combination with their experiences values and internal rules They sense and respond Without knowledge an organization could not organize itself it would be unable to maintain itself as a functioning enterprise What concerns us in this chapter is the conscious and intentional generation of knowledgethe specific activities and initiatives firms undertake to increase their stock of corporate knowledge In general this has been the least systematic of knowledge management activities Many companies approach knowledge generation as a black box essentially just trying to hire smart people and then leaving them alone One of us Davenport studied thirty attempts to improve knowledge work in a process context with two coauthors We found that most successful initiatives addressed not the process of knowledge generation itself but rather the external circumstances of work including location and team structure 1 Some important literature on this subject has been published in recent years including Nonaka and Takeuchis The Knowledge Creating Company and Dorothy LeonardBartons Wellsprings of Knowledge2 Many of their examples involve Japanese firms which have aggressively pursued knowledge generation as a means of achieving business success Our discussion is influenced by these sources as well as by our own observation and research with several companies a few of them Japanese as well In this chapter we will consider five modes of knowledge generation acquisition dedicated resources fusion adaptation and knowledge networking In each case the conventions of language force us to discuss Page 53 knowledge as a thing that can be managed We want to emphasize again however that knowledge is as much an act or process as an artifact or thing Acquisition When we talk about knowledge generation we mean the knowledge acquired by an organization as well as that developed within it Acquired knowledge does not have to be newly created only new to the organization British Petroleum gives a Thief of the Year award to the person who has stolen the best ideas in application development They recognize that when it comes to organizational knowledge originality is less important than usefulness Texas Instruments has created a Not Invented Here but I Did It Anyway award for borrowing a practice from either inside or outside the company The proverb Well stolen is half done is sound reasoning if youre in the knowledge business The Spanish proverb Well stolen is half done sums up this idea succinctly The knowledgefocused firm needs to have appropriate knowledge available when and where it can be applied not to generate new ideas for their own sake The most direct and often most effective way to acquire knowledge is to buy itthat is to buy an organization or hire individuals that have it 3 Of course not all corporate purchases are knowledge acquisitions Companies buy other companies for various reasons to generate additional revenue to achieve a strategic size or product mix to get access to new markets or to gain the skills of a senior management team this last reason however borders on knowledge acquisition Sometimes knowledge may emerge as a byproduct of a purchase made primarily for other reasons Increasingly though firms acquire other companies specifically for their knowledge They are often willing to pay a premium over the market value of the company purchased because of the value they expect to get from adding that new knowledge to their own knowledge stock One recent example of this thinking is IBMs 1995 purchase of Lotus IBM paid 35 billion which was fourteen times Lotuss book valuation of 250 million Clearly IBM did not pay that amount of money for the current revenue generated by Notes and other Lotus products or for Lotuss manufacturing and sales capabilities The 325 billion premium IBM paid represents their appraisal of Lotuss Page 54 unique knowledge of Notes and other collaborative software applications The minds that invented Notes are more valuable than the software itself they have the ability to envision the next generation of communications and informationsharing software They have the skills experience and creativity that IBM needs to apply its knowledge to the new world of collaborative software IBMs implied belief is that this capability Lotus hasits knowledgeadds more value than any purely financial reckoning can demonstrate ATTs purchase of NCR is another wellknown example of attempted knowledge acquisition ATT bought NCR to get into the computer business but NCRs generalpurpose computer business was not in good shape The factors that made this acquisition unsuccessful are too complex and some too sketchy for us to enumerate here but this failure within a few years of the deal by no means unusual suggests how problematical knowledge acquisitions can be This is particularly true when the objective is to combine one type of knowledge with anotherin this instance NCRs knowledge of computing with ATTs communications expertise As we have discussed a company generates knowledge in the context of its specific culture and it is thus more resistant to transfer than most other corporate resources A company that acquires another firm for its knowledge is buying people that is the knowledge that exists in peoples heads and within communities of knowers perhaps some structured knowledge in document or computerized form and the routines and processes that embody the purchased companys knowledge Since reliable analytical tools for measuring the value of this knowledge do not yet exist determining how much that knowledge is worth is speculative and sometimes unnervingly subjective All that most due diligence investigations can do is to try to ensure that key personnel are locked up for a few years with employment contracts or payout agreements Attempts to devise formal measures to guide knowledge purchases have so far been imperfect and incomplete When managers assess the level of employee education for example they often fail to distinguish between very general capabilities and knowledge that is of genuine value to a firm They also frequently ignore undocumented and tacit expertise That knowledge and talent are not synonymous with university degrees is epitomized by the fact that the chairman of Microsoft never graduated from college These and other efforts to measure the value of knowledge at least reflect an understanding that knowledge is an asset but they Page 55 also show how hard it is to quantify Sid Schoeffler a pioneer in valuing knowledge and one of the founders of the PIMS method that seeks to measure strategic market success has estimated that a firms balance sheet reflects only 20 to 25 percent of its real value In other words there are no standard methods for accurately analyzing the largest components of a companys worth Economic and trade institutions such as FASB GATT OECD EC and US government agencies are currently attempting to develop metrics based on available financial information as rough proxies for quantifying knowledge 4 As this research continues and analytic tools improve markets for company knowledge may become more efficient and the number of acquisitions based on measurable knowledge will surely increase Beyond the problems of measuring the value of purchased knowledge the acquiring firm may find it difficult to determine exactly where the knowledge resides Many of the people whose knowledge makes an organization work are not often identified or officially responsible for the results that they achieve Leonard Barton describes the 1988 purchase of Grimes by EL Products both manufacturers of electroluminescent lamps In addition to eliminating a competitor EL Products expected to benefit from what seemed to be Grimess greater expertise in producing high quality lamps efficiently In other words ELP was buying Grimess knowledge Yet the company failed to realize that the critical expertise was the tacit knowledge of line employees who didnt transfer to the new operation The knowledge you think youre buying may walk out the door Naturally the transferred process did not work successfully because the key knowledge workers were missing5 This is a classic problem in the consulting industry where knowledge and knowledgebased skills are highly visible Many consulting firms are reluctant to make acquisitions because the human assets they buy having reaped financial rewards can then walk out the door forever A knowledgerich organization even a robust one may prove to be fragile in that much of its knowledge may not survive the upheaval of an acquisition The organic connection of knowledge to particular people and a particular environment means that a purchaser may end up with only a fraction of the knowledge that existed before the sale The uncertainty of a corporate takeover and the disruption of internal work processes and networks often lead some talented personnel to explore Page 56 new options and sometimes to leave the company taking their knowledge with them More subtle but no less real losses may result from changes in the work environment Organizational size focus management and intangibles like trust and atmosphere may change in ways that disrupt the knowledge culture We said in that the tendency of knowledge to thrive only in the environment where it develops is one of its advantages That stickiness prevents competitors from easily appropriating knowledge that required a significant investment of time and money to develop The willingness to acquire a company for its knowledge and pay a premium to do so comes from a recognition that it is not possible to pick up another firms knowledge simply by hiring a few employees or borrowing some ideas However even acquisition of the whole company may not buy its knowledge if the acquisition process disrupts the ecology of the knowledgecreating environment Finally the acquiring company may not succeed in integrating new knowledge effectively Although the purchase is proof of a desire to increase the corporate knowledge stock there may be cultural and political barriers to accepting and absorbing the acquisitions knowledge fully 6 Entrenched interests in the purchasing company may resist being told how to do things by new employees even when the newly acquired procedures are demonstrably superior This reluctance can be reinforced by a common tendency to view purchaser and acquisition as conqueror and conquered This attitude contributed to the failures of ATTs takeover of NCR and IBMs purchase of ROLM These potential problems suggest that a knowledge acquisition must be handled with considerable care Success may depend on extensive efforts to locate and evaluate the knowledge of the acquired company to protect its knowledge workers and environment during and after the purchase and to encourage the smooth meshing of existing and newly acquired knowledge Rental In addition to being purchased outside knowledge can be leased or rented A common type of leasing is a firms financial support of university or institutional research in exchange for the right to first commercial use of promising results Joseph Badaracco Jr says that approximately two hundred industryuniversity consortia were operating under the Page 57 1984 National Cooperative Research Act by 1987 7 These firms in effect outsourced all or part of their research and development They give up a certain amount of control in exchange for reduced financial and organizational burdens The drug company Hoeschst for example supports research at the Molecular Biological Institute at Massachusetts General Hospital in hopes that it will lead to the development of profitable new drugs CSIRO the Australian national RD consortium establishes these kinds of relationships between research institutions and industry RD efforts are always speculative and it is not easy to predict when or if research will pay off However it should be possible over time and in the aggregate to calculate the value of leased knowledge in terms of the eventual returns that derive from the funded research The initial decision to support a particular research institution or department is based on the same useful but imperfect measures currently applied to the purchase of a knowledgerich company the reputations of the organization and the people in it their past success and the opinions of experts on future research potential8 If youre renting knowledge make sure you take steps to retain it too Renting knowledge really means renting a knowledge source Hiring a consultant for a project is an obvious example Using reputation as a key measure of value a company will pay a consultant a fee to share his knowledge with them or apply it to a particular issue Unlike rentals of equipment or facilities knowledge rentals are likely to involve some degree of knowledge transfer Although the knowledge source is temporary some of the knowledge is likely to stay with the firm Some clients we have worked with now specify in their consulting contracts that consultants knowledge be made available to clients in some structured codifiable format And consultants are beginning to market their services partly on the basis of transferring knowledge to clients For example more than one hightech consulting firm now offers to provide technical training for the software package SAP if the client employs these firms to implement the package Of course if an experts knowledge has substantial depth only a small portion of it is transferable in a short consulting engagement or even in a structured knowledge base Hiring firms may also have different aims If a company is renting assistance in solving a particular problem they are probably more interested in the consultants recommendations than the knowledge behind them In other cases a company may attempt to Page 58 learn as much as possible from the outside expert As with so many investments in knowledge generation intentions are important a firm needs to know what it wants to have a good chance of getting it Highlevel consultants are sometimes surprised at how little clients ask of them in terms of knowledge transfer Firms that hire them for a day or a week at considerable expense might be expected to squeeze as much knowledge out of them as possible But they usually do not ask the questions that would help them absorb that expertise in practical ways Dedicated Resources A customary way to generate knowledge in an organization is to establish units or groups specifically for that purpose Research and development departments are the standard example Their whole aim is to come up with new knowledgenew ways of doing things Ernst Youngs Center for Business Innovation is a kind of RD department Andersen Consulting has established technology research centers in Silicon Valley and southern France IBM Consulting has established dedicated competencydevelopment groups in key consulting domains Motorola Merck and McDonalds universities Xerox PARC and other corporate research and training facilities are all resources more or less designed to generate knowledge Some corporate libraries are also variations on RD departments expected to provide new knowledge to the organization This is especially prevalent when the library is tied to a specific knowledge process or function as is true in many consulting firms Since the financial returns on research take time to materialize and may be difficult to measure when they do come a focus on near term profits may create pressure to cut costs by cutting RD While no part of a business can be funded indefinitely if it generates no measurable value a narrowly bottomline view of that return can lead to savings that deplete vital knowledgegenerating resources Because dedicated knowledge resources are by definition somewhat distinct from the everyday work of an organization transferring knowledge to where it can be used is often complicated In general patentable new ideas which can be made explicit are easier to transfer than what we might call internal knowledgethe more subjective processtype knowledge of how to do things and think about things The premise behind separating RD from other parts of the firm is to give researchers the freedom to explore ideas without the constraints imposed by a preoccupation with profits and deadlines However this Page 59 distance may be difficult to bridge when the time comes to transfer the results of RD to the wider organization Knowledge creators and users may not even speak the same language Probably the most notorious case of a costly transfer gap occurred at Xeroxs Palo Alto Research Center in the mid1970s The knowledge workers at Xerox PARC invented key elements of the graphical interface computer including the mouse graphical icons and menus Ironically the independence that made this breakthrough possible probably contributed to Xeroxs inability to understand its importance and potential value They were not close enough to the research to evaluate the newly created knowledge Steve Jobs on the other hand was prepared for those new ideas by his work at Apple as well as by culture and temperament and quickly grasped their significance although he paid no attention himself to some object technologies under development at Xerox PARC which he regretted later A brief tour of Xerox PARC was all he needed to gather the fruits of research funded for years by Xerox He went back to Apple and built the Macintosh essentially at Xeroxs expense 9 Xerox eventually was able to capitalize on some research at PARC for example the development of the largescale laser printer but a major commercial opportunity had been lost To avoid snafus of this kind managers must take explicit steps to ensure that knowledge generated by dedicated resources will be made available throughout the company At Sharp the results of research by corporate RD groups are formally transferred to the research laboratories of Sharps nine business groups and then to business division labs Corporatelevel researchers may move down to the group or divisional level taking their knowledge with them These procedures exist for the express purpose of getting the knowledge to where it will be useful A series of regular highlevel meetings focuses on evaluating and integrating new knowledge Senior management and business group lab managers meet monthly to discuss RD projects A regular Laboratory Directors Conference gives lab directors the director of RD planning and the director of the Intellectual Property Office opportunities to plan RD directions and ways to transfer newly developed knowledge to business groups10 Fusion Whereas the RD approach is predicated on reducing the pressure and distractions that can stifle productive research knowledge generation Page 60 through fusion purposely introduces complexity and even conflict to create new synergy It brings together people with different perspectives to work on a problem or project forcing them to come up with a joint answer Borrowing a phrase from Gerald Hirshberg director of Nissan Design International Dorothy LeonardBarton calls this process creative abrasion and describes how intentionally combining people with different skills ideas and values can generate creative solutions Innovation she says occurs at the boundaries between mindsets not within the provincial territory of one knowledge and skill base 11 Nissan Design International believes strongly in the creative potential of fusion The company makes hiring decisions specifically to promote cognitive diversity within the firm matching for instance an analytical and rational new hire with an intuitive and aesthetically inclined one Hirshberg talks about this kind of diversity as a rich and yeasty opportunity for a kind of abrasion that I wanted to turn into light rather than heat12 In The KnowledgeCreating Company Nonaka and Takeuchi say that bringing together people with different knowledge and experience is one of the necessary conditions for knowledge creation They borrow a term from cybernetics requisite variety to describe both the productive conflict of creative abrasion what Nonaka and Takeuchi call creative chaos and the value of having a larger more complex pool of ideas to work with The differences among individuals prevents the group from falling into routine solutions to problems Dont be afraid of a little creative chaos Since the group has no familiar solutions in common individuals must develop new ideas together or combine their old ideas in new ways One argument in favor of workforce diversity is the prospect of pooling a variety of talents and backgrounds which increases the chances of a successful outcome The complexity and diversity of the forces brought to bear on a problem should match or at least be proportional to the complexity and diversity of the problem As we have said a prime value of knowledge is its ability to handle complex issues efficiently but not reductively Nonaka and Takeuchi cite Matsushitas development of the first automatic breadmaking machine as an example of requisite variety and creative chaos in action Matsushita combined three product divisions with different cultures to develop a successful breadmaking machine Page 61 realizing that it needed the variety of knowledge possessed by groups that had previously made rice cookers toasters and coffeemakers and food processors The new product combined the computercontrol expertise of the first group the seconds experience with induction heater technology and the thirds knowledge of rotating motors The creative chaos came from a breakdown of old assumptions and ways of working an intentional shakeup of the status quo that as conventionally portrayed is not innovative The combined groups a total of 1400 employees initially almost spoke different languages 13 Total chaos is not creative though LeonardBarton argues that innovation occurs at the boundaries between mindsets but the mindsets must connect for boundaries to exist Creative abrasion or fusion requires some common ground Group members must develop enough of a common language to understand one another There must be some shared knowledge before collaboration can take place Nonaka and Takeuchi call this overlapping knowledge redundancy and identify it as a necessary condition for knowledge creation Matsushita used a threeday retreat for middle managers and a regular newspaper for factory workers to help establish a common languagein effect a territory that diverse knowledge workers must inhabit to work together They also articulated an organizational intentiona shared goal or concept to unify the efforts of the diverse members of the group In this case it was easy and rich The Japanese are comfortable with metaphorical orto American earscryptic phrases that point the group in a common direction but dont inhibit creativity by being too definite Knowledge generation clearly worthwhile in itself is not the only valuable outcome of knowledge activities IDEO a large and successful product design firm routinely innovates for its clients14 The firm is rigorously committed to formalized brainstormingone to twohour meetings of three to ten participants dedicated to generating an array of possible solutions The sessions employ specific behavior rules clear facilitator roles and various inputs The benefits of these sessions often have less to do with the volume and quality of generated ideas than with spillover effects which include supporting organizational memory providing skill variety and promulgating an attitude of wisdom IDEO defines wisdom as the quality possessed by skilled practitioners who openly acknowledge what they dont know and question the validity of their individual and organ Page 62 izational knowledge Needless to say this attitude is extremely rare in most organizations yet its an important atmosphere to create for knowledge generation to flourish If we were to construct a single test for how open to knowledge generation an organization is we would ask how often its executives question their own knowledge Although fusion can lead to powerful results that are unobtainable in other ways it is not a shortcut to knowledge generation A significant commitment of time and effort is required to give group members enough shared knowledge and shared language to be able to work together Careful management is also necessary to make sure that the collaboration of different styles and ideas is positive not merely confrontational As Hirshberg says abrasion should generate light rather than heat Here are five knowledge management principles that can help make fusion work effectively 1 Foster awareness of the value of the knowledge sought and a willingness to invest in the process of generating it 2 Identify key knowledge workers who can be effectively brought together in a fusion effort 3 Emphasize the creative potential inherent in the complexity and diversity of ideas seeing differences as positive rather than sources of conflict and avoiding simple answers to complex questions 4 Make the need for knowledge generation clear so as to encourage reward and direct it toward a common goal 5 Introduce measures and milestones of success that reflect the true value of knowledge more completely than simple balance sheet accounting Adaptation In Microcosmic God a 1941 science fiction story by Theodore Sturgeon the main character creates a miniature world of beings who live and evolve extremely rapidly He forces them to innovate by imposing various environmental threats on them They react to storms heat droughteven a metal plunger moving inexorably down from their skywith a steady stream of inventions and discoveries from new insulating materials to power sources to superhard aluminum The Page 63 crises in their environment act as catalysts for knowledge generation Adapt or die is their fate so they adapt and advance The story provides a vivid metaphor for the way external and sometimes internal changes cause businesses to adapt New products from competitors new technologies and social and economic changes drive knowledge generation because firms that dont change in response to changing conditions will fail In fact there is a large and growing body of literature concerning self organizing and complex adaptive systems and the relevance of these models to organization effectiveness and strategy 15 Positive and negative examples abound Weve already mentioned Digital Equipment and Wang Laboratories as oncesuccessful corporate cultures that failed to adapt Success is often the enemy of innovation it has been called the winners curse16 It is difficult to change something that has worked and may still be working Lulled by past success companies sometimes fail to see that change is happening or to acknowledge that it can affect them The appearance of lowcost highquality Japanese cars on the US market changed the automotive world but decades of dominance blinded American automakers to the magnitude of the threat Similarly Sears ignored the changes that WalMart was making in the retailing environment until shrinking sales forced them to face reality Several years ago one of us Prusak was called in by a very successful food products firm to evaluate how it managed its core information it didnt and what improvements could be made It quickly became apparent that the firm was not really interested in changing its routines since as one executive said Were on a rocket to the moon Why go off course with changes However rockets may either run out of fuel or be diverted by forces beyond their control As one after another of the most successful companies of the 70s and 80s have faced a crisis in the 90s the business world has become aware that success can lead to an unwillingness to adapt to recognize challenges and respond to them by generating new knowledge John F McDonnell of McDonnell Douglas Corporation which itself had trouble adapting to change and was recently acquired by Boeing observes While it is difficult to change a company that is struggling it is next to impossible to change a company that is showing all the outward signs of success Without the spur of a crisis or a period of great stress most organizationslike most peopleare incapable of changing the habits and attitudes of a lifetime17 Page 64 LeonardBarton talks about core rigidities which include the tendency of companies and employees to stay on wellworn and successful paths and comments human minds are the most flexible assets a company hasand the most rigid People are capable of making astounding leaps in intuition and at the same time of tenaciously clinging to the details of petty unproductive routines 18 Striving for continuous innovation some companies try to instill a sense of crisis before it exists Like the character in Sturgeons story they shake up their organizations creating obstacles that the firm must overcome by generating new knowledge Instill a sense of crisis before it exists and you might be able to head off a real one Ryuzaburo Kaka chairman of Canon has said The role of top management is to give employees a sense of crisis as well as a lofty idea19 HewlettPackards Lew Platt has stated that creating a sense of artificial crisis is one of his highest objectives BPs decision to restructure itself into a large number of fairly autonomous business units was less an adaptation to current problems than an anticipation of future challenges BPs executives expect new knowledge to keep the company competitive and perhaps to make it the environmentchanger to which other firms react The various reasons that companies have trouble adapting to changes in their environments all come down to the essential fact that history matters A firms ability to do thingseven its ability to see and understand thingsis developed over time Its knowledge is a social construct built out of the collective experiences of its workforce the talents it rewards and the shared stories of the firms triumphs and mistakes The current interest in assessing how the socalled agile company can keep ahead in a volatile competitive environment should not obscure the fact that any companys agility is necessarily limited Neither firms nor the people in them are chameleons able to adapt to any change They can only build on their inherent capabilities A firm may make significant changes but it cannot transform itself into a different animal altogether The attention managers have devoted in recent years to classifying core competencies reflects firms efforts to understand the ways they can and cannot change Core competencies can be broken down into discrete parcels of knowledge explaining precisely how certain things are done WalMarts widely discussed crossdocking competency for example is knowledge of how to orchestrate a complex ballet of people trucks and forklifts in a distribution center and how to build the facilities and Page 65 information systems infrastructures that allow the activity to take place daily These knowledge assets are the firm It may be necessary to find ways to apply them to new products and services when external changes make the old ones uncompetitive but it is not possible to throw them out and start from scratch any more than an individual can totally remake his personality or a country remake its culture The firm may learn to do new things but those skills will be similar to what they have done in the past 20 A firms ability to adapt is based on two principal factors first having existing internal resources and capabilities that can be utilized in new ways and second being open to change or having a high absorptive capacity While a full discussion of these factors is beyond the scope of this book both of them have specific knowledge management implications Employees who are willing and able to learn new things are vital to an adapting company The most important adaptive resources are employees who can acquire new knowledge and skills easily Since the best predictor of mental nimbleness is proven experience in taking on new tasks firms should seek out employees who have already mastered a variety of roles and skills After theyve been hired employees should also be encouraged to change jobs often to build and manage their own skill portfolios and to take learning sabbaticals to master new workrelated disciplines Employees whose backgrounds suggest an openness to change should therefore be given hiring preferences But this attribute can be reinforced by exposing workers and managers to a wide variety of knowledge particularly at times when change is seen as vital At Monsantos Agricultural Chemicals Division for example chemical researchers were given access to a wide variety of external market information shortly before patents expired on key products Standard Life a large UK insurer immersed its senior managers in new sources of competitor knowledge at a time when the countrys insurance market was rapidly diversifying Of course its important to start digesting and creating new knowledge before a business crisis occurs by the time the crisis hits it may be too late to respond Networks Knowledge is also generated by informal selforganizing networks within organizations that may over time become more formalized21 Page 66 Communities of knowers brought together by common interests usually talk together in person on the telephone and via email and groupware to share expertise and solve problems together When networks of this kind share enough knowledge in common to be able to communicate and collaborate effectively their ongoing conversation often generates new knowledge within firms Although it may be difficult to codify this process can add to the knowledge of the entire company As well describe in such networks often need help from professional knowledge editors or network facilitators who can record knowledge that would otherwise remain in the heads of experts In addition the early or initial users of the network may play a key role in putting knowledge into practice New technologies for instance are often adopted by lead users and passed along by networks In that way a particular practice can gradually become part of the active knowledge capital of the firm 22 Given that their product is knowledge itself it is not surprising that many consulting and service firms have organized their previously informal communities of practice into formal networks with budgets for enabling technologies knowledge coordinators librarians writers and administrative staff Some smaller consulting and service firms have chosen not to do this either from a reluctance to add overhead or a feeling that too much managerial oversight can stifle the spontaneity and passion of informal networks In the absence of formal knowledge policies and processes networks act as critical conduits for much innovative thinking Consider for example a series of events that occurred recently at HoeschstCelanese a large fabric manufacturer in North Carolina During a lunch with colleagues a Hoeschst RD technician who had recently come back from a conference on synthetic fiber manufacturing in Europe mentioned a particular presentation regarding a new material One of his colleagues passed on some details of the lunchtime discussion to about eighteen global peers via an informal email network Three weeks later one of these networked researchers mentioned the email message to a company executive during a plane ride they took together to visit a client The executive brought the matter up with a team he was on whose mandate was to look at new business opportunities Soon Hoeschst formed a small executive group to look further into this promising material This story undoubtedly resonates with readers familiar with how Page 67 knowledge gets around in organizations It shows how extensively an informal network can generate knowledge when each participant adds an incremental portion At the same time it is obvious how large a role chance played in getting the knowledge where it could be used in this particular instance How easily the knowledge brought back from the conference might never have reached the group that needed it In our consulting work we use this story as a prompt to stimulate thinking about what the management of HoeschstCelanese should or should not do to make this informal process more effective and efficient in the future Common Factors The common denominator for all these efforts is a need for adequate time and space devoted to knowledge creation or acquisition In companies committed to dedicated resources space not only means the laboratories and libraries in which discoveries can be made but also the meeting places where knowledge workers can congregate In some instances the shared space may be electronic but meeting places of some kind must exist Unfortunately time not physical space is the corporate resource most likely to be begrudged to knowledge activists It is the scarcest of all resources the one impossible to replicate and yet most essential to genuine knowledge generation A third critical factor is a recognition by managers that knowledge generation is both an important activity for business success and a process that can be nurtured Knowledge generation is admittedly difficult to measure and botched interventions can be catastrophic But since it is axiomatic that a firms greatest asset is its knowledge then the firm that fails to generate new knowledge will probably cease to exist Page 68 4 Knowledge Codification and Coordination Only those ideas that are least truly ours can be adequately expressed in words Henri Bergson The aim of codification is to put organizational knowledge into a form that makes it accessible to those who need it It literally turns knowledge into a code though not necessarily a computer code to make it as organized explicit portable and easy to understand as possible An analogous example is the legal system where the laws and decisions that act as precedents are codified in many texts and now online and in CDROMbased systems These references of course represent only part of what the law is and how it is practiced they do not encompass the tacit skills of lawyers and judges However this codified material embodies and makes accessible a significant portion of articulated legal knowledge Codification in organizations similarly converts knowledge into accessible and applicable formats Knowledge managers and users can categorize knowledge describe it map and model it simulate it and embed it in rules and recipes Each of these approaches has its own specific set of values and limitations and they can be applied singly or in combination Obviously new technologies play an important role in knowledge codification and make the prospects for these activities increasingly promising The Basic Principles of Knowledge Codification The primary difficulty encountered in codification work is the question of how to codify knowledge without losing its distinctive properties and turning it into less vibrant information or data In other words some structure for knowledge is necessary but too much kills it Companies Page 69 that want to codify knowledge successfully should therefore keep in mind the following four principles 1 Managers must decide what business goals the codified knowledge will serve for example firms whose strategic intent involves getting closer to the customer may choose to codify customer knowledge 2 Managers must be able to identify knowledge existing in various forms appropriate to reaching those goals 3 Knowledge managers must evaluate knowledge for usefulness and appropriateness for codification 4 Codifiers must identify an appropriate medium for codification and distribution Codifying all corporate knowledge would be an immense and futile undertaking similar to and even more difficult than the mostly futile efforts undertaken to deploy enterprisewide data modeling As Patricia Seemann a consultant and former managing director of the Right First Time knowledge project at HoffmannLaRoche says Relevance is far more important than completeness Since the purpose of codification is to put knowledge in usable form the corporation needs some idea of what uses it has in mind The definition of usefulness should not be too narrow however Honda for instance keeps track of failed development ideas because it recognizes that they may be successful in the future ideas that are promising though currently unfeasible need to be recognized and preserved To be worthwhile however a knowledge codification project needs more specific aims than just making knowledge generally available At Senco Products an innovative Cincinnatibased metal fastener manufacturer there is a corporate initiative to try to diagram the logic trail leading to major decisions The goal is to understand what failures of knowledge or reason occurred when a decision turns out poorly Of course firms can only undertake this kind of analysis if they have a hightrust culture or the politics around it could be devastating Finding the sources of the knowledge you want to codify is obviously essential If you dont know where it is you cant do anything with it and are unlikely to know what it is Mapping corporate knowledge sources discussed in detail below is an important part of the codification process Once found someone must evaluate the knowledge to assess Page 70 its usefulness and importance to the organization and to determine what kind of knowledge it is Is it the rich tacit intuitive knowledge of a seasoned expert or is it rulesbased schematic explicit knowledge or something in between Whether you should do anything with the knowledge depends on its importance what you should do to it depends on its type Careful evaluationlaborintensive and demanding significant skill and company knowledgeis an expensive but essential requirement for successful codification The cost of this evaluation is a prime reason for focusing codification efforts on a particular goal or set of goals Codifying Different Types of Knowledge Knowledge in organizations ranges from the complex accumulated expertise that resides in individuals and is partly or largely inexpressible to much more structured and explicit content The following chart adapted from Sidney Winters work outlines some appropriate codification strategies for different kinds of knowledge 1 Along with providing an overview of codification options it suggests the tension between the benefit of capturing the rich knowledge that has the greatest potential value to an organization and the difficulty of representing that knowledge effectively Codification Dimensions of Knowledge Tacit Articulable Not teachable Teachable Not articulated Articulated Not observable in use Observable in use Rich Schematic Complex Simple Undocumented Documented Codifying Tacit Knowledge Tacit complex knowledge developed and internalized by the knower over a long period of time is almost impossible to reproduce in a document or database2 Such knowledge incorporates so much accrued and embedded learning that its rules may be impossible to separate from how an individual acts The distinctive style of a master musician can barely be described in words much less externalized in a way that would Page 71 allow someone else to play in an identical way The knowledge a creative research scientist uses to decide which line of inquiry to follow likewise cannot be turned into a stepbystep list or a report If it were possible to extract knowledge from the knower in this way it would radically change our compensation and education policies We simply cant represent some knowledge effectively outside the human mind To dramatize this point here is a personal story from Larry Prusaks childhood When I was in eighth grade I was on a baseball team with my classmates My class only had nine boys so they had to put me on the team to have enough players Because of an injury I had suffered at birth I was by far the worst hitter on the team I couldnt hit at all though I could run and field My teammates gave me a hard time of course They were fiercely competitive and wanted every edge they could get When my father saw how unhappy I was about the situation he bought me a copy of Ted Williamss The Art of Hitting My father didnt know much about baseball but he loved books so it was the one thing he could think of doing to help me Ted Williams understood hitting as well as any man alive and he tried to put what he knew into his book I couldnt hit but I could read so I read it twicepractically memorized it Result I still couldnt hit much I made only a very modest improvement perhaps based on a newfound self confidence Of course I wasnt much of an athlete But even if I were Id say that hitting cant be taught by a book The skills involved are too complex and subtle too internal they just cant be expressed in words that can be put to much use In other words they cannot be effectively codified at least in print a document cannot capture Ted Williamss knowledge skill expertise understanding passion and delight in hitting As his books title suggests hitting is an art and arts are difficult to boil down into rules and formulations Even if this kind of knowledge could be successfully codified the process of getting it on paper would be prohibitively laborious Trying to get down everything a skilled knowledge worker knows would be similarly arduous and futile As Michael Polanyi the philosopher who first articulated the concept of tacit versus explicit knowledge remarks to understand tacit experience try explaining in detail how you swim or ride a bicycle 3 This is why the codification process for the richest tacit knowledge in organizations is generally limited to locating someone with the knowledge pointing the seeker to it and encouraging them to interact Arian Ward a manager at Hughes Space and Communications created a Page 72 system to try to address problem solving with tacit knowledge in satellite developmentthe need for example for a lastminute supplier substitution Not only supplier knowledge is involved here but also knowledge of how to work the procurement system to make things happen quickly The system connects people who have problems with those who can solve them Because certain problems tended to recur Ward eventually began to structure the patterns of tacit knowledge and capture solutions in a repository He called the system the Knowledge Highway British Petroleums Virtual Teamwork project is also based on the understanding that providing access to people with tacit knowledge is more efficient than trying to capture and codify that knowledge electronically or on paper The traditional apprentice system so successful in transferring skills in the industrial age attests to these truths Mapping and Modeling Knowledge A knowledge mapwhether it is an actual map a knowledge Yellow Pages or a cleverly constructed databasepoints to knowledge but doesnt contain it It is a guide not a repository Developing a knowledge map involves locating important knowledge in the organization and then publishing some sort of list or picture that shows where to find it Knowledge maps typically point to people as well as to documents and databases The principal purpose and clearest benefit of a knowledge map is to show people in the organization where to go when they need expertise Rather than making do with accessible but imperfect answers or spending time tracking down better knowledge essentially building ones own map on the fly the employee with a good knowledge map has access to knowledge sources that would otherwise be difficult or impossible to find A knowledge map can also serve as an inventory Just as a city map shows both what resources libraries hospitals train stations schools are available and how to get to them a knowledge map is a picture of what exists in the company as well as where it is located It therefore can be used as a tool to evaluate the corporate knowledge stock revealing strengths to be exploited and gaps that need to be filled As we have already suggested a firms organizational chart is a poor substitute for a knowledge map In some cases a job title can be a reliable proxy for knowledge for instance a regional sales director is Page 73 often the best source of knowledge about customers in that region but generally the organization chart will not tell you where people actually go to find knowledge For one thing most organizational charts are hierarchical describing formal reporting structures with far more detail at the top than the bottom A good knowledge map goes beyond conventional departmental boundaries But key knowledge can and does exist anywhere in the company Effective knowledge seekers almost always need to cross departmental boundaries and ignore reporting structures to get what they need This means that knowledge maps may lead to political tensions Expertise not reflected in peoples titles and job descriptions doesnt show up on an organizational chart Moreover the chart has nothing to say about accessibility Key knowledge personnel dont simply have knowledge they are willing and able to share it At least initially knowledge mapping should focus on a clearly defined need A health products firm where we consulted for example had a strategic focus on health maintenance organizations and other nonhospital care providers but managers realized that knowledge of these customers was highly diffused and disorganized Arian Ward developer of the Hughes Communications Knowledge Highway talks about starting with areas that scream to be mapped 4 The knowledge map developed at HoffmannLaRoche was specifically designed to help process new drug applications more efficiently and comply quickly with questions about them Assembling the Map The information needed to create a knowledge map often already exists in organizations but its usually in a fragmented and undocumented form Every employee has a little piece of the map in her head knowing about her own expertise and where she goes to get certain questions answered Creating an organizational map is a matter of combining these individual minimaps Organizations that develop knowledge maps often use surveys that ask employees what knowledge they have and where they get the knowledge they need to do their jobs They analyze and stitch together the responses assembling a public map out of many private ones5 Mapmakers may also follow a trail of recommendations taking what sociologists call a snowball sample Talking to the knowledge sources Page 74 suggested by one person then following up with the people they mention and then the people those people suggest can eventually lead to just about whatever information you need no matter how specialized or distant it is The widening cascade of referrals leads everywhere The title of John Guares play Six Degrees of Separation refers to the notion that there are no more than six stepsfrom all the people I know to all the people they know to all the people those people know and so forthseparating any one individual from everyone else on earth Heres an example of an effective map of knowledge at work both inside and outside an organization showing how a trail of associations can lead to the most esoteric information A few years ago one of the senior fact checkers at Time Lifes massive and wellestablished Information Center got a call from a staff writer who said I need to know if spiders get car sick The writer was doing an article for Time on Rodeo Drive jewelry stores that were putting tarantulas in the shop windows to discourage smashandgrab thieves The tarantulas were dying after a few days on the job but no one knew why One theory was that the long truck ride that brought them from Latin America was making them sick Like all of the 240 fulltime researchers at the center the fact checker had a file of cards listing experts in various fields There were four specialists on arachnids listed on her knowledge map Thats what the cards actually werea map can take many forms Two of the scholars were identified as having some expertise in spider illnesses She called one Although he didnt have the answer he gave her the name and number of a colleague who specialized in arachnid disturbances He was able to provide the information she needed which was by the way that spiders lack inner ears and do not suffer from motion sickness they were dying because not enough air circulated through the shop windows The fact checker added the name of the new expert to her card file expanding and improving her knowledge map Had he not known the answer to her question he probably would have been able to suggest a colleague who did These Time Life researchers continuously pooled their sources and sources of new sources The critical mass of knowledge seeking and sharing gave the organization superb access to knowledge A Case in Point Microsofts Knowledge Map As weve noted the knowledge map can refer to documents and structured knowledge to people or to both The most elaborate knowledge Page 75 maps for people can be quite complex because knowledge structures are complex knowledge changes over time subjectivity comes into play and expertise involves power One of the best examples of a peopleoriented knowledge map can be found at Microsoft where the information systems group decided to map the knowledge of system developers A 1995 pilot in an applicationdevelopment group was successful and full implementation is proceeding The project called Skills Planning und Development or SPUD is focused not just on entrylevel knowledge but rather on that needed to stay on the leading edge of the industry The project objective is to improve the matching of employees to jobs and work teams Microsoft also believes that once its IT employees have a better idea of what knowledge is required of them they will be better consumers of educational offerings within and outside of the company Eventually the project may be extended throughout Microsoft and into products and services for customers There are five major stages to the project 1 Developing a structure of knowledge competency types and levels 2 Defining the knowledge required for particular jobs 3 Rating the performance of individual employees in particular jobs by knowledge competencies 4 Implementing the knowledge competencies in an online system 5 Linking the knowledge model to training programs The SPUD project uses a fourtype knowledge structure to evaluate employee competency Entrylevel competencies come under the heading of foundation knowledge Above the foundation level there are local or unique knowledge competenciesadvanced skills that apply to a particular job type A network analyst for example might need a fault diagnosis competency for LANs The next level of knowledge is global which applies to all employees within a particular function or organization Every worker in the controller organization for example would be knowledgeable in financial analysis every IT employee would have expertise in technology architectures The highest level in the knowledge structure comprises the universal competencies for all employees in the company Examples include knowledge of the overall business the company is in the products it sells and the drivers of the industry Within each of the four knowledge competency levels there are two Page 76 different categories Explicit knowledge competencies involve expertise in specific tools or methods for example Excel or SQL 60 and change frequently with the marketplace Implicit competencies such as requirements definition involve more abstract thinking and reasoning skills All told there are 137 implicit competencies and 200 explicit ones in the Microsoft knowledge structure Within each type of knowledge competency there are also four defined skill levels basic working leadership and expert Each skill level for each knowledge competency is described in several bullet points that make the level clear and measurable Each job in Microsoft IT has to be rated by a manager in terms of the forty to sixty knowledge competencies required to perform it Workers are also evaluated in terms of the knowledge they have exhibited in their current jobs The initial rating is built in an iterative fashion by the employee and his or her supervisor eventually the entire work team participates Microsoft is using the employee rating process to build an online knowledge map that can be accessed companywide A manager building a team for a new project can query the online system and ask Give me the top five candidates who have leadership skill levels on 80 percent of the knowledge competencies for this job and who are based in Redmond Microsofts headquarters location in Washington State The system runs on an SQL Server and has a Web front end for easy intranet access around the world The systems knowledge types and levels are also linked to specific course opportunities inside and outside Microsoft Ultimately the Learning and Communications Resources group hopes to be able to recommend not only specific courses but even specific material or segments within a course that would be aimed at the targeted knowledge level Dont underestimate the symbolic value of a knowledge map to your companys culture Microsofts knowledge map demonstrates that the companys management values knowledge and supports its exchange Their commitment of time and money is a symbolic action that has value apart from the actual ability of the map itself The map simultaneously makes knowledge easier to find and promotes the idea that corporate knowledge belongs to the corporation as a whole not to a particular group or individual Since the success or Page 77 failure of knowledge work depends so heavily on culture this benefit of the knowledge map should not be underestimated The Technology of Mapping Knowledge As the Microsoft case suggests computer technology can help make knowledge maps work Online Yellow Pages or an electronic database of knowledge workers can be made accessible to everyone on the corporate network It will generally allow users to search by topic or key word making it easy to locate and compare potential knowledge sources Most important an electronic map can be revised more frequently than a printed one Organizations are dynamic knowledge maps begin to go out of date as soon as they are created Moreorless continuously edited electronic Yellow Pages will be more useful and credible than an increasingly inaccurate paper document Computers also have the potential to communicate a better sense of the knowledge owners as people than a print entry In many companies knowledge Yellow Pages show an image of the person listed A few organizations include a brief video clip instead an even richer personalization Since successful knowledge transactions depend so heavily on trust and compatibility personalizing the entries in these ways can make the map more effective Lotus Notes and Web browserintranet systems are common tools for publishing corporate knowledge maps HewlettPackards research laboratory uses Web technology to make the knowledge of researchers more accessible the company also has a similar system in place for corporate trainers and educators McKinsey Ernst Young and IBM Global Services all use Notes for their knowledge maps British Petroleum which is creating an electronic Yellow Pages for its virtual teamworking network has both groupware and Web browsers as part of their suite of communications software At a more rudimentary level general human resources HR packages such as PeopleSoft and SAP have limited capabilities to inventory the skills and knowledge of employees and the expertise required for particular positions Because these broad packages are typically used for payroll as well companies can link compensation to knowledge But the knowledge categories are simple and generic and few companies take advantage of them At the next level of functionality in HR systems are resume oriented packages which are often interfaced with broader systems like PeopleSoft These systems including Restrac and Resumix work by scanning Page 78 in resumes extracting key concepts from resume text and comparing them to expertise desired in particular jobs They can be used for either internal or external job candidates though most companies are more focused on the external labor market They can also analyze resumes submitted from the Internet or an intranet Resumeoriented systems are primarily geared toward reducing the cost and time of the staffing process rather than aimed at evaluating the knowledge of employees The knowledge categories while better than general HR systems are still limited and generic Even in terms of assessing the capabilities of applicants the conceptanalysis and search capabilities of these systems are only a starting point Some of the systems now allow line managers to search and browse the applicant databases directly rather than having to go through the HR function Some small vendors are attacking the knowledge issue directly producing systems that are oriented to specific knowledge domains notably information technology For example Success Factor Systems has a software tool that allows firms to specify the success factors knowledge skills abilities and behaviors for the organization and then to evaluate the match between jobs and applicants Within the IT function a program called Skillview allows evaluation of up to three hundred IToriented skills by employees supervisors peers or clients The skills are granular enough so that an employees skill profile can be used to create an individualized training program Despite these useful features technology alone cannot ensure that the knowledge map will be used effectively in an organization Here as elsewhere in knowledge work the 33 13 percent rule applies If more than a third of the total time and money resources of a project is spent on technology the project becomes an IT project not a knowledge project Clarity of purpose accuracy availability and ease of use are the essentials of a good knowledge map Although technology can help achieve them those characteristics are what make the map valuable In fact some of the most successful maps are not electronic at all At Chemical now Chase Bank a paper phone directory was once produced for the entire IT organizationseveral thousand people It categorized employees for the first time by what they actually did Like many directories it used traditional listing categories of alphabetical last name geography and division The innovation was to list employees by what they did in their jobs and presumably were knowledgeable about Page 79 For the first time for example all the C programmers were listed together The book was a huge success with employees many of whom noted that theyd never been able to find likeminded and skilled coworkers before it was created The Rolodexes once used by Time Life fact checkers were a highly effective lowtech knowledge map An electronic version of the same information would improve search speed and make updating easier in fact Time Life later put the Rolodex system online to get those benefits but clearly the value of the map was the quality and depth of information much more than the bells and whistles of a sophisticated storage and retrieval system The Politics of Mapping Knowledge Most maps have a political dimension A map is a representation of reality but if that reality is ambiguous or in dispute any one map will be seen as favoring one viewpoint over another The map itself becomes a force in creating the reality it is supposed to describe The old saying The map is not the territory may be literally true but the map can influence the territory defining as well as describing it Organizational knowledge maps are political documents too Questions about who has the most useful knowledge are open to interpretation unlike say the question of where water fountains are located in an office building If knowledge is genuinely important to an organization and those who have it are recognized and rewarded then the knowledge map will be a picture of status and success as well as a knowledge locator For example although the fact checkers at Time Life were able to share their knowledge an effort to document and share sources among editors and writers at one of the companys magazines later failed Giving away ones proprietary sources of knowledge in that particular setting was viewed as giving away power and influence In any listing of who knows what people will also care about whether or not they are on the map and will try to influence the mapmakers to include them When one hightech firm we work with tried to create a map depicting the key human and technical knowledge repositories for new product development the project almost foundered because of the intense maneuvering to be situated well on the map As one of us has noted in a recent article If politics plays no part in a knowledge management initiative it is a safe bet that the organization perceives nothing of value is at issue 6 Page 80 So in one sense political wrangling over a corporate knowledge map is a good sign It shows that knowledge matters But it raises issues of how to keep politics from distorting a map that is supposed to reflect knowledge not power When he created a directory Political wrangling can be a good signit tells you that knowledge matters of employee skills in the late 1980s Ted Lumley chief of technical computing at Mobil Exploration and Producing asked people to rate their own levels of expertise He found that the experts were modest about their capabilities and the neophytes overestimated theirs How much this had to do with the newer employees honestly not understanding the dimensions of real expertise and how much was political jockeying for status is hard to say but Lumley felt politics played a significant part When he developed a new map a few years later he left out ratings altogether 7 Modeling Knowledge Dynamic modeling has a lengthy history and a generally favorable reputation when it is used to help managers understand and improve a specific operation As operations research modeling has proven quite useful when rules entities and routines are stable but there is still much to discover about the value of its application to knowledgecentered operations One large consumer products firm we have worked with has constructed a dynamic model of how new products are developed in its key units The model uses various types and forms of knowledge as inputs and executive actions as transforming agents with new products being the output or outcome One of the most interesting aspects of this project is the firms attempt to quantify the value of the key variables as well as the frictions that impede knowledge flow and utilization These frictions can be infrastructure failures social political cognitive and communication impediments and failures of managerial will While this experiment is still being refined and its overall results are not yet known the very act of undertaking it has signaled the value of knowledge to those in the firm and ensuing discussions have helped management focus on the subject In general the greatest value of modeling knowledge processes lies not in reaching an exact understanding of knowledge input output and flow rates but in identifying the variables in the model that can be affected by management action Page 81 Capturing Tacit Knowledge As difficult as it is to codify tacit knowledge its substantial value makes it worth the effort Mapping who knows what in an organization creates an essential knowledge inventory but does nothing to guarantee the ongoing availability of knowledge Having access to knowledge only when its owner has time to share it or losing it entirely if she leaves the company are significant problems that threaten the value of the organizations knowledge capital Firms must therefore have strategies for preventing such losses A partial answer which we will discuss in the next chapter is to try to transfer as much knowledge as possible to someone through mentoring or apprenticeship so that important tacit knowledge is not wholly concentrated in one person Multimedia computing and the hypertext capabilities of intranets have created the possibility of effectively capturing at least some meaningful fraction of an experts knowledge making the tacit explicit If Larry Prusak had watched films of Ted Williams hitting or better yet had been able to use an interactive multimedia computer program to study Teds swing visually he might have learned a little more about hitting Companies are beginning to use these technologies to record the narratives and nuances that carry so much of the real value of knowledge IBMs approach to retaining important knowledge at its Lotus Development subsidiary includes trying to retain key employees by creating special programs to identify and reward essential knowledge workers 8 The Value of Narratives Human beings learn best from stories As Karl Weick says people think narratively rather than argumentatively or paradigmatically9 This precept has always been intuitively clear to anyone who teaches recent research most notably by Roger Schank at Northwestern University has tended to underscore its importance10 His work has been supported by recent studies examining the role rhetoric plays in conveying knowledge Donald now Deidre McCloskey has looked at rhetoric in economics Bob Eccles and Nitin Nohria have examined its role in organizational behavior11 Other studies have focused on law theology and other areas In all these fields research shows that knowledge is communicated most effectively through a convincing narrative that is delivered with formal elegance and passion Page 82 In discussing what is needed for sensemaking which is essentially what knowledge does Weick says The answer is something that preserves plausibility and coherence something that is reasonable and memorable something that embodies past experience and expectations something that resonates with other people something that can be constructed retrospectively but also can be used prospectively something that captures both feeling and thought something that allows for embellishment to fit current oddities something that is fun to construct In short what is necessary in sensemaking is a good story 12 This description of storiesthe way they embody experience and apply it to future expectations their basis in feeling and thought their essential humannessis similar to our description of knowledge and suggests why there is a meaningful link between the two A good story is often the best way to convey meaningful knowledge We have talked about war stories that convey ground truth as one of the most effective ways of communicating not just information but knowledge a rich and complex understanding of an event or situation in a human context What does the importance of narrative suggest about knowledge codification Trying to turn knowledge into a code would seem to defeat the purpose of communicating it through resonant storytelling Once we recognize that narratives are the best way to teach and learn complex stuff though we can often encode the stories themselves so as to convey meaning without losing much of its leveragable value Many firms already do something like this when they send videos to branch offices to be shown over lunch In the past they were likely to contain a speech or exhortation by a senior executive Increasingly though firms distribute tapes that tell the story of an important business event such as how a key sale was made Knowledge is more likely to be absorbed if it adheres to the listeners sense of ground truth is delivered with feeling and is placed in a context or frame that is at least partly shared by its audience One wellknown securities firm sends out a message every morning on its hoot and holler network to all its brokerage agents giving them what is called useful information about a particular sale an upcoming event or some valuable piece of customer feedback These messages almost always take the form of a story At Verifone a recently acquired subsidiary of Hewlett Packard where workers are Page 83 widely dispersed around the world stories of desirable business behavior are circulated electronically under the banner of Excellence in Action We have seen many examples of these sorts of efforts failing because the speaker lacks the insight or imagination to understand where his listeners are coming from that is the context in which they interpret his words In one instance the CEO of a major midwestern manufacturer spoke to all the firms US employees over a satellite network to announce a reengineering initiative Unfortunately his speech was so heavily laden with business jargon that many factory workers couldnt follow Even more seriously he failed completely to address the natural anxieties that the workers associated with reengineering With all the media attention given to the association of reengineering and downsizing he should have known that employees would interpret even the most neutral proposals in a negative light Whatever knowledge he intended to share failed to take because he didnt communicate with his employees in terms they could understand Embedded Knowledge Some knowledge that is quite complex and initially tacit can be externalized and embedded in a companys products or services The knowers use their expertise to develop a process or product that contains at least some of what they know Any manufacturing process whether automated or formalized in a set of procedures is constructed from what was once the knowledge of individuals In theory this embedded knowledge is independent of those who developed it and therefore has some organizational stabilityan individual expert can disappear without bringing the process to a halt or reducing the companys stock of embedded knowledge In practice however it is difficult to locate the dividing line between knowledge that is fully embedded in a process and the tacit human knowledge that keeps the process going As we mentioned in when EL Products a manufacturer of electroluminescent lamps bought Grimes one of its competitors ELP managers imagined that Grimess knowledge of how to make dustfree lamps was embedded in an explicit production process Only when they tried and failed to make that process work without the help of the Grimes line operators did they understand how much essential expertise still existed only in the heads of skilled employees or in this case exemployees 13 Page 84 Codifying Knowledge in Systems An expert system represents an explicit attempt to capture or imitate human knowledge by transferring it to a formalized rules based system As well describe in greater detail in the history of artificial intelligence has been characterized by excessive claims from proponents who have underestimated the complexity and contextuality of human thought and overestimated the capabilities of computers For example some years ago a major oil company decided to build an expert system to capture the knowledge of one of their interpreters of aerial photographs a man reputed to be the best in the world at locating potential drilling sites Wanting to formalize this valuable knowledge so they would still have it should the employee not be available the company hired an expert on artificial intelligence to develop the system He went through a process of watching the photograph analyzer work asking him questions about how he evaluated and weighed what he saw in the photographs what clues he looked for and what principles he applied The process was lengthy and complex long sessions spent clarifying the analysts expertise followed by writing elaborate computer code to embody that knowledge followed by further clarification and code writing Even so the first prototype was discarded and the project failed The expertise was too subtle and complex to be written into the computer the artificial photo analyst could not begin to match the humans knowledge However expert systems and artificially intelligent systems can play a limited role in the codification of knowledge The more bounded unambiguous and rulesbased that knowledge is the more easily it can be embedded in an expert system Chessplaying computers like IBMs Deep Blue can now compete with the best human players because chess though complex is a closed system of unchanging and codifiable rules The size of the board never varies the rules are unambiguous the moves of the pieces are clearly defined and there is absolute agreement about what it means to win or lose Even with advances in fuzzy logic computers are not yet well suited to ambiguous and intuitive operations where the rules if they exist at all are much harder to define Evaluating Explicit Knowledge Like the tenets of law described early in this chapter some forms of knowledge are already codified and explicit Patents are one form of Page 85 codified knowledge a representation in text of a process or product developed through the expertise of scientists or inventors By definition patented knowledge is knowledge that can be explicitly expressed The word patent means lying opena patent represents knowledge that is protected by being publicly described and connected with an owner Similarly reports and other structured documents are examples of knowledge that has already been made explicit But the structured explicit knowledge of patents and reports does not become usable simply by being codified It needs to be evaluated and made accessible to the people who can do something with it in order to benefit the organization When Gordon Petrash was appointed Dow Chemicals director of intellectual asset management he understood that many of the companys 29000 patents represented intellectual capital that was largely dormant and even hidden because Dow had forgotten what they contained The knowledge codified in them was not being utilized The first project taken on by Petrash and his group was to evaluate patents to determine which could be used which might be sold and which should be abandoned keeping unused patents in effect is an expensive proposition The process of weeding out patents with little or no value saved 1 million in fees in the first eighteen months and created the potential to develop valuable new products Furthermore making Dow business units and potential business partners aware of the untapped value in other patents offered substantially higher potential returns As Petrashs initiative makes clear evaluating codified knowledge and then making it available is an integral part of the entire codification process 14 A Case in Point Monsantos Knowledge Management Architecture Monsantos Knowledge Management Architecture project is an ambitious effort to codify corporate knowledge Its aim is to allow the companys 30000 employees to share knowledge and information and by making global knowledge locally available to combine the knowledge benefits of a large company quantity and diversity of knowledge with the benefits of a small one accessibility to knowledge Several features of Monsantos approach illustrate important codification issues In their evaluation of existing knowledge and information the company makes a distinction between quantitative structured content and qualitative relatively unstructured content The Knowledge Management Architecture provides different tools for capturing representing Page 86 and retrieving the two kinds of material Structural content is housed in a relational database with desktop access provided by appropriate query software Unstructured content is represented in Web pages and Lotus Notes This flexible approach means that relatively amorphous soft knowledge is not destroyed by being forced into a rigid structure The structured material that does fit comfortably into the database can be retrieved more easily and systematically than if it were stored in a more loosely organized form The Knowledge Management Architecture includes what Monsanto calls an Enterprise Reference Data System which provides global definitions for key terms such as customer product and material Without a common understanding of these terms the company could not organize intellectual material into a single system Harmonize organizational knowledge but dont homogenize it It might seem that such words are too basic to need defining In fact multiple and sometimes contradictory meanings for fundamental terms exist in many organizations and create barriers to consolidating information and knowledge 15 Common definitions are not only required to make a system like the Knowledge Management Architecture work they are the necessary common ground of communication across a company Knowledgeable people cannot share expertise efficiently if they mean different things when they use familiar essential terms Common ground and orderliness are purchased at a cost idiosyncratic local definitions may express local truths that get lost when a global standard is adopted In any codification process there is an inherent tension between local and global needs between the value of the particularity of knowledge and the value of making it comprehensible to a variety of people Only the most essential shared terms should be standardizedand even those are not yet completely standardized at Monsanto What is called for is just enough uniformity to make the system work The goal is to harmonize organizational knowledge not to homogenize it Monsanto also recognizes the importance of evaluating and interpreting its knowledge capital An unedited repository of intellectual material is of little value to an organization Users need to be guided to important material and given a context in which to understand it At Monsanto analysts who had previously been gatekeepers of financial information provide analyses of the content of the companys financial data warehouse adding their knowledge to what had been relatively undifferen Page 87 tiated data and information Other employees have the responsibility of evaluating the unstructured intranet and Lotus Notes content analyzing its relevance to different business units and putting their analyses online as guidelines for users The Continuing Codification Challenge Codifying knowledge is an essential step in leveraging its value in the organization Codification gives permanence to knowledge that may otherwise exist only inside an individuals mind It represents or embeds knowledge in forms that can be shared stored combined and manipulated in a variety of ways The challenge is to codify knowledge and still leave its distinctive attributes intact putting in place codification structures that can change as rapidly and flexibly as the knowledge itself As we have discussed stories and rhetorical strategies provide the richest and most flexible approach to this task Developing technologies will extend the range of possible applications but for the foreseeable future codification will continue to be more art than science the domain of minds rather than machines As Lofti Zadeh an early AI pioneer and developer of fuzzylogic concepts recently stated No computer can summarize what you tell it That task vital to knowledge codification is still a human one 16 Page 88 5 Knowledge Transfer A man has no ears for that to which experience has given him no access Friedrich Nietzsche How can an organization transfer knowledge effectively The short answer and the best one is hire smart people and let them talk to one another Unfortunately the second part of this advice is the more difficult to put into practice Organizations often hire bright people and then isolate them or burden them with tasks that leave no time for conversation and little time for thought While well consider various knowledge transfer issues and strategies in this chapter many of them come down to finding effective ways to let people talk and listen to one another Knowledge is transferred in organizations whether or not we manage the process at all When an employee asks a colleague in the next cubicle how to put together a budget request hes requesting a transfer of knowledge When a sales rep new to a territory asks the retiring rep about the needs of a particular customer theyre exchanging knowledge When one engineer asks another in an office down the hall if he has ever dealt with a particular problem the second engineer if willing and able will transfer his knowledge These everyday knowledge transfers are part of organizational life They are however local and fragmentary We discuss a business problem with someone down the hall because she is conveniently close and we feel comfortable with hernot necessarily because she is the best person to consult on the subject Although we make a judgment about who in our immediate area is most likely to be able to help us we rarely try to find the person in the company who has the deepest knowledge of the subject We hope to get good enough information from someone nearby This is yet another example of the implications of bounded rationalitythe very human limits on how much information people can absorb and how much effort they will expend to get it The larger and more complex Page 89 the firm is the less likely it is we will find the best expertise in the next office or anywhere at our location Greater size may increase the chances that the knowledge we need exists somewhere in the company but it decreases the likelihood that we will know how and where to find it In a competitive environment good enough is often in fact not good enough A company that fails to keep track of components needed in a manufacturing process probably will not thrive The same is true of companies that dont keep track of their knowledge componentseven more so because knowledge assets are difficult to buy in a market Knowledge abounds in our organizations but its existence does not guarantee its use Strategies for Knowledge Transfer Spontaneous unstructured knowledge transfer is vital to a firms success Although the term knowledge management implies formalized transfer one of its essential elements is developing specific strategies to encourage such spontaneous exchanges This is particularly necessary for organizations whose primary role is to create knowledge Perhaps we can find the most useful lessons about knowledge transfer from research facilities in Austin Texas where two hightech consortia Microelectronics and Computer Corporation MCC and Sematech have struggled with the transfer of technologies ideas and research results to the companies that funded their research into computer and semiconductor technologies respectively According to a thorough account by David V Gibson and Everett M Rogers of the two organizations Sematech has been the more successful at technology or knowledge transfer 1 As one MCC researcher commented There are lots of known techniques for knowledge transfervolumes have been written At MCC we have used liaisons assignees workshops training technical reports thirdparty licenses production and support of products as opposed to prototypes and many other techniques Again on the basis of the result we may assess the approach reflected by these techniques as having failed2 The primary reason for Sematechs success has been the organizational and human resource structures devoted to technology transfer More specifically the organization pays great attention to the role of assignees from sponsoring firms who come to Sematech to participate in Page 90 research and then take ideas back with them Indeed when a technology transfer manager was asked to describe how Sematech transferred knowledge she commented We have documents document databases an intranet Web groupware you name it But the assignees and the facetoface meetings we have are by far the most important channels for transferring knowledge to the member firms 3 Tacit and ambiguous knowledge is especially hard to transfer from the resource that creates it to other parts of the organization Perhaps the most reliable way to put this knowledge into circulation is to emulate Sematech and transfer people in and out of the dedicated resource Have them spend a year or two absorbing and helping to generate new knowledge which they then can carry to new assignments In Japan for example it is common to rotate engineering executives into manufacturing and viceversa so that the managers have an understanding of the entire process of new product development and production Water Coolers and Talk Rooms Conversations at the water cooler or in the company cafeteria are often occasions for knowledge transfer Influenced by outdated theories of the nature of work management sometimes assumes that water cooler socializing is wasting time Although some of the talk will be about sports and the weather most water cooler conversation focuses on work people ask each other about current projects they bounce ideas off one another they get advice on how to solve problems Their conversations are work In his article Whats So New About the New Economy Alan Webber says In the new economy conversations are the most important form of work Conversations are the way knowledge workers discover what they know share it with their colleagues and in the process create new knowledge for the organization4 When IBM needed to reinvent itself in response to the fact that companies were reducing their reliance on mainframe computers thenchairman John Akers circulated a memo telling employees to stay away from the water coolers and get back to work He thought they were avoiding work when in fact they were often trying to find ways out of the companys difficulties In a knowledgedriven economy talk is real work When a business is struggling people naturally gather to talk through problems and share Page 91 ideas about how to solve them Those conversations are more likely to generate creative solutions than keeping employees at their desks plugging away at their individual tasks Akerss memo reflected a traditional management attitudeStop talking and get to work On the contrary as Webber says Start talking and get to work is better advice in an economy driven by knowledge Transferring knowledge through personal conversations is being threatened not only by industrialage managers but also by the move to virtual offices Many firms are adopting work arrangements in which workersparticularly those in such customer oriented functions as sales and serviceare encouraged to work at home or at a customer site While these arrangements offer benefits such as greater employee flexibility and more time with customers it also lowers the frequency of informal knowledge transfer Firms that initiate virtual office programs should at least encourage workers to be in the office on the same days identify ways to make up for lost interaction and educate workers on effective knowledge transfer through computers and telephones IBM for example has taken some steps to restore knowledge transfers that have been lost or reduced in the transition to virtual offices The companys managers worried for example that virtual field employees who have contact with customers would be less likely to pass on customer comments to researchers product developers and marketers Therefore each of these functional areas started programs in which previously officebound workers were expected to spend time directly with customers In effect field sales and service personnel are no longer expected to be information intermediaries Water cooler knowledge exchanges are also hitormiss in terms of dealing with a particular business problem or making a key decision When faced with a need for specific knowledge at a critical point in a project it would not be a sensible strategy to stand by the water cooler in hopes of picking up exactly what youre looking for from whoever happens to be thirsty Similarly if youve learned something important about a customer competitor or supplier you shouldnt count on unstructured casual conversations to spread the word But these unstructured transfers of knowledge do have the corresponding advantage of opening the door to serendipity They are opportunities for spontaneous meetings of the mind that have the potential to generate new ideas or solve old problems in unexpected ways 5 Page 92 Many Japanese firms have set up talk rooms to encourage this kind of unpredictable creative blending and exchange As we mentioned earlier at DaiIchi Pharmaceuticals there are rooms with green tea and attractive lighting that researchers are expected to visit for twenty minutes or so as a normal part of their workday No meetings are held in the talk rooms there are no organized discussions The expectation is that the researchers will chat about their current work with whomever they find and that these more or less random conversations will create value for the firm It is a kind of Brownian motion theory of knowledge exchange its very randomness encouraging the discovery of new ideas that a more specifically directed discussion would miss In addition Japanese managers spend many afterwork hours together Group dinners and visits to nightclubs are part of Japans corporate culture They function as an important knowledge sharing mechanism as well as mechanisms for establishing trust and with inebriation as an excuse opportunities for criticism Japanese businesses do not commonly use email managers and workers prefer facetoface meetings When one of us Davenport made a trip to Japan to discuss knowledge management he suggested to a small group of managers that they could go home earlier if they exchanged ideas electronically They laughed and said that neither they nor their wives necessarily wanted earlier homecomings Davenport also observed the development of a Lotus Notesbased knowledge repository at a very large Japanese financial services firm At that time the Notes implementation team saw many cultural barriers to effective information and knowledge sharing at the company We dont have an output culture said one team member Our knowhow is hidden in people If knowledge is in my brain it will be difficult to get it out The motivation to share is very difficult Another team member noted that information is less valuable if widely shared Much of our information is secret he noted A third team member commented that When we share information it is after work over drinks and dinner We would like for Notes to take over some of those functions since we are a global company and everyone cannot meet face to face But it will be difficult The lesson here is that knowledge transfer methods should suit the organizational and national culture It is not possible and in many ways would not be desirable to impose the Japanese model on American companies The attempt described above to impose an American knowl Page 93 edge transfer approach in Japan may also fail We should recognize the value of both facetoface and electronic contacts and provide opportunities for both Above all we need to broaden our definition of productivity to include what may be very productive casual conversations periods of reflection and learning When you need to transfer knowledge the method must always suit the culture Informal knowledge transfer is endangered by a particularly American sense of what is and isnt real work An employee who dutifully reads and answers email messages and responds promptly with email and memos of his own is supposedly hard at work regardless of the value of what is being exchanged On the other hand an employee who reads a book at his deskarguably an effective approach to knowledge acquisitionis looked at with suspicion Doesnt he have work to do Shouldnt he save his reading to do on his own time The suspicion exists even if the book may enhance the employees knowledge in a way that proves beneficial to the organization If it is unusual to find an employee who enhances his knowledge by reading at work it is almost unheard of for a coworker to have the leisure to ask what the book is about and enter into a conversation about it A company that claims to value knowledge but discourages reading and talking on company time sends mixed messages The more convincing message is that knowledge is not much valued after all Managers need to recognize that the availability of slack time for learning and thinking may be one of the best metrics of a firms knowledge orientation Knowledge Fairs and Open Forums There are other ways that organizations can encourage serendipitous knowledge sharing across the lines of departments or business units They are basically the strategies we outlined in our discussion of knowledge marketplaces creating locations and occasions for workers to interact informally Corporate picnics provide opportunities for exchange between employees who never get to talk to one another in the course of their daily work A knowledge fair is a more orchestrated forum for encouraging the exchange of knowledge but one that still allows for spontaneity It brings people together without preconceptions about who should talk to whom Page 94 Ernst Young a large accountant and consulting firm held a knowledge fair in Cleveland at which close to thirty separate consulting and research units set up booths to display information and discuss their work Participants were free to wander around and pick up whatever struck them as useful The hope borne out by surveys after the event was that participants would make new connections and discover new synergies given the opportunity to mingle freely CSIRO a large Australian contract RD organization recently held its first knowledge fair near Melbourne bringing together scientists from across the country who communicated electronically but had never actually met one another in person One of the authors attended the fair and felt a palpable sense of excitement in the air as these researchers finally had a chance to meet Although many had had extensive email exchanges they all said in one form or another Ive wanted to chat with that fellow for ages I cant wait to talk with him These knowledge fairs worked in part because they were relatively unstructured They gave people opportunities to wander and mingle at will as well as ample time to talk They did not impose a progression they let visitors create their own itineraries and in effect their own markets Contrast this approach to that of a large hightech firm when it brought together more than three hundred senior managers for a threeday conference intended as a forum for knowledge exchange Unlike the EY and CSIRO knowledge fairs the conference was organized down to the minute with a full schedule of speakers workshops and eventsthree long structured days There was no time set aside for people to talk about what they were hearing or about their work Some managers who knew one another from phone conversations but had never met had no chance to interact at the conference At most they could exchange a word or two as they hurried along to the next activity Although the event cost a fortunemuch more than a knowledge fairparticipant surveys rated it a failure The lesson to be learned is not that fairs are good and conferences are bad but that in any gathering there needs to be room for choice and time for conversation Conversation should never be seen as an extra a spare time activity A conference that tries to stuff people with knowledge is operating on a false assumption of how knowledge works We strongly advocate knowledge transfer through facetoface meetings and through narratives in addition to more structured forms The signals that convince people they can communicate effectively are best Page 95 given in person But as we have said giving people who work at the same location opportunities to talk to one another does not by itself solve the problem of transferring knowledge especially in large organizations Conversations must be encouraged to flourish but they wont ensure that an innovation developed at an oil rig in Texas will be adopted at one in Alaska They wont keep business units that are half a world apart from duplicating problemsolving efforts because they provide no good mechanisms for efficiently disseminating knowledge So we also need to consider more formal and intentional ways of sharing knowledge within organizations What Kinds of Knowledge As we have made clear throughout our discussion and especially in our chapter on codification the relative difficulty of capturing and transferring knowledge depends on the kind of knowledge involved Knowledge that is more or less explicit can be embedded in procedures or represented in documents and databases and transferred with reasonable accuracy Tacit knowledge transfer generally requires extensive personal contact The transfer relationship may be a partnership mentoring or an apprenticeship but some kind of working relationship is usually essential Such relationships are likely to involve transferring various kinds of knowledge from explicit to tacit Not all of the learning communicated will be complex and intuitive but it is the tacit knowledge that we cannot readily transfer in any other way We described a failed attempt to capture an aerial photo analysts skill in an expert system in the last chapter This example illustrates how hard it is to replicate tacit knowledge through a set of rules even the complex rules of a sophisticated computer program However although the system failed to learn how to read aerial photographs the computer scientist who was brought in to develop the system did acquire those skills The long process of trying to extract and understand the experts knowledge served as an apprenticeship Having extensive conversations looking at photographs together asking questions and seeking clarifications taught the consultant a new skill When the project ended the expert system was useless but the system designer was said to be the second best analyzer of aerial photographs in the world Companies committed to transferring tacit knowledge often set up formal mentoring programs and make passing on knowledge to young employees an explicit part of the job descriptions of skilled senior staff Page 96 Japanese steel firms for instance encourage and expect older younger bonding between employees with the more experienced senior person passing along his knowledge of the job to the next generation 6 The consulting firm Booz Allen Hamilton redesigned its consultant appraisal process to incorporate knowledge transfer through mentoring Every consultant is responsible for facilitating the learning and development of a colleague one level below her in seniority7 The infrastructure of tacit knowledge transfer can also include but should not be limited to electronic technology Raychem a California electronics and telecommunications manufacturer has set up an Internal Information Interview Network a database that lists employees who are willing to meet with colleagues and share information8 This network is a specialized kind of knowledge map Knowledge maps are clearly part of the knowledge transfer infrastructure The BP Virtual Teamwork videoconferencing system is essentially a tacit knowledge pipeline a mechanism for linking the people with knowledge to the people who need it Another use of technology to transfer tacit knowledge can be seen in the efforts of several organizations to record the stories and experience of its senior practitioners on video or CDROM before they leave the company As a general rule though the more rich and tacit knowledge is the more technology should be used to enable people to share that knowledge directly Its not a good idea to try to contain or represent the knowledge itself using technology Explicit knowledge can be more successfully stored in some sort of technological repository such as Lotus Notes or some more highly structured database Extensive knowledge transfer could not happen in large global companies without the tools provided by information technology but the values norms and behaviors that make up a companys culture are the principal determinants of how successfully important knowledge is transferred The Culture of Knowledge Transfer There are many cultural factors that inhibit knowledge transfer We call the inhibitors frictions because they slow or prevent transfer and are likely to erode some of the knowledge as it tries to move through the organization The following are the most common frictions and ways of overcoming them Page 97 Friction Possible Solutions Lack of trust Build relationships and trust through facetoface meetings Different cultures vocabularies frames of reference Create common ground through education discussion publications teaming job rotation Lack of time and meeting places narrow idea of productive work Establish times and places for knowledge transfers fairs talk rooms conference reports Status and rewards go to knowledge owners Evaluate performance and provide incentives based on sharing Lack of absorptive capacity in recipients Educate employees for flexibility provide time for learning hire for openness to ideas Belief that knowledge is prerogative of particular groups notinventedhere syndrome Encourage nonhierarchical approach to knowledge quality of ideas more important than status of source Intolerance for mistakes or need for help Accept and reward creative errors and collaboration no loss of status from not knowing everything Trust and Common Ground In 1990 and 1991 surgical teams at five northern New England medical centers took part in a study of skill sharing Their goal was to discover whether a skillsharing process that included observation of one anothers work could improve the rate of success for the coronaryartery bypass surgery in which they all specialized The project began by Register today for Dallas Comic Con March 3031 2019 DallasMarketHallcom DallasComicCon DCC2019 Special Guests MORE TO BE ANNOUNCED GARY DALTON Artists such as Marc Silvestri Glen Fabry Cliff Rathburn Page 98 providing each of the twentythree surgeons involved with information about his or her success rates compared with others in the medical center and with statistics for the entire region It included training in continuous improvement techniques and site visits during which visiting professionals observed their counterparts in action After these activities had taken place the hospitals collectively showed a 24 percent reduction in the mortality rate of the surgeryseventyfour fewer deaths per year than predicted Four of the five medical centersall but the one that had the lowest mortality rate before the studyshowed substantial reductions In addition participants attributed the adoption of more than a dozen enhancements in patient evaluation staff organization and surgical technique to their site visit experiences 9 Some of the details of this successful transfer initiative illuminate issues relevant to other transfer projects Giving surgeons information about the better success rates of some of their colleagues created a motivation to learn As David Kanouse and Itzhak Jacoby point out in their study of information transfer in the medical profession physicians are motivated to change habitual behavior only when they believe that their patients are not experiencing satisfactory outcomes10 Why change what works as well as or better than anything else Professionals in any business ask the same question we must answer it with a convincing demonstration that a new idea or technique is superior A major factor in the success of any knowledge transfer project is the common language of the participants Sharing almost identical training and experience working in precisely the same specialized area the surgeons and other professionals in the heartsurgery study could readily understand one anothers words and actions Research shows time and again that a shared language is essential to productive knowledge transfer Without it individuals will neither understand nor trust one another People cant share knowledge if they dont speak a common language Brought together they will clash or simply not connect Nonaka and Takeuchis emphasis on redundancy or overlapping areas of expertise and Thomas Allens discussion of cultural mismatch as a barrier to technology transfer both recognize the importance of common ground Effective knowledge transfer is far easier when participants speak the same or similar languages by language we mean not just English or Spanish but also mechanical engineer or field sales or as Allen says when there are gatekeepers or boundary span Page 99 ners to translate between cultures and value systems 11 BP for example employs consultants to translate observations made by roughnecks on North Sea oil rigs into language and concepts that executives in London can better understand Sometimes knowledge transfer can work only if the various parties are brought together physically This was the experience of a large contracting firm that was a key contractor in the Boston Harbor tunnel project They had overseen a similar project in New Zealanda tunnel linking two islands that had some of the same characteristics as the Boston project The tunnelers in New Zealand developed innovative improvements on a particular drilling process that some executives wanted the Boston workers to emulate They tried to transfer that knowledge in various ways sending memos and descriptions creating diagrams and manuals even hiring consultants to give talks to the Boston crews The firm strenuously resisted bringing the groups together for two reasons The expense was one factor but an even more powerful influence was an entrenched engineering culture that made them believe firmly that some sort of technological mediation must be the right way to transfer knowledge Eventually though they had to fly tunnelers from Wellington to Boston and let the two groups of workers spend time together because nothing else worked Over rounds of Fosters lager the New Zealand group discussed and demonstrated their innovations with the Boston workers and were thus able to transfer their knowledge in bulk Over time the Bostonians came to internalize these innovations and employed them on the tunnel This story shows how difficult it can be to make tacit knowledge explicit and transfer it quickly and easily The particular skills involved in this process did not lend themselves to codified documentation that form of communication simply could not work The fact that the knowledge involved may have been too subtle and complex to express in words is only one of the reasons for the failure The instinctive resistance to change and the need for trust are at least as important As handson people the Boston tunnelers may not have invested the printed word with enough authority to let it change ingrained behaviors Like many of us they may have felt that seeing is believing only an actual demonstration of the new technique and its advantages was likely to convince them Why should a few sheets of paper that come from the other side of the world persuade them theres a better way to do what theyve been doing for years Like most of us they need to size up the people Page 100 providing the new knowledge before they will accept it Are they regular guys Are they good workers Are they genuinely skillful Are they trustworthy People who share the same work culture can communicate better and transfer knowledge more effectively than people who dont The New Zealanders and the Boston workers could get along together because they had common interests and experiences They could communicate in the same way military people from around the globe can often more easily than they can talk to their neighbors The closer people are to the culture of the knowledge being transferred the easier it is to share and exchange In some cases theres no substitute for direct contact The cases of the surgeons and the tunnelers show how important it is to have a common work language and to communicate in person Physical proximity helps participants to share that language and to establish a foundation of mutual respect The US Army whose CALL system we mentioned earlier actually budgets face time into a knowledge teams plans They find this direct contact essential to building rapport and to eliminating what they recognize as one of the basic frictions that prevent effective knowledge transferthe absence of trust The Status of the Knower People judge the information and knowledge they get in significant measure on the basis of who gives it to them Organizations that ignore this fact are likely to be disappointed by the results of knowledge transfer projects It is common for instance for organizations to send junior engineers to a conference because the company can spare them Their work isnt considered as important as that of senior staff who cant take time off from essential projects The younger engineers often come back from the conference and say We learned these things We think the company can benefit if we change our process in these ways But few listen to them whether theyre right or wrong The knowledge they bring back will be rejected for the same reason they were chosen to go to the conference they are not perceived as esteemed employees A similar problem bedeviled MCC the computer research consortium in Austin Companies sent relatively poor workers as assignees because they were expendable Not only did they not contribute as effectively as Page 101 star researchers to the research itself but they were also less effective as transfer agents The CEO of a large pharmaceuticals firm where one of us was consulting several years ago needed information on market conditions in Malaysia He asked for reports from the corporate librarian a marketing director and a senior vicepresident in charge of strategic planning The librarians information was by far the best It was a carefully organized report using recent data from the World Bank and other key sources The senior VP threw together a couple of articles from weekly business magazines But the CEO thought that the senior VPs information was the most valuable and gave the librarians report the lowest rating The status of the provider and probably his personal regard for his strategic planner biased his judgment When the same material was shown to other managers in the company without any indication of the source they all judged the librarians report superior to the others The CEOs response was a case of judging by reputation which is not always a bad thing We all do it Reputation is a proxy for value that we use to evaluate the flood of information coming at us We dont have time to look carefully at everything so we select what we think will be worthwhile based on the reputation of the sender We say I know Susan is smart and shes provided useful material in the past so Ill pay attention to what came from her But sometimes we can be wrong especially if we base our decision more on status than past performance Transfer Transmission Absorption and Use Knowledge transfer involves two actions transmission sending or presenting knowledge to a potential recipient and absorption by that person or group If knowledge is not absorbed it has not been transferred Merely making knowledge available is not transfer Access is necessary but by no means sufficient to ensure that knowledge will be used The goal of knowledge transfer is to improve an organizations ability to do things and therefore increase its value Knowledge that isnt absorbed hasnt really been transferred Even transmission and absorption together have no useful value if the new knowledge does not lead to some change in behavior or the development of some new idea that leads to new behavior It is fairly common for someone to understand and absorb new knowledge but not put it to use for a variety of reasons Not respecting or trusting the source Page 102 of the knowledge is an important one Pride stubbornness lack of time lack of opportunity a fear of taking risks in a company that punishes mistakes are others Our selfesteem is based on what we know and how weve done things in the past If someone comes in and says My way of doing this is better than what youve been doing for the past five years we are likely to resist As Kanouse and Jacoby point out There are good reasons to believe that behavior change is a much rarer event than acquisition of knowledge In Wellsprings of Knowledge Dorothy Leonard Barton talks about signature skills which she defines as the abilities by which a person identifies himself or herself professionally Peoples egos are bound up in these skills their sense of competence and wellbeing at work depends on using them They will resist any innovation that may require them to abandon their signature skills in favor of new ones Resistance to change is powerful even in the face of indisputable objective evidence that a particular change makes sense We are hardly wholly rational creatures Most people in the United States have all the information they need about the dangers of too much fat in their diets At the same time Americans are more overweight than ever and sales of fatty junk food are growing Knowing is not the same as doing Velocity and Viscosity All the factors weve discussed affect the success and efficiency of knowledge transfer in organizations They will influence the velocity of transfer that is the speed with which knowledge moves through an organization How quickly and widely is it disseminated How quickly do the people who need the knowledge become aware of it and get access to it Computers and networks of course excel at enhancing the velocity of knowledge Viscosity refers to the richness or thickness of the knowledge transferred How much of what we try to communicate is actually absorbed and used To what extent does the original knowledge get pared down Does what was absorbed bear little resemblance to what we tried to transmit and retain little of its original value Viscosity is influenced by a number of factors especially the method of transfer Knowledge transferred by means of a long apprenticeship or mentoring relationship is likely to have a high viscosity the receiver will gain a tremendous amount of detailed and subtle knowledge over time Knowl Page 103 edge retrieved from an online database or acquired by reading an article will be much thinner Obviously both velocity and viscosity are important concerns for knowledge managers in determining how efficiently a firm uses its knowledge capital How quickly does it place knowledge where it can generate value and how much of the knowledge assets are actually getting where they need to go Because genuine learning is such a deeply human endeavor and because not only absorbing but accepting new knowledge involves so many personal and psychological factors velocity and viscosity are often at odds What enhances velocity may thin the viscosity Most knowledge transfer efforts strike a compromise between these two factors Mobil Oil provides a useful example Mobils engineers developed some sophisticated ways of determining how much steam is required to drill under various conditions They applied these techniques at their oil fields in Liberal Kansas and found that they could dramatically reduce the amount of steam they generated themselves and bought from outside sources Because they now knew precisely how much they needed the potential savings were significant and the financial implications of making this knowledge operational at other Mobil oil fields were immense So they embedded the techniques in an intricate and intelligent systemfocusing on enhancing the knowledges velocityand sent a memo to other Mobil drilling operations detailing the new calculations and describing the benefits They assumed that other sites would quickly adopt an innovation whose value was indisputable Yet nothing happened Nothing changed The effective viscosity level for the new process was zero After some investigation Ted Lumley an information manager at Mobil decided that the transmission medium was wrong a memo was not an effective vehicle to transfer the knowledge The requisite information could be presented in the memo but a piece of paper did not have the power to convince experienced people that they should change what they had been doing for years Like the surgeons who would not alter their triedandtrue methods just because they read about new ones the Mobil engineers were unlikely to absorb and use new techniques described in a memo The authors and some colleagues were asked to help them devise a better way We developed a case study about the breakthrough and even made videos of the people who had designed the new process We recommended days of debate and intensive discus Page 104 sion so the new techniques could be internalized and socialized thereby making it possible to present a more convincing case in favor of the change and give people an opportunity to weigh its benefits and make it their own After six months the adoption rate was 30 percent Remember this was a process whose financial benefits were clear and immediate Probably the rate will climb to 50 percent it may or may not eventually approach 100 percent Does this mean that the knowledge transfer process was a failure or poorly handled We think not The adoption and application of new knowledge can be a slow and arduous process and the success rate will be profoundly influenced by the culture of the firm That is a fact of organizational life Part of Mobils corporate culturea distrust of braggingmay have militated against a full expression of the value of the new technique and against receptivity to this success story But resistance to abandoning procedures that have been successful for years is a universal phenomenon not one limited to Mobil Simply improving a process wont be enough to win over everyone A mechanistic model of human behavior would predict high velocitythe rapid acceptance of an innovation that is demonstrably superior to the old way of doing things A works better than B so stop doing B and do A instead seems to be unassailable logic But neither organizations nor people are strictly logical They are much more often intentionally rational That is they do what is rational for themselves based on their own agendas and goals irrational as these might seem to outside observers To many people hang gliding is irrational because of the risks involved to those who feel that excitement and risk make life worthwhile it makes perfect sense Similarly a manager who chooses to ignore a clear improvement in a process he manages is not simply irrational His resistance may be based on a reasonable desire to continue to believe that his way is best He might recall other innovations that didnt pan out or reflexively opt for the comfort of doing things the old way over the challenge of learning a new one A Case in Point 3M 3M has a justifiable reputation for encouraging new ideas and turning those ideas into products and profits The company sells over 60000 Page 105 different products with 30 percent of its revenues coming from products less than four years old Last year 3M produced over 400 new products The goal of CEO Livio DeSimone is to have 10 percent of the companys revenues generated by products less than a year old by 1997 Developing innovations on such a scale would almost certainly be impossible without effective knowledge transfer since new ideas are so often sparked by access to existing ones Knowledge transfer is even more essential to getting from idea to product This process requires the cooperation and abilities of numbers of people who are on the same page to collaboratively solve the complex problems inherent in creating a new product With its impressive success in innovation 3M provides a striking example of a culture that encourages and enables knowledge transfer Deeply ingrained beliefs and values at 3M have encouraged knowledge transfer and led to significant investment in the machinery of transfer Delegating responsibility tolerating creative mistakes and respecting individual talents at all levels of the firm have been part of the companys culture almost from the beginning Researchers at all levels are expected to spend 15 percent of their work time on personal research interests All are eligible to apply for grants to support their research and encouraged to involve other employees in their projects One of the most famous results of this openness and encouragement was the invention of Scotch tape by Dick Drew He was a sandpaper salesman who in most companies would have been told that product development was not his job Regular meetings and fairs give 3Ms researchers time and space to meet and exchange knowledge A technical council composed of leaders of major 3M laboratories meets once a month to share ideas The group also holds a threeday retreat once a year A technical forum of scientists and technologists sponsors an annual threeday knowledge fair and has more frequent meetings for members with common interests In addition an online database of technology expertise is available throughout the company 3M has fostered the belief that technical knowledge belongs to the company not to the individual or group who developed it Making knowledge widely available and giving researchers time to absorb it and play around with it has led to some notable new products Art Frys invention of PostIt Notes was instigated in part by a memo from another 3M scientist inviting others in the company to take a look at his newly developed bonding material It is hard to imagine a clearer Page 106 example of innovation spurred by effective knowledge transfer within a company Although information technology plays an important role at 3M and may have been tangentially involved in distributing the memo the knowledge transfer that resulted in this profitable invention was not caused by technology but by a culture of sharing 12 In this chapter we have attempted to discuss knowledge transfer in a broader context than typically encountered Too often knowledge transfer has been confined to such concepts as improved access electronic communication document repositories and so forth Firms need to shift their attention from documents to discussions We believe it is time for firms to shift their attention to the more human aspectsfrom access to attention from velocity to viscosity from documents to discussions Obviously firms need to exploit both the hard and the soft aspects of knowledge transfer but in the Western business culture there are usually too few advocates of the soft stuff With this chapter we complete our analysis of the process of knowledgeits generation codification and transfer We will now focus on some enablers of knowledge management including knowledge management roles and information technologies Page 107 6 Knowledge Roles and Skills We can be knowledgeable with other mens knowledge but we cannot be wise with other mens wisdom Michel de Montaigne If knowledge management is to thrive organizations must create a set of roles and skills to do the work of capturing distributing and using knowledge There are many strategic and tactical tasks to perform and it is unrealistic to assume that a company can simply throw knowledge management activities on top of its existing positions As we have been emphasizing humans add the value that turns data and information into knowledge Employees in dedicated roles with specific responsibilities must therefore perform some aspects of this process In this chapter we describe some of those roles and the types of skills they require On the other hand knowledge management will also not succeed in an organization if it is solely the responsibility of a smallor even a largestaff group Ultimately managers and workers who do other things for a living designing and engineering manufacturing selling and providing service to customers have to do the bulk of the daytoday activities of knowledge management As we will discuss the most successful organizations are those in which knowledge management is part of everyones job Of course it will usually take the efforts of some fulltime knowledge staffers to make knowledge management a pervasive phenomenon In this chapter we will begin by addressing the most important knowledge rolesthose performed by personnel working throughout the firm Our goal is to help organizations encourage every employee to become a manager of knowledge We will then describe frontline knowledge tasks and knowledge project management roles The chapter concludes with a detailed discussion of the seniormost knowledge role the Chief Knowledge Officer or CKO Page 108 KnowledgeOriented Personnel While specialists are clearly critical to the success of knowledge management even more important are the activities and attitudes of those who are paid to do something other than manage knowledge Planning managers business analysts design and manufacturing Managing knowledge should be everybodys business engineers marketing professionals and even secretaries and clerks are the most important managers of knowledge They all need to create share search out and use knowledge in their daily routines In this sense knowledge management must be part of everyones job Despite the corporate mantra that employee knowledge is a valuable resource most firms do not make concerted efforts to cultivate the knowledgeoriented activities of their personnel We will briefly discuss two notable exceptions one in a knowledge intensive business the other in an industry not often viewed in that light McKinsey and Company is perhaps the most knowledgeoriented firm in a knowledgeoriented industry The consulting firm has several roles with the job of managing knowledge either creating it or storing and distributing it But there have been some difficulties in conceptualizing and implementing these roles at least partially because at McKinsey knowledge is everyones jobor at least almost everyones The firms managing director even calls knowledge the lifeblood of McKinsey 1 Consultants are expected to contribute to the firms knowledge capital and to use it in client work Line consultants write books and articles as frequently if not more so as specialists in industries or functions Research and practice development projects are typically staffed by regular consultants who thereafter go back to client service McKinsey is a model of the organization in which every practitioner is a reflective one This isnt to say that the knowledge environment is perfect at McKinseyat least it wasnt several years ago when one of us Davenport worked there No one expected much of secretaries or administrators for example with regard to creating distributing or using knowledge And Tom Peters a former McKinsey consultant has pointed out that while the firms consultants are excellent at learning from one another they are average or weak at learning from outsiders2 In our view this dynamic is partly intrinsic to client work and partly due to an implicit attitude at McKinsey that its people are the smartest around Page 109 If theres a single factor that is most critical to McKinseys success in knowledge management we believe its at the front endthe kind of people the firm hires from the beginning Interviews and screening processes are designed to identify bright intellectually curious knowledgeseeking individuals McKinseys staff consultants are thus fully capable of being knowledge creators sharers and users Ironically their knowledge orientations make it more difficult for knowledge specialistsexperts in a particular business function or industryto do their work many consultants feel selfsufficient and not needful of experts The firm has wrestled with the role of knowledge specialists for years The McKinsey case is an impressive example of how knowledge roles work in a knowledgedriven industry Even more impressive however is the example of Chaparral Steel which Harvard researcher Dorothy LeonardBarton has described in some detail 3 The company is a successful minimill steel manufacturer hardly a business where you would expect to find knowledge given much prominence But at Chaparral every worker is considered a knowledge worker Line steelworkers visit customers to better understand their requirements attend industry seminars and perform production experiments Ideas come from everybody in the organization A visitor to Chaparral once noticed that the security guard was reading a textbook about steelmaking There is no division of knowledge labor designating some people as thinkers and relegating others to doers For this free flow of knowledge to prevail the organizational culture must be extraordinary At Chaparral the organizational structure is remarkably flat both officially and symbolically The company has a unique apprenticeship program for all production workers that includes both classroom and onthejob training Risk taking is encouraged Employees are selected for their ability and their attitudes about learning There are no time clocks and there is a generous profitsharing system These cultural and organizational approaches clearly encourage Chaparrals workers to gain and share knowledge Knowledge Management Workers The first dedicated knowledge roles well describe in this chapter involve the daytoday work of knowledge management Certain of these functions are strictly technical writing HTML and Perl scripts for Web sites structuring and restructuring knowledge bases and installing and maintaining such knowledgeoriented software packages as Lotus Notes But Page 110 pure technology is not enough Even technologists should have a strong focus on how to make knowledge content appealing and how to persuade those who have knowledge to put it into a rich knowledge base The most intriguing new knowledge jobs however are knowledge integrators librarians synthesizers reporters and editors Lets be honest few organizations have many workers who are skilled at framing and structuring their own knowledge even fewer of them have time to sit down and input it into a system An engineering team may have designed a great new product but nobody on the team has the time inclination or skill to describe what happened in a project and put it into a repository Thus organizations need people who will extract knowledge from those who have it put it in structured form and maintain or refine it over time Universities dont really teach these skills but the closest approximation is found in journalism and libraryscience curricula Perhaps some schools will begin educational programs specifically oriented to knowledge management For now well have to view knowledge management education as a byproduct of other objectives Knowledge management jobs are proliferating rapidly Andersen Consulting has over two hundred of them Ernst Young McKinsey and IBM Consulting are probably close to that Coca Cola has identified forty HewlettPackard probably has twenty or thirty One of the challenges of this emerging field is for these knowledge workers to identify one another and begin to develop an occupational community A greater sense of professional affiliation would be especially valuable given the varying levels of the worker roles Andersen for example has knowledge integrators who are sufficiently expert in a particular domain to determine what knowledge is most valuable and synthesize it The firm also has knowledge administrators whose work focuses on capturing storing and maintaining the knowledge that others produce Ideally knowledge workers possess both technical knowhow and intuitive skills Good knowledge workers at any level should have a combination of hard skills structured knowledge technical abilities and professional experience with softer traits a sure sense of the cultural political and personal aspects of knowledge Well roundedness isnt necessary for everyone but it is particularly important for those who work closely with knowledge users At a minimum knowledge management teams should Page 111 combine these orientations and each member must respect all required skill sets Some firms draw knowledge management workers from the ranks of line employees At Ernst Young for example the employees who compile and maintain knowledge repositories in particular industry or practice areas are consultants who worked in those areas They cycle in and out of knowledge management roles remaining in them for one or two years This arrangement ensures that knowledge management workers are conversant with the domain even if they lack professional knowledge structuring and writing skills Organizations are also redesignating existing groups of workersoften librariansas knowledge managers Ernst Youngs Center for Business Knowledge was previously a library for its consulting practice though new functions were added with the conversion to the new title At OwensCorning the corporate library became the Knowledge Resource Center But the name was not all that was changed The former librarians got themselves out of the routine of fetching information that users knew existed but couldnt find and encouraged users to fetch their own through database searches or outsourced librarytype transactions They focused on creating navigational toolsknowledge maps as we called them into acquaint their customers with available knowledge resources and on advising them on how best to use internal and external knowledge resources 4 If librarians are to thrive in the new world of knowledge management they will have to change their objectives activities and cultural predispositions5 One alternative to knowledge reporters editors and librarians is the group that became known as knowledge engineers in the heyday of expert systems Surely some of them would be candidates for knowledge management positions but many with such jobs tend to be insulated more concerned about writing well structured computer code than capturing and leveraging knowledge Even the term sounds a bit arrogant Finally participants in an online discussion group excoriated one of us Davenport for not including technical communicators as potential managers of knowledge Some members of this group who are also known as technical writers said that they were currently working on knowledge management projects On reflection there is actually considerable logic behind the idea that technical writers would be able to understand certain forms of knowledgeparticularly technical knowl Page 112 edgeand contribute to an electronic repository There are undoubtedly other groups in organizations with useful knowledge management skills as well Managers of Knowledge Projects The middle level of the formal knowledge management infrastructure is occupied by the manager of the knowledge project As we argue in much of the real work of knowledge management takes place in the context of specific projects to manage specific forms of knowledge or to improve particular activities related to knowledge As with any other type of change project knowledge management initiatives need managers Knowledge initiative managers should have facility in project management change management and technology management Good candidates may have led successful research reengineering or behaviorchanging IT projects in the past Ideally a knowledge project manager should come from a background that emphasizes the creation distribution or use of knowledge The manager of a knowledge project performs such typical project management functions as Developing project objectives Assembling and managing teams Determining and managing customer expectations Monitoring project budgets and schedules Identifying and resolving project problems But managing knowledge projects isnt just about project management The role demands an unusual mix of technological psychological and business skills Managers of such projects should be equally comfortable with Webaccessed databases and with selfmanaging teams with knowledge structures and compensation structures Whatever the types of knowledge workers involved in a particular initiative the knowledge project manager should speak their languages and understand their value systems Depending on the specific type of knowledge management project the project manager may have to perform other kinds of activities If the project is a repository for example the manager will have to deal with Page 113 such issues as determining the technology for storing the knowledge persuading employees to contribute to the repository and creating a structure for holding the knowledge If the project involves knowledge transfer the project manager will have to identify develop and monitor both human and automatic channels for knowledge sharing Knowledge asset management approaches may involve such activities as calculating knowledge valuations negotiating with internal and external holders of desired intellectual capital and managing a knowledge asset portfolio Projects involving infrastructure development typically encompass financial analysis work with external vendors of technologies and services and development of human resources management approaches The knowledge project manager needs to be on top of both the hard and soft aspects of knowledge management He or she must be willing and able to discuss the finer points of organizational learning while at the same time ensuring that knowledgeoriented systems go forward Of course the project manager must also complete knowledgeoriented project activities on time and under budget Weve seen too many knowledge project managers who were very good at talking about the subject but didnt walk it very well A little humility goes a long way when youre managing a knowledge project Well mention one more attribute of the knowledge project manager that you probably havent considered Managers who work with knowledge need a certain humility One knowledge project manager at HewlettPackard went even further arguing for egolessness He explained that knowledge is a sensitive subject If youre the manager of a particular knowledge domain its easy to come to believe that you are the primary source and arbiter of knowledge for the organization Its even easier thereafter for lesser mortals to resent you and withhold their knowledge or their attention from you At HoffmannLaRoche the large pharmaceuticals company a knowledge project manager confirmed this problem in speaking of a knowledge manager colleague He represented the dark side of knowledge management believing that he knew more about new drug development the subject of the firms knowledge repository than anyone in the firm or perhaps the world Since there is apparently much deep knowledge about specific aspects of drug development but very little understanding of the entire processeven in drug companieshe may even have been correct in this belief His colleagues and customers Page 114 within the organization however bridled at his intellectual arrogance While the project was successful overall his domineering personality made the objectives more difficult to accomplish The Chief Knowledge Officer Many firms in the United States and a few in Europe have now appointed chief knowledge officers CKOs to lead the knowledge management charge Others have created chief learning officers a related role that involves both the management of knowledge and the facilitation of organizational learning Both of these positions are senior management roles on the level of chief information officers heads of the human resources organization and other functional and business unit leaders Other related positions include director of intellectual capital a position at Skandia the Swedish insurance company director of knowledge transfer Buckman Laboratories and global director of intellectual assetintellectual capital management Dow Chemical The role of a chief knowledge officer is complex and multifaceted Many firms of course dont yet have anything like a CKO Even if yours doesnt if youre serious about managing knowledge someone has to undertake the executivelevel tasks If your firm is considering the creation of such a job or if you are angling to become a CKO yourself you must recognize that some will consider the role a passing fad To make the job real its specific tasks and responsibilities must be carefully enumerated The list below of CKO musts will provide a good start for a company attempting to shape the role The chief knowledge officer in an organization must Advocate or evangelize for knowledge and learning from it Particularly given the important role for knowledge in the strategies and processes of many firms today longterm changes are necessary in organizational cultures and individual behaviors relative to knowledge These changes will require sustained and powerful advocacy Design implement and oversee a firms knowledge infrastructure including its libraries knowledge bases human and computer knowledge networks research centers and knowledge oriented organizational structure Manage relationships with external providers of information and knowledge for example academic partners or database companies Page 115 and negotiate contracts with them This is already a major expense item for many companies and efficient and effective management of it is important Provide critical input to the process of knowledge creation and use around the firm for example new product development market research and business strategy development and facilitate efforts to improve such processes if necessary Design and implement a firms knowledge codification approaches as described in Such approaches specify key categories of information or knowledge that the organization would address and entail mapping both the current knowledge inventory and future knowledge models Measure and manage the value of knowledge either by conventional financial analysis or by anecdote management If the organization has no sense of the value of knowledge and its management the function wont last long Manage the organizations professional knowledge managers giving them a sense of community establishing professional standards and managing their careers These workers may be matrixed between the CKO and managers of the domains where the company focuses knowledge management efforts for example a particular market product set or type of customer Lead the development of knowledge strategy focusing the firms resources on the type of knowledge it needs to manage most and the knowledge processes with the largest gaps between need and current capability Of all of these CKO responsibilities three are particularly critical building a knowledge culture creating a knowledge management infrastructure and making it all pay off economically The cultural factors usually entail longterm change and probably will hinge on the types of people a company hires and the reasons they come to work there in the first place In the short term however a firm can begin to foster a knowledge culture in part through such means as education incentive programs and management example Setting up a knowledge management infrastructure involves more than making a decision between Lotus Notes and a Webbased intranet system As we will discuss in there is a substantial technology component to knowledge management the task involves workstations Page 116 networks databases search engines and even word processing and desktoppublishing tools But the human resources issuessetting up structures for the development and maintenance of knowledge bases in different functions and departmentsare more difficult to create and manage These include human networks some of the roles and responsibilities described in this chapter and even relationships across firms Only a few organizations have built a fully capable infrastructure For example John Peetz CKO at Ernst Young has set up a substantial organizational infrastructure for knowledge management There are knowledge councils at the firms international level its national level and its business unit audit tax consulting level Within the consulting organization which began managing knowledge first there are knowledge networks for each key practice area It takes substantial time and effort to create and maintain such an infrastructure but its necessary if knowledge management is to become institutionalized Anecdote management can be the best way for a chief knowledge officer to justify knowledge work And no knowledge management undertaking will come to much unless there is a close tie to dollars yen and marks The CKO has to determine how better management of knowledge will help the firm make or save money and must be able to document that connection Gordon Petrash at Dow Chemical saved his firm more than 4 million through better management of patents alone At Buckman Laboratories there are no overall figures for increased revenues available but anecdote management is a key focus The firm has plenty of examples of how sharing and using knowledge led to big sales that wouldnt have happened otherwise Figures and stories are the ultimate weapons when budget renewal time arrives Perhaps the best example of measuring the economic value of knowledge is at Skandia Leif Edvinsson the firms director of intellectual capital has led a comprehensive effort to measure the firms intellectual capital and has published several annual reports on the firms progress in accumulating such capital As in any new position in organizations the personal characteristics of a CKO are critical As we see it some of the following attributes would be desirable for a CKO in addition to the general attributes and skills of a senior executive If youre thinking youd like to be a CKO you can test your own background against these criteria Page 117 Deep experience in some aspect of knowledge management including its creation dissemination or application Familiarity with knowledgeoriented organizations and technologies libraries groupware and so forth Display of a high level of knowledgeability directly related to ones professional stature Comfort and ideally personal experience with the primary operational processes of the business As this list suggests CKO positions require a blend of technical human and financial skills Although it is necessary to have some experience with efforts to use technology for knowledge capture and distribution a good CKO combines an orientation to technologybased explicit knowledge with a feel for the cultural and behavioral factors that impede or enable knowledge Faith in the virtues of knowledge is an important characteristic but it must be combined with a hardnosed business sense Executive recruiters and our personal experience tell us that its difficult to find this combination of hard and soft attributes in one person The structure and reporting relationships of the CKO role and its associated organization are also importantnot only for daytoday execution but also for symbolic value Our research shows that there are generally three options for the location of the CKO role in a firms organization chart It can be a senior standalone role or it can be combined with either the human resources HR or information systems IS functions Well describe later a few firms that have combined knowledge management and HR or IS organizations with some measure of success Both of these existing functions however have many responsibilities that do not involve knowledge in any substantial way Combining knowledge management with them is bound to dilute the importance of knowledge and send a signal that it is less important than these more traditional roles A standalone role is therefore the most desirable situation As described above the CKO job is an important and complex one and clearly substantial enough to stand on its own Furthermore the establishment of a new role and infrastructure sends an important signal to the organi Page 118 zation To embed it within another function makes it seem less important and easier to ignore Naturally an independent CKO will still have to maintain a close liaison with a firms information technology and human resources management executives The standalone knowledge organizations we have seen thus far generally report to the president or CEO of a company though there are also examples of CKOlike roles that report through the senior RD or technology officer A related but confusing issue that bears on the reporting relationships of the senior knowledge executive is establishing parameters for knowledge management organizational learning and intellectual capital While the three provinces are obviously related the senior roles built around each tend to involve different responsibilities and incumbents with different backgrounds We believe that firms should integrate these roles but only a few have done so If a company calls the position chief knowledge officer chances are good that a primary focus of the role involves capturing and leveraging structured knowledge with information technology as a key enabler Managers with these roles often come from technologyoriented backgrounds though they also typically have experience in cultural and organizational change For example Nick Rudd voluntarily surrendered his role as chief information officer at Young Rubicam the big advertising agency for a new CKO role at Wunderman Cato Johnson one of the YR business units Rudd had been yearning to move in a more knowledge oriented direction for several years but he felt that he could have much more direct impact at the business unit level and this business unit was much more interested in managing knowledge than any other While he had been a technology manager for more than twenty years he has a strong predisposition to issues of learning and change as well Similarly Mark Demerest Sequent Computers CKO was formerly a manager in the companys technology architecture group and worked both internally and with customers on architectural planning By contrast if the senior role is designated chief learning officer CLO you can bet that the key focus of the job has more to do with training and education than with capturing and leveraging structured knowledge Its also likely to involve the human resources function more than the information systems group Most of these executives have responsibility for executive development at a minimum and sometimes all employee training CLOs tend to come from human resources or organizational development backgrounds General Electrics CLO Steve Page 119 Kerr formerly a professor of organizational behavior presides over GEs education center in Crotonville New York Monsantos first CLO was previously head of human resources Both managers have some interest in managing explicit knowledge but their primary focus is executive and employee development Positions having intellectual capital or assets in the title tend to be in the middle with a strong focus on converting knowledge into revenues and profits The two most prominent holders of such positions are Leif Edvinsson at Skandia and Gordon Petrash at Dow Chemical Edvinsson as described above concentrates on measuring the value of Skandias intellectual capital and communicating the value to the investment community Petrash whose title is Global Director of Intellectual AssetIntellectual Capital Management has a strong RD background and emphasizes management of Dows intellectual property including patents and licenses One of the more balanced approaches to the senior knowledge role can be seen at CocaCola Judith Rosenblum became Cokes first CLO in 1995 and was previously vicechair for learning education and human resources at Coopers Lybrand Her job at Coke however goes well beyond the usual training and HR bureaucracy It includes organizational learning knowledge management and establishing solid links between knowledge and learning and shareholder value Managers who report to Rosenblum have responsibility for each domain and her job is to integrate them Like John Peetz at Ernst Young Rosenblum has placed a strong emphasis on building an organizational infrastructure for knowledge and learning training a large contingent of fasttrack managers to lead knowledge efforts all around the firm CKO roles are particularly appropriate in firms where knowledge is a critical business resource Professional service firms have this characteristic and many of themincluding Ernst Young IBM Consulting Coopers Lybrand Booz Allen Hamilton and EDShave established CKO roles Young Rubicam and its subsidiaries one of which created a CKO role are also businesses that sell advertising and marketing knowledge Each of these organizations has realized that their clients are seeking not only the services of individual professionals but the aggregated knowledge of their worldwide staffs At Ernst Young for example in addition to presiding over the organizational infrastructure described above the CKO works with tech Page 120 nologists to develop a knowledgeoriented infrastructure Its also his job to translate the strategic directions of the firms audit tax and consulting business units into specific knowledge requirements and desirable knowledge behaviors In fact several of the firms different national practices including Canada the United Kingdom and continental Europe have each named their own CKOs and they coordinate their activities through an international knowledge committee CKOs are also appropriate in businesses where knowledge is embedded in the products sold or critical to the services offered to customers This is a likely situation for example in the computer industry Sequent Computer created its CKO role when managers realized that knowledge management in the form of an online repository called the Corporate Electronic Library was critical to sales of its highend servers and to the professional services business it had recently started CKOs have also popped up in industries that one wouldnt initially associate with knowledge such as insurance Skandia in Sweden and Lincoln National Life in the United States have created CKO like positions as have a couple of Canadian insurance companies But the insurance business actually contains several important knowledge domains including underwriting knowledge actuarial knowledge and investment knowledge Insurance companies were among the most active developers of computerbased expert systems in the 1980s Several insurance CEOs have even proclaimed to us that they are really in the knowledge business not the insurance businessthough in our opinion they have yet to explain the implications of these statements Still creating a CKO role is not for every firm Even in companies where knowledge management is quite popular there may be circumstances that dictate against establishing a CKO position The organization may have such a decentralized organizational structure that a central knowledge role would be inappropriate At HewlettPackard for example despite the fact that more than a score of knowledge management initiatives are underway throughout various parts of the firm HP managers doubt that a formal CKO job will ever grace the corporate organization chart The firm consists of a set of decentralized autonomous business units and for a central CKO to try to influence divisional knowledge plans and policies would be wholly inconsistent with the HP Way Another reason firms may decide against establishing a CKO is that Page 121 all important CKO functions are already being performed by other managers At Andersen Consulting there are already more than two hundred knowledge managers working at various industry or competence groups around the firm but the company has no plans for a CKO The functions of a CKO are currently divided among several different roles and like many partnerships Andersen has an antipathy toward senior overhead roles Most of the necessary knowledge leadership tasks are clearly well covered however since Andersens Knowledge Xchange repository is one of the most ambitious and successful knowledge efforts in business today It has over 40000 users thousands of knowledge bases and many examples of successful application in Andersens client work In decentralized organizations it makes sense to assign CKO functions to a number of different managers When there are obstacles to creating a CKO position per se it may be helpful to combine it with other roles Several chief information officers for example including those at HewlettPackard and General Motors have taken on knowledge management as a component of their overall responsibilities At Buckman Laboratories the existing director of information systems became the director of knowledge transfer but still maintained the oversight of the chemical companys information systems At Lincoln National when a CIO left the company a new chief information and knowledge officer took his place Since there are still substantial responsibilities involved in building and maintaining an organizations IT infrastructure it will be easier to focus on knowledge if some of the IT activities are shifted to other departments or outsourced At General Motors knowledge management started out under the head of IT but moved into a more marketingoriented group when a new CIO came on board Most CKOs feel that they can accomplish little by themselves they manage others who do the tactical work of knowledge management In at least one case however the CKO stands alone or rather relies on managers and employees who are not knowledge professionals Nick Rudd the CKO at the Wunderman Cato Johnson division of Young Rubicam intentionally avoided building a staff because he feels the work of managing knowledge is the responsibility of all knowledge workers He attempts to persuade the directmarketing firms managers to start Page 122 their own projects and to use their own people to carry them out Wunderman only recently created Rudds role and it is probably too early to assess the results We have explored four levels of knowledge management roles line workers who must also manage knowledge within their own jobs knowledge management workers knowledge project managers and the senior knowledge executive This is a good snapshot of the organizational structure for knowledge in leading corporations While some firms will have different structures someone must perform these roles and activities if the company is truly committed to managing knowledge But remember that knowledge management is still an emerging field that is being explored primarily at companies where business and organizational environments are changing rapidly Therefore any company embarking upon knowledge management should be prepared to adjust its structure and roles frequently As one researcher put it with regard to organizational structures in fast changing Silicon Valley firms The pivotal importance of informal networks in hightechnology companies is due to the fact that the productivity of knowledgebased entities depends on employees capabilities commitments motivations and relationships They cannot be programmed around predetermined roles and positions in a machinelike hierarchy Moreover continuous change typically renders institutionalized roles and positions somewhat obsolete 6 If there is one overriding principle to keep in mind regarding knowledge management roles and responsibilities it is that they should be real jobs requiring dedicated resources One of the reasons knowledge hasnt been well managed in the past is that no one was clearly responsible for it In todays harried business environment few employees will be able to mix corporate knowledge management responsibilities with their existing jobs They will be lucky enough if they have time to manage their own knowledge and share it with others Page 123 7 Technologies for Knowledge Management The real danger is not that computers will begin to think like men but that men will begin to think like computers Sydney J Harris As weve asserted throughout this book knowledge management is much more than technology but techknowledgy is clearly a part of knowledge management Indeed the availability of certain new technologies such as Lotus Notes and the World Wide Web has been instrumental in catalyzing the knowledge management movement Since knowledge and the value of harnessing it have always been with us it must be the availability of these new technologies that has stoked the knowledge fire A Case in Point HewlettPackard At HewlettPackard for example knowledge technologies are bursting out all over The firms information systems managers began to notice around 1995 that the real growth in applications had less to do with data than with technologies for managing knowledge expertise and documents containing them When they convened a workshop to discuss knowledge management applications they were surprised to hear about more than twenty Since most of these applications involved Webbased intranets or Lotus Nets HPs IT managers established a general policy that Notes should be used for discussionoriented applications and the Web for publishing purposes Of course the actual ways in which these tools were employed were more complex than these guidelines Today HewlettPackard is a showcase of Webbased knowledge management The companys Electronic Sales Partner ESP system contains Page 124 hundreds of thousands of documents that help HPs computer systems sales force in the sales process White papers sales presentations technical specifications and pointers to external materials are all available worldwide through an intranet Web Anyone within HP can submit a document for possible inclusion on ESP a small group of reviewers determines whether the submitted documents are unique and appropriate for the system Eventually the selected documents are classified automatically based on metaknowledgeclassifications of the type and format of knowledgefurnished by the submitting employee The system also includes a search engine a function for browsing documents by category tools for assessing accesses by HP employees and archiving capabilities for documents that have not been recently accessed Based on the numbers of submissions and accesses as well as anecdotal information about the use of ESP in successful sales efforts the system appears to be a great success Calling it the most successful implementation of software I have seen in twenty years the manager of the sales support area reports phenomenal feedback from both submitters of information and users The only difficulty cited by HP involves navigating among the vast number of documentsa problem that will probably get worse before it improves HP has another Webbased system called Connex in its RD laboratories to identify experts Connex allows an HP employee to search for an HP Labs expert who for example has a PhD in electrical engineering knows ISDN well and lives in Germany The company has mastered the technical side of this locator service but is still wrestling with the issue of how to motivate scientists to include their biographies and with the controversial connotations of the term expert The same system has also been used to identify experts within the training and education community HewlettPackard uses Notes for both internal and external knowledge applications a Trainers Trading Post application allows trainers and educators throughout HP to exchange experiences with educational programs and offerings Externally a Notesbased application called HP Network News allows resellers of HP computer systems to get product and service knowledge without having to make a phone call While Notes and the Web are the most visible knowledge tools at HP there are many underlying infrastructural elements that support knowledge management as well One reason the firms various knowledge repositories are so useful is that HP has a common set of tools for word Page 125 processing presentations and spreadsheets Any document produced within the company therefore can be read and modified by other users Many of the knowledge applications also incorporate such infrastructural tools as database management systems document search engines and HPs worldwide communications network HPs technology managers are now exploring a new tool called GrapeVINE that allows targeted distribution of knowledge based on content categories that are specified by knowledge users The concept of knowledge management then would be much less powerful at HP and at many other firms without these knowledge oriented technologies Technologys most valuable role in knowledge management is extending the reach and enhancing the speed of knowledge transfer Information technology enables the knowledge of an individual or group to be extracted and structured and then used by other members of the organization or its trading partners worldwide Technology also helps in the codification of knowledge and occasionally even in its generation However knowledge management technology is a broad concept encompassing much more than Notes and the Web Firms can apply a wide variety of technologies to the objectives of managing knowledge some of which have been available for many years In this chapter we will review these technologies discuss their application to knowledge management problems and describe how to combine them with more humanoriented knowledge management approaches to create a dynamic knowledge environment Expert Systems and Artificial Intelligence While knowledge management is a relatively recent field of study attempts to use technology to capture and manipulate knowledge have been underway for decades Going under the name of artificial intelligence these efforts have typically concentrated on managing narrow domains of knowledge such as configurations of computers or the diagnosis of a particular type of disease We will review these technologies which include expert systems case based reasoning and neural networks only briefly here since there is an extensive body of literature on the subject 1 We will mainly look at what has happened with these technologies in business environments as well as comment on some Page 126 newer technologies such as Notes and the Web that have become popular for managing businessoriented knowledge Like many technology fields the area of knowledge technology has suffered from overly high expectations and excessive levels of hype particularly with regard to expert systems It is fair to say that the vaunted potential of expert systems has never been realized Here is a typical pronouncement written a little more than a decade ago It is early yet to estimate the magnitude of the contribution expert systems will make to the extension of human capability and to our effectiveness as managers and it would be more than a little reckless to rank it now along with steam power and electricity But the contribution will be in that class and will be indeed profound 2 Other authors speculated that expert systems would change the way businesses operate by altering the way people think about solving problems help America solve its productivity problems and help businesses reorganize themselves into more efficient and effective organizations With such systems managers will be able to monitor more activities and personnel while simultaneously increasing the quality and quantity of decisions training will also be revolutionized and in short the whole business environment should become much more rational3 The wildest exaggerations came from adherents who envisioned machinery replacing human brainpower Here for example is MIT professor Marvin Minskys 1970 prediction In from three to eight years we will have a machine with the general intelligence of an average human being I mean a machine that will be able to read Shakespeare grease a car play office politics tell a joke have a fight At that point the machine will begin to educate itself with fantastic speed In a few months it will be at genius level and a few months after that its power will be incalculable4 The shortcomings of artificial intelligence should heighten our appreciation for human brainpower As we know neither expert systems nor any other branch of artificial intelligence has lived up to this prediction Even the prospect of a computer greasing cars is nowhere in sight Indeed the limited success of artificial intelligence systems has fostered a greater appreciation for just how rich and complex human knowledge is Take the case of McDonnell Page 127 Douglas now a part of Boeing which developed an expert system to scan aircraft approaching the runway and determine if they were positioned properly for landing The company knew that experienced ground crews could tell at a glance if a pilot needed to adjust pitch raising or lowering the nose bank alignment or speed After watching thousands of landings these personnel had internalized a lot of information and knew intuitively what a good landing looked like But they were not in a position to communicate corrections to the pilots Moreover McDonnell Douglas wanted a system that would work in low visibility So the company decided to build an expert system that captured this human knowledge They interviewed and tested the ground crews to learn as much as possible about what they saw during that brief overtheshoulder observation Then they incorporated that material into a system that eventually proved to be 80 to 85 percent as accurate as the twosecond human glance a level of success that justified the effort according to McDonnell Douglas Nevertheless the fact that it took two years and considerable expense to capture even a relatively small straightforward amount of human expertise shows how difficult it is to embed tacit knowledge in such a system A different branch of artificial intelligence attempts to combine the power of narrative with the codification of knowledge on computers Called casebased reasoning or CBR the technology involves extraction of knowledge from a series of narratives or cases about the problem domain CBR technology has been commercially successful in resolving customer service problems over five hundred firms use CBR for this purpose Unlike expert systems which require that rules are well structured with no overlaps case structures can reflect the fluid thinking that goes on in our minds According to one expert on the technology Casebased reasoning is both a cognitively plausible model of reasoning and a method for building intelligent systems It is grounded in commonsense premises and observations of human cognition and has applicability to a variety of reasoning tasks providing for each a means of attaining increased efficiency and better performance 5 Whether casebased reasoning can take on other types of knowledge with commercial success however remains to be seen Companies have applied CBR to such tasks as planning scheduling design legal reasoning story understanding and robot navigation but the technology has not achieved broad business application in any of these areas We Page 128 describe CBRs considerable successes in the customer service domain where rapid access to knowledge is at a premium later in the chapter Casebased reasoning programs have been shown to bring about marked improvements in customer service The reality of expert systems and artificial intelligence in business has been much less spectacular than originally anticipated though certainly not without value While organizations have implemented technical systems in narrow knowledge domains humans have not been supplanted as knowledge providers The field of knowledge engineering thrives in a few areas but has never taken off in a general sense Therefore we believe that the foreseeable future will bring evolutionary not revolutionary improvements in technology and a continued heavy role for people as more than passive users of knowledge technologies Implementing Knowledge Technologies The concept of knowledge management technologies is not only broad but also a bit slippery to define Some infrastructure technologies that we dont ordinarily think of in this category can be useful in facilitating knowledge management Take videoconferencing for example or even the telephone Both of these technologies dont capture or distribute structured knowledge but they are quite effective at enabling people to transfer tacit knowledge The BP Exploration Virtual Teamwork project discussed in involved nothing other than providing a desktop videoconferencing infrastructure to help people exchange knowledge across vast distances BP experts in Italy and Alaska for example fixed a problem with a drill rig compressor in Latin America in a videoconference Instead of the days it would have taken for the experts to fly in and solve the problemdays when oil wasnt coming out of the groundthe defect was corrected in hours We all use telephones for knowledge transfer And any manager will quickly realize that knowledge workers are unlikely to make effective use of knowledge repositories if they do not have personal computers on their own desktops Because tools like PCs videoconferencing and telephones are well understood we wont focus any further in this chapter on infrastructural technologies that make knowledge transfer Page 129 possible But if youre a manager with the objective of facilitating knowledge dont overlook them Our focus here however is on the technologies that capture store and distribute structured knowledge for use by people The goal of these technologies is to take knowledge that exists in human heads and paper documents and make it widely available throughout an organization We will also focus on the human dimension of knowledge technologieshow they are used by people in organizations and what difference they make to organizational processes structures and cultures Since it is the value added by peoplecontext experience and interpretationthat transforms data and information into knowledge it is the ability to capture and manage those human additions that make information technologies particularly suited to dealing with knowledge While technologies designed for managing data are structured typically numerically oriented and address large volumes of observations knowledge technologies deal most frequently with text rather than numbers and text in relatively unstructured forms such as clauses sentences paragraphs and even stories Volume may be the friend of data management but it is the enemy of knowledge managementsimply because humans have to sift through the volume to find the desired knowledge Vast amounts of computerized processing may take place on data without substantial human intervention Knowledge technologies however are more likely to be employed in an interactive and iterative manner by their users Therefore the roles of people in knowledge technologies are integral to their success The different roles of people is also a key factor in distinguishing the various types of knowledge technologies Some technologies involve participation by broad groups in the use of knowledge others involve only a few individuals An even more critical differentiating factor is the level of knowledge required to successfully use a particular technology Some knowledge tools effectively require that the user be something of an expert on the topic others assume that the user is a more passive participant in the knowledge process This dimension is used to structure much of the discussion below of individual knowledge management tools see diagram The other key dimension is the time required to find a knowledge management solution in a particular business application of a tool Some knowledgework environments allow time for search synthesis and reflection others such as those in Page 130 Key Dimensions of Knowledge Management Tools volving customer inquiries require realtime or near realtime performance Broad Knowledge Repositories One of the bestknown approaches to using technology in knowledge management is the repository of structured explicit knowledgeusually in document form Such repositories have been present for decades in the form of computerized databases of published materials for example LexisNexis and Dialog A few companies have used external online services to store internal knowledge repositories Buckman Laboratories for example employed a private branch of the CompuServe service as its repository for documents and discussion on customer product and competitor knowledge The firm has recently shifted to an intranet but for four years it employed CompuServe quite successfully and was able to focus on content issues rather than technology problems The best example of a broad knowledge repository is the Internet As a source of outside knowledge the Internet can overcome some of the disadvantages of the localness and asymmetry of knowledge since a subject search will return results from the whole system Localness is not an issue because it does not matter to the user where material resides The hypertext that has made the World Wide Web such a success allows related content to be linked regardless of its physical location Page 131 Although these systems partly solve the problem of locating knowledge they often compound the problem of judging the knowledge that is being provided As anyone who has carried out an Internet search knows the overwhelming majority of hits supplied by search engines are irrelevant or worthless A tremendous amount of time can be wasted sorting through trash to find a few treasures The level of trust in the Internet knowledge market is thus justifiably low You might recall the former diplomat who brandished a secret report that the US military had shot down TWA Flight 800not realizing that the report had originated on the Internet where numerous conspiracy theorists ply their trade Future technical innovations such as increased speed and more sophisticated search engines will probably make the Internet a better knowledge source But the emergence of human Internet brokers or librarians with reputations for finding quality material would enhance the value of the Internet as a knowledge tool more significantly than purely technical improvements One information entrepreneur is currently attempting to develop such a network of librarians In the past repositories were largely external to any particular organization they were used to obtain competitive intelligence market knowledge or external technical legal or commercial knowledge Now however many firms are creating repositories of internally sourced structured knowledge They are creating repositories of internal product knowledge marketing knowledge customer knowledge or other types Lotus Notes and Intranetbased Webs are the two leading toolsets for managing knowledge repositories today Although the functionality of these two tools is merging there are still differences between them In early 1997 Notes excels at database management discussiongroup creation and management and replication of databases for remote disconnected use in the field The Web is ideal for publishing information across multiple types of computer platforms for multimedia databases and for displaying knowledge that is linked to other knowledge through hypertext links In the fairly near future these capabilities will be available on both technologies At present Notes is a more comprehensive outofthebox solution that includes many of the capabilities replication security applicationdevelopment tools that organizations will eventually have to purchase in using Webs However the growth in Web capabilities is much faster since thousands of companies rather than one are working on them If Page 132 youre starting a knowledge management project today involving publishing discussion and search wed recommend using the Web because of its maturation trajectory and because its a lot simpler for users to understand If youve been doing this type of knowledge management for a while youve probably been doing it in Notes and we see no reason to switch now It particularly excels at the lessons learned form of knowledge management involving discussion The Lotus Domino Web server allows knowledge to be created in Notes and then distributed over the Web Professional services and consulting firms were some of the earliest adopters of Notes for the purpose of knowledge management and it is safe to say that they have advanced the frontiers of the tool Firms such as Ernst Young Andersen Consulting Price Waterhouse and Coopers Lybrand all have very large repositories of knowledge from serving clients several of which exceed a thousand different databases Notes is particularly appealing in professional services because work in that industry often involves travel to the client site and the replication feature in Notes allows a remote employee to quickly download all new items added to databases of interest and then to peruse them offline Firms outside of the professional services industry have also adopted Notes for knowledge applications Chrysler for example has used it to create an Engineering Book of Knowledge a set of lessons learned in the design and engineering process about particular car components Since it is relatively easy to develop Notes applications many of them are developed by individual users and can overlap in functionality and content Most of these firms knowledge architectures in Notes are a bit haphazard finding the knowledge one wants from so many different places to look is very challenging even with the Yellow Pages or card catalogue applications that most of these firms have devised Andersen Consulting for example has developed at least three levels of navigation tools for its enormous Knowledge Xchange system but users still find it difficult to negotiate among the more than twentyfive hundred Notes databases in the repository Firms will increasingly have to use rigorous management approaches to deal with Notes databases and content in the future including criteria for application development naming conventions for data or knowledge bases and the content within them and the creation of reusable knowledge management templates and objects This level of structure may seem a bit Procrustean but it is necessary if the largevolume repository is the mechanism of choice Notesbased knowledge management implementations are often ac Page 133 companied by other tools particularly where the management of external knowledge is concerned Two such tools are Hoover from Sandpoint Systems a unit of Dun Bradstreet and GrapeVINE from Grapevine Technologies Hoover searches through selected external databases sucking up knowledge that has been identified as relevant based on userspecified keywords to a particular user or group within a company Hoovers customer does not have to specify or know the sources from which the knowledge is drawn Notes is typically employed to distribute the found knowledge to the users desktop Monsanto for example uses Hoover and Notes to distribute external market knowledge to the desks of scientists developing new chemicals and genetic advances The goal of the initiative is to ensure that scientists develop new products that are not only technically successful but also consistent with the needs of customers and distinct from competitor offerings Automated search programs similar to Hoover are offered by Individual Inc NewsPage OneSource Information Services Company Watch and Bolt Beranek Newman Personal Internet Newspaper GrapeVINE a program used for knowledge management at such firms as HP Andersen Consulting and Ford is a somewhat more structured technology for bringing external knowledge into an organization It can also be combined with Notes for purposes of distribution and alignment with other knowledge management applications GrapeVINE like Hoover searches through external databases It does its searching however not on the basis of simple keywords but rather on a knowledge charta hierarchical map of an organizations knowledge terms and relationships The chart is not easy to construct and maintain but it can allow a more strategic perspective on what knowledge really matters to the organization GrapeVINE also allows designated knowledge editors to comment on and prioritizein other words add value toexternal data that GrapeVINE has brought in and escalate the importance of an item to ensure it reaches the PCs of the employees and managers who need it If an organization is willing to make the commitment to the organizational and technical infrastructure demanded by GrapeVINE it can be a very useful vehicle for managing external knowledge Repositories based on the World Wide Web are rapidly picking up steam The Web is a very intuitive technology and deals easily with audio graphic and video representations of knowledge Knowledge in a particular domain is often related to other knowledge and the hypertext structure of the Web makes it very easy to move from one piece of knowledge to another Most Web based repositories are smaller and Page 134 easier to negotiate than those built in Notes Intranet Webs are therefore the easiest way to get into knowledge management However if you plan to use Web technology for knowledge management particularly the searchandretrieval of structured documentbased knowledge dont think that a Web browser and server software is all that you need A complex suite of tools is normally necessary to capture the information store it and allow broad access The usual requirements include Hypertext Markup Language HTML publishing tools for producing Web documents a relational database system for storing them text searchand retrieval engines and some approach to managing the metaknowledge that describes and facilitates access to the knowledge youve got on handplus of course your preferred Web browser and server If this seems rather overwhelming there are some organizations that sell a bundled Webbased knowledge management capability for example Sequent Computers Knowledge Depot products and services Sequent used all these tools internally to develop its Sequent Corporate Electronic Library SCEL a Webbased repository of information and knowledge Development of the system began in 1994 making it one of the oldest Webbased repositories Initially the SCEL was developed to support the sales force Sequents vice president of corporate architecture Dave Rodgers argued that the system would allow sales representatives to become productive more quickly at a time when the firm had substantial turnover in field sales Over time however the SCEL has become a onestop shop for information and knowledge of all kindsfrom the Corporate Mission Statement to lunch menus at its corporate headquarters in Portland Oregon While we see the virtues of having one place to go for all computerbased knowledge the idea of putting highly prosaic content into a knowledge repository does not appeal to us Were afraid that as with network television bad content will drive out good A good thesaurus is essential to most online knowledge repositories Another requirement for searchandretrieval knowledge management is the development of an online thesaurus Knowledge is unwieldy to structure and you will find that searchers will be looking for knowledge using terms that you cant always anticipate The idea behind a thesaurus is to connect the terms by which youve structured the knowledge with the terms employed by the Page 135 searcher This isnt that tough technically if youve bought a search engine It is more difficult to compile a set of meaningful terms by which your knowledge repository can be searched The underlying technique for both Web and Notesbased knowledge repositories is text searchandretrieval While this technology has been around for decades it has both strengths and shortcomings for knowledge management On the positive side the knowledge itself typically has plenty of meaningful context that was created by the original author of the article legal brief or biography However the knowledge in textual databases is indexed on the basis of keywords and their proximity in the text These are relatively shallow aspects of the knowledge and it can be difficult to extract knowledge in search queries on this basis And if the information about a problem is not already in text form putting it in that form requires significant time and human labor Notes and the Web can be used for other knowledge management applications as well One popular application for example is the expert locator which allows users to search through a set of biographies for an expert on a particular knowledge domain This is still a form of repository but the objective is to locate people rather than documents Intranetbased Webs combined with databasemanagement software are the most popular technology for this type of application The data on the expert may include educational background jobs held within and outside the company current projects or responsibilities and particular skills including languages spoken or computer proficiency Most importantly the expert locator should include a keywordbased guide to the domains of expertise in the company If someone seeks an expert on the topic of database marketing for example it should be easy to connect with experts having that expertise by searching on that keyword The technology associated with expert locators is relatively straightforward In addition to a Web browser and server software the application will typically require some system of database management and a search engine As with repositories the search engine should work with a thesaurus since the terminology in which expertise is sought may not always match the terms the expert uses to classify that expertise Database marketing searches for example should also turn up experts in interactive marketing response management and fulfillment Companies do however often encounter nontechnological difficulties in building expert locator systems The systems require a considerable time commitment on the part of the expert or of some intermediary Page 136 to enter and update biographies into the database Motivating experts to perform such tasks may be difficult As we made clear in our discussion of mapping knowledge the very idea of designating some employees as experts may also be fraught with political peril We mentioned HewlettPackards expert locator system at the beginning of the chapter Another firm that has constructed this type of system is Teltech where it is at the core of the firms business Teltechs system deals with a network of external experts The company first used conventional textual database systems and now employs Web technology to allow both Teltech analysts and clients to search for experts in a wide range of technical domains The companys thesaurus of technical terminology is critical to the ability of users to match their need for expertise with available experts Teltech creates the online biographies from paper documents and also has a consulting service to create a locator system for clients However the knowledge management activities that can be supported via Notes or the Web dont encompass all possible situations These technologies work well for broad knowledge domains when there is no right answer to a problem or when there are many different answers scattered around the organization The use of these tools requires substantial user time to search the database and read the retrieved knowledge and intelligence to synthesize and interpret the retrieved knowledge Not all knowledge management environments needless to say are blessed with these conditions Many firms have adopted both Notes and the Web for knowledge management We have already mentioned both technologies for example at HewlettPackard At National Semiconductor employees in the marketing and sales functions gravitated to Notes for knowledge management largely because they traveled frequently in their jobs and used the replication feature of Notes Engineers however were drawn to the Web for their knowledge repositories because they were comfortable with the Unix tools often employed with the Web and because they were already heavy users of the Internet Theres generally no rush to settle on a single technology strategy The firms managers decided that there was no reasonfor the moment at leastto move to a single standard for knowledge tools Early on in the life of knowledge management initiatives a let a thousand flowers bloom technology strategy may be helpful in encouraging learning and explo Page 137 ration Later on however the sharing of knowledge across organizational boundaries will be easier with a single broadly employed toolset Focused Knowledge Environments Some organizations have concentrated knowledge domains rather than a community of expert users This is the best situation for expert systems which can enable the knowledge of one or a few experts to be used by a much broader group of workers who need the knowledgesay a group of insurance salespeople who need to be able to do financial planning for their customers but who dont know much about financial planning The user normally needs to engage in a dialogue with the system entering information about the problem or situation a process that takes time Expert systems which are typically structured in a set of rules can perform very complex reasoning such as that required in detailed financial planning However it can be difficult to extract knowledge from an expert in the first placeeither because the expert doesnt know what he or she knows or because he or she doesnt want to surrender the knowledge For this reason the rules governing the expert system must be carefully specified in a tight structure and must not contain overlapping knowledge Expert systems have one other related requirement because these highly structured systems are difficult to maintain or add knowledge to the knowledge domain needs to be fairly stable American Express for example still uses its Authorizers Assistant expert system for credit authorization because the factors that make for good credit risks or deadbeats have remained fairly constant On the other hand Digital Equipment stopped using the XCON configuration system because its product line changed constantly and the system was too difficult to maintain One recent research study found that only a third of the expert systems developed in the 1980s were still in use by 1992 The systems were abandoned less for technical reasons than for organizational onestheir sponsor moved on there were difficult politics in extracting knowledge from experts or representing users as less than expert or the systems were viewed as too expensive to update and maintain 6 Another option for companies with focused knowledge environments are constraintbased systems which are suited for situations with high levels of data but normally less quantitative data than that required by Page 138 neural networks Like expert systems they are suited for relatively narrow problem domains such as product configuration or pricing Constraintbased systems capture and model the constraints that govern complex decision making determining for example what kind of memory hard disk modem and video board work with a computer having a particular processor and operating system Because constraintbased systems are usually objectoriented underneath rather than rulebased they are easier to modify than expert systems there are no complex interactions to understand and modify Constraintbased systems from Trilogy Development Group are currently being employed in the configuration of complex productsfrom Boeing airplanes to Digital and HewlettPackard computers to office furniture layouts At Boeing for example there are literally millions of possible configurations of airplane models numbers of seats galley and lavatory options and placements and engine choices Keeping track of valid configurations across multiple functional departments throughout multiple design changes has proven to be too difficult for either humans or ordinary computer systems While Boeing has not yet completed the implementation of its configuration system it expects to ultimately reduce its timetomarket for a configured airplane by 50 percent and to reduce its production costs by 25 percent 7 Trilogy technology is also behind a recently introduced application that allows you to configure custommade Italian shoes quickly and at a reasonable cost Similar constraintbased tools are being developed by other software manufacturers and will be embedded within broad enterprise resource planning packages that combine configuration with manufacturing inventory management and financial systems RealTime Knowledge Systems If you have little time and smarter users the knowledge management tools described above will be less appropriate Take customer support or help desk applications for example These processes are usually performed by bright analysts especially in IT vendor firms but time is usually of the essence because the customer is on the telephone in real time In this situation there are a couple of options If your users are only somewhat expertcapable of understanding problems but not normally of solving them or classifying their symptomsthen casebased reasoning is your best bet CBR applications require someone to Page 139 input a series of cases which represent knowledge about a particular domain expressed as a series of problem characteristics and solutions Then when a customer analyst is presented with a problem its characteristics can be compared against the set of cases in the application and the closest match is selected CBR is a branch of artificial intelligence that is most commonly found in the customer service and support process in firms Inference Corporation is the leading vendor of CBR tools which are used in a number of customer support environments including HewlettPackard Compaq PeopleSoft Reuters Xerox and Broderbund 8 Broderbund offers its customers Web access to a version of the Inference tools called the Gizmo Tapper 586 LC the site mimics a dialogue with detectives in the Carmen Sandiego computer game Xerox uses a simple version of CBR to allow service dispatchers to solve some copier repair problems over the phone rather than sending a service technician Compaq built an application it calls SMART Support Management Automated Reasoning Technology created and managed by expert knowledge engineers Since implementing SMART Compaq support processes involve a faster learning curve are less affected by turnover employ a less expert support worker and resolve 95 percent of customer problems within ten minutes9 CBR works best when you have one or a few experts construct the cases and maintain them over time There must also be a domain expertsomeone knowledgeable about the area supported by the systemwho can decide when a new case is worth creating when an old case has become obsolete and whether a newly submitted case is actually correct Case construction and modification is somewhat complex though getting simpler with new tools and requires knowledge of the CBR approach If you have a large group of knowledge workersexpert not in CBR but in the relevant knowledge domainwhose expertise you want to tap you must either create a case administrator as intermediary or explore other realtime knowledge options One such option is a tool called SolutionBuilder developed by Primus Corporation for the Customer Support Consortium a group of more than sixty hightech firms working together to solve problems of knowledge management in customer support Primus has developed an approach to managing customer support knowledge and eventually other types based on breaking down a problem or situation into its knowledge components they havent given it a name but wed call it knowledge Page 140 component analysis The support analyst can classify knowledge about the problem received from the customer or add new knowledge about the problem as one of the following seven components or statements 1 The goal or task that the customer is trying to accomplish but cannot perform 2 A fact about the customers technology environment 3 A symptom of the customers problem 4 A recent change in the customer technology environment 5 A likely cause of the problem 6 A negation or a fact that is clearly irrelevant to the current problem 7 The fix for the problem While the analyst classifies the components of the problem Solution Builder searches the database for solutions with similarities to the components of the customers problem An objectoriented database is employed to create dynamic relationships among the components to yield a solution to the problem Its an empowered democratic approach to knowledge management but it requires an ability to classify knowledge components that not all users may possess While a number of companies are conducting pilot programs with SolutionBuilder its not really a viable production tool yet LongerTerm Analysis Systems If you have a lot of time and a user with a PhD in statistics neural networks are just the ticket for turning data into knowledge A neural network is a statistically oriented tool that excels at using data to classify cases into one category or anothersay whether a loan customer is likely to default on a loan or pay it back Because of its statistical nature one might question its fit with the concept of knowledge management However since one aspect of these systems is that they learnwhich is to say their classification becomes more accurate with more casesthey are often discussed in the realm of artificial intelligence and knowledge Neural nets require a lot of normally quantitative data and a highpowered computer They can yield very accurate classifications of cases even with many interrelated variablesan aspect of data that can create problems with conventional statistical analysis Because setting up the analysis and interpreting results can be very tricky these systems Page 141 require a very knowledgeable user at least to set up the initial model Subsequent data for example a months new scanner data in a consumer products firm may be analyzed with the same model so converting the data into knowledge can happen faster and with less expertise Still in order to make decisions based on the recommendations of neural networks its very helpful to know how they work However neural networks are something of a black box its not easy to explain why they did what they did A particular case will be classified in a particular fashion according to nodes and variable weightings and is therefore difficult to interpret Some new neural networking tools such as those from a company called Trajecta hide the complexity from the user and are able to explain to some degree why the system did what it did Smart businesspeople as opposed to smart statisticians nevertheless may not like them for their difficulty of interpretation This is one of the reasons why Fidelity Investments which generally hires smart users as fund managers is no longer using neural networks to select stocks in the Disciplined Equity fund but has converted to a more algorithmic approach that is presumably easier to interpret in the context of fund management Neural networks and other artificial intelligence tools as well as more conventional statistical analysis are also used for what is known as data mining This approach also falls into the category of turning vast amounts of data into knowledge Some advocates of this approach maintain that the pattern identification and matching capabilities of software can eliminate human intervention They argue for example that a data mining system could by itself discover that a certain group of customers purchases more of a certain product on a certain day of the month This may be true but an intelligent human is still required to a structure the data in the first place b interpret the data to understand the identified pattern and c make a decision based on the knowledge And in practice most of the organizations we have come across have also used humans to generate the hypothesis for analysis As a practical matter then data mining is essentially a new term for a relatively conventional and wellunderstood practice What Technologies Cant Do While these technologies are exciting and clearly improving it is important to bear in mind their limitations in any program of knowledge management As we have noted throughout this book effective knowl Page 142 edge management cannot take place without extensive behavioral cultural and organizational change Technology alone wont make you a knowledge creating company The installation of Notes or the Web or casebased reasoning software will not in itself bring about that change Technology alone wont make a person with expertise share it with others Technology alone wont get an employee who is uninterested in seeking knowledge to hop onto a keyboard and start searching or browsing The mere presence of technology wont create a learning organization a meritocracy or a knowledgecreating company Technology is common in the domain of knowledge distribution but it rarely enhances the process of knowledge use Distribution delivers knowledge to the potential users desktop but cannot dictate what he or she does with it thereafter It would be interesting to envision technologies that help to manage personal knowledge as it applies to decisions and actions but beyond the very rudimentary personal information managers that allow searching of unrelated bits of information little progress has been made toward personal knowledge managers On the group level an interesting but unpopular tool attempted to capture graphically the process of applying knowledge to policy decisions This Graphical IssueBased Information System was developed in the late 1980s and early 1990s at the Microelectronics and Computer Corporation a research consortium in Austin and later marketed by Corporate Memory Systems as the CM1 product However perhaps because of its complexity and conceptual strangeness the product never took off 10 Information technology is also relatively less helpful when it comes to knowledge creation which remains largely an act of individuals or groups and their brains There are technologies that purport to enhance these activities but at best they operate on the margins of the problem Group decision support systems for example involve a relatively small group of people usually in the same location attempting to employ technology to create some form of group knowledge out of their beliefs and experiences Outlining tools frequently used by writers might be viewed as a means of converting unstructured tacit knowledge into structured and explicit knowledge Systems for analyzing clinical data could be said to help create medical or pharmaceutical knowledge just as systems for analyzing market data attempt to turn it into market knowledge Recently some systems have begun to address the problem Page 143 of creativity and invention suggesting prospective inventions based on a set of rules of thumb The technological support for knowledge creation may improve in the future but it is negligible today However if the appetite the skills and the attention to knowledge are already present in an organization technology can expand access and ease the problem of getting the right knowledge to the right person at the right time The presence of knowledge management technologies may even have a positive effect on the knowledge culture of the organization Workers who see their company investing time and money on its Web site for example may gain added incentive to take knowledge management seriously Here in the early days of knowledge management what is most important in a knowledge technology strategy is to get a few toes into the water You may not even know how willing people are to share knowledge through systems until you build a system and see how the organization responds It will be difficult to determine which types of applications provide the best fit with an organization until you experiment Right now there is no right technology for knowledge management Were all finding our way and as long as technology isnt the only aspect of your knowledge management effort the most essential thing is just to get started with something Page 144 8 Knowledge Management Projects in Practice There is the world of ideas and the world of practice Mathew Arnold When people talk about knowledge management the conversation often devolves into highly abstract and philosophical statements But there is a real world of knowledge managementa world of budgets deadlines office politics and organizational leadership This is the area that we will explore in this chapter which focuses on the knowledge management project Such projects are attempts to make practical use of knowledge to accomplish some organizational objective through the structuring of people technology and knowledge content These projects are appearing throughout the business world and in 1996 we undertook an effort to examine a number of them 1 By selecting the knowledge management project as the unit of analysis we gain some illuminating perspectives on the topic After all it is through structured projects however imperfect that anything in companies actually gets done Through the study of practices and practitioners at the vanguard of knowledge management we hope to provide background for the uninitiated as well as practical guidelines for those more familiar with the subject As we will see however none of these projects is an optimal model Some beg the question of whether it is really knowledge that is being managed and most fall short of knowledgebased organizational transformation It is far easier to talk about such transformations than to achieve them In order to understand how knowledge is really being managed in companies today we studied thirtyone different knowledge management projects in twenty different firms In most companies we addressed only one project but to get an indepth look at knowledge management in a single organization we also observed ten projects in one firm HewlettPackard We made site visits to four of the firms and inter Page 145 viewed the rest by telephone Our sources were typically the managers of the knowledge projects or of the knowledge management function across the organization In addition many of these firms were participants in a research program on multiple aspects of knowledge management sponsored by Ernst Young 2 We refined our ideas in two review sessions with the program participants In the first section of the chapter we briefly discuss the range of approaches we observed before presenting a highlevel typology of knowledge management projects We then attempt to shed some light on what makes for a successful knowledge project Success and failure are ambiguous terms when applied to so nascent a field as knowledge management but we discuss the characteristics of projects that were thriving when we observed them We conclude the chapter by going over some differences between success factors for knowledge management projects and those for other types of initiatives such as information or data management efforts One indication that knowledge management differs from these other areas is that the projects address different factors Of course it can be a fine line to distinguish between projects geared toward information and knowledge When we asked our respondents about how they viewed the difference between those two terms several admitted overlaps Many noted that while their efforts to manage knowledge sometimes included information but rarely data they were always attempting to add value to the information and hence turn it into knowledge Their projects also tended to devote substantial attention to human contributions which is one characteristic that generally distinguishes knowledge from information or data Types of Knowledge Management Projects Knowledge management is an evolving practice Even the most developed and mature knowledge management projects we studied were unfinished works in progress Most of their managers however were able to articulate specific business and knowledge management objectives and some had already achieved some of their goals We found great variation among these thirtyone projects Some were selffunding using a marketbased approach that charged users for knowledge services Companies funded others out of overhead Some took a hybrid approach for example relying on corporate funding Page 146 during rollout but requiring a transition to selffunding after some period of time A centralized knowledge management function managed or coordinated some projects while others occurred in a more bottomup and decentralized fashion Where some initiatives were fundamental to the very purpose and existence of a firm others were peripheral some defied economic justification and others actually generated revenue from external customers In many ways however these projects were alike In addition to defined objectives each had someone in charge of the effort some specific commitment of financial and human resources and of course a focus on knowledge as distinct from information or data The projects also shared in common three very broad types of knowledge management objectives attempts to create knowledge repositories attempts to improve knowledge access and attempts to improve knowledge cultures and environments Knowledge Repositories Much of the energy in knowledge management has been spent on treating knowledge as an it an entity separate from the people who create and use it Abstracting knowledge like this is not new in fact it is as old as the book The typical goal of this type of project is to take knowledge embodied in documentsmemos reports presentations articles and so forthand put it into a repository where it can be easily stored and retrieved A somewhat less structured form of accumulated knowledge is the discussion database in which participants record their own experiences on an issue and react to others comments In our research we came across three basic types of knowledge repositories 1 External knowledge example competitive intelligence 2 Structured internal knowledge example research reports productoriented marketing materials and methods 3 Informal internal knowledge example discussion databases full of knowhow sometimes referred to as lessons learned We found no current examples of rulebased expert systems in our research though these might also be classified as repositories of narrow knowledge domains Contrary to expectations as we discussed in there are few commercial examples of this technology in business today Page 147 An automobile company in our study for example compiled an external repository of competitiveintelligence knowledge It encompassed analyst reports trade journal articles and external market research on competitors in the automobile industry Using a tool called GrapeVINE discussed in the knowledge managers for this project could route information or knowledge on different topics to managers with a specified interest in that topic Items of particular importance could be prioritized and sent to everyone thus making the information or knowledge in the system more accessible and useful In the examples of internal knowledge repository projects we observed the storage of both knowledge and information If the distinction between knowledge and information is seen as more of a continuum than a sharp dichotomy most projects that focus on internal knowledge deal with the middle of the continuuminformation that represents knowledge to certain users Weve already mentioned for example HewlettPackards Electronic Sales Partner a system that provides technical product information sales presentations sales and marketing tactics customer account information and anything else that might benefit field personnel in the sales process The leaders of this project had knowledge manager on their business cards and although some of the content in the system felt more like information than knowledge the HP managers tried to add value to their repository through careful categorization and pruning Weve also described Sequent Computers system Sun Microsystems and Silicon Graphics have similar repositories in place Knowledge repositories can help reinforce an organizations cultural rituals and routines Finally there is the tacit knowledge that resides within the minds of people in an organization but is not in structured documentbased form Weve already described different codification approaches for tacit and explicit knowledge earlier in this book and other authors have done so elsewhere 3 In the projects we studied when firms wanted to extract tacit knowledge from employees for a repository they opted for some sort of communitybased electronic discussion For example in the Corporate Education Division at Hewlett Packard a project called Trainers Trading Post attempts to capture tips tricks insights experiences and observations onto a Lotus Notes database shared by all the companys trainers and educators One out of every fifty employees at HP hold such positions Page 148 but they are scattered across many different sites and previously could not easily share their knowledge This type of knowledge repository attempts to accelerate and broaden the traditional knowledge sharing that happens with socialization of newcomers the generation of organizational myths and stories and the general transmission of cultural rituals and routines 4 Knowledge Access and Transfer Another type of project we found was predicated on providing access to knowledge or facilitating its transfer among individuals Where knowledge repositories aim at capturing knowledge itself knowledge access projects focus on the possessors and prospective users of knowledge These types of projects acknowledge that finding the person with the knowledge one needs and then successfully transferring it from one person to another can be a daunting process If the metaphor of a library is useful for conceptualizing knowledge repository projects then that of a knowledge Yellow Pages might best symbolize the purpose of knowledge access projects Managers involved in knowledge access projects commonly used phrases like getting at the knowledge we know we have sharing our knowledge and so forth phrases that connote a need for connectivity access and transfer Like the knowledge repository projects knowledge access projects vary in their technological orientation For example we came across several instances of companies who were building and managing expert networks or to use one of our own terms maps of knowledge sources At one company the expert network was not an improvement targeted at some segment of the operation but was actually the primary business The company Teltech Resource Network Corporation provides a technical expert referral service by maintaining a comprehensive database of external technical experts Teltech provides these referrals to engineers researchers and scientists in companies who have an occasional need for expert knowledge The company motivates experts to participate in the network by paying them to answer client questions after being contacted through the database The firm markets its services to technical managers and professionals within their client companies constantly trying to remind potential customers that they are an available resource Apparently its not natural for engineers to ask for help so Teltech works hard to overcome this predisposition We have already described several projects that fall into this category Page 149 of knowledge access and transfer Microsofts SPUD project which consolidates the knowledge of its system developers is a vehicle for enhancing access to personal knowledge BPs Virtual Teamwork project addresses the transfer of tacit knowledge Sematechs knowledge transfer efforts focus largely on human communication but also include information systems Knowledge Environment The last type of project attempts to establish an environment conducive to knowledge management Within this category we saw examples of projects intended to measure or improve the value of knowledge capital efforts to build awareness and cultural receptivity initiatives attempting to change behavior as it relates to knowledge and attempts to improve the knowledge management process Some firms now treat knowledge as another kind of capital asset Some firms we studied were making concerted attempts to treat knowledge as an asset just as real as any other that appears on its balance sheet Skandia undertakes an internal audit of the companys intellectual capital every year and issues a report to stockholders and the investment community One goal of this analysis is to persuade investors of the value of Skandias knowledge capital Other firms focus on managing the value of the asset more than measuring it through such activities as patent management or licensing Several firms have adopted higherlevel and less focused efforts to change the general organizational attitude toward knowledge At one large computer firm there have been a series of ongoing efforts to encourage the reuse of a particular knowledge type component designs Over the years we have also seen a gradual shift in the attitudes of engineers to valuing time to market more than or at least as much as originality of design At a direct marketing firm we surveyed the goal of knowledge management efforts is to increase awareness and reuse the knowledge embedded in client relationships The firm appointed a chief knowledge officer who had no staff he worked through the education and exhortation of others Some companies make knowledgerelated employee behavior a specific target of their projects A large consulting firm for example revamped its performance appraisal system to include contributions to the firms knowledge base as an important part of compensation decisions Page 150 The firm was making significant inroads toward changing employee perceptions of their jobsencouraging consultants to think of themselves as creators and distributors of management knowledge Finally some companies concentrate on the processes for creating sharing and using knowledge At a simple level a process orientation means developing methods of measuring of the speed cost impact and customer satisfaction of the knowledge management activities Teltech for example calls each customer after a referral to assess the quality of the expert and the expertise We also observed process improvement and reengineering being applied directly to knowledge management in some projects These approaches involved describingat least at a high levelthe desired steps in the process of knowledge management Projects with Multiple Characteristics We view the projects just discussed as examples of conceptually pure or ideal types In real life of course such ideals are rarely attained Almost all the projects we studied were combinations of different types of projects At Young Rubicam for example divisional CKO Nick Rudd was striving to inculcate a knowledge friendly culture while at the same time setting up formal faceto face knowledge transfer programs The consulting firm we researched adopted almost all of the project types described above including Development of an expert network Development of internal document repositories Efforts to create new knowledge Development of lessons learned knowledge bases A highlevel description of the knowledge management process The use of evaluation and compensation systems to change behavior While it is too early to tell for sure one would expect that knowledge management projects that work along multiple fronts would be more effective than those that employ only one type of initiative This is consistent with the ecological approach to information and knowledge management that we have advocated elsewhere 5 One drawback to their approach is that the absence of clear demarcations of project types may cause measurement problems The fuzziness of project objectives also defies easy quantification How does one pri Page 151 oritize the different aspects of a project that comprises for example 20 percent culture 45 percent transfer and 35 percent repository Further how does one measure cultural change and apportion the results to the investments Finally firms do not ask shareholders to pay money for ownership in order to have a knowledgesharing culture or a knowledgeable sales force Shareholders expect firms to make money and establishing the link between knowledge and financial performance is at best tricky 6 Let us turn then to the question of how one measures success in knowledge management projects Success in Knowledge Management Projects What constitutes success in knowledge management Since economic returns from knowledge have always been difficult to quantify we must rely on more general indications of success And because we observed these projects only for a finite period we cannot know for sure whether current indications of success will persist over time Still the indications of success in knowledge management projects are not that different from the criteria companies use to measure success in other types of business change projects Here are the primary attributes we use to define success in knowledge management Growth in the resources attached to the project including staffing and budgets Growth in the volume of knowledge content and usage for example the number of documents or accesses for repositories or participants for discussion database projects The likelihood that the project will be sustaining beyond a particular individual or two that is the project is an organizational initiative not an individual project Comfort throughout the organization with the concepts of knowledge and knowledge management Some evidence of financial return either for the knowledge management activity itself if it is seen as a profit center or for the larger organization This linkage need not be rigorously specified and may be only perceptual In interviewing the managers of knowledge projects we didnt ask if they felt their projects were successful We did however ask about these Page 152 particular indicators of success The presence or absence of these indicators made it relatively easy to classify projects as successful likely to fail or not yet successful About half the projects fit into the successful category For two of the projects we felt that it was too early to characterize their degree of success The projects we defined as successful had most or all of these indicators present Several lacked financial benefits today but they had plans to develop them in the future In contrast the unsuccessful or not yet successful projects had few or none of these characteristics Managers had to scrounge for resources They struggled to get members of the organizations to contribute to repositories or use discussion databases A few visionarybut lonelyindividuals championed these projects And any sense that the projects would make money for their firms was either not under consideration or a long way off While conditions might change in the future these projects were clearly failing to thrive in the present In evaluating these projects we observed two degrees of success The most impressive type involved the fundamental transformation of a company This was quite rarejust three casesand debatable even in the firms where we felt it was present The other type of success involved operational improvement limited to a bounded process or function Managers intended knowledge management projects to bring about specific improvements in new product development customer support education and training software development patent management and many other functions and processes This was the primary form of success we found but it is difficult to speculate how improvement in these relatively narrow areas might translate into broader organizational success At the large consulting firm we studied knowledge was arguably responsible for a major transformation of the firm The transformation was extensive in both depth and breadth of impact and financial results improved markedly during the period of knowledge management Line consultants drew heavily from the firms centralized knowledge centers accessing previous presentations to other clients process and system design specifications work plans and other projectoriented collateral and artifacts The firm increased its win rate in client proposals At the Sematech RD consortium knowledge creation and sharing has been critical to the organizations existence Since it has employed approaches to knowledge management from its beginning it is difficult Page 153 to argue that these tactics led to transformation but survival is an equally important form of success Another firm where knowledge management has been critical to survival is Teltech The knowledge management approaches it had adopted seemed to be working as the company was growing when we studied them Factors Leading to Knowledge Project Success The indicators described above tell us whether a project is successful or not but not what makes it that way After we had classified the projects we next tried to identify the most telling variables and found nine factors that were common throughout the successful projects This was a highly exploratory effort and the causal factors weve identified should be viewed only as hypotheses about what makes a project successful With this provision we will describe each of the nine factors below A knowledgeoriented culture Technical and organizational infrastructure Senior management support A link to economics or industry value A modicum of process orientation Clarity of vision and language Nontrivial motivational aids Some level of knowledge structure Multiple channels for knowledge transfer KnowledgeOriented Culture A knowledgefriendly culture was clearly one of the most important conditions leading to the success of a project in our survey It is perhaps the hardest factor to build from scratch and has several different components A positive orientation to knowledge employees are bright and intellectually curious are willing and free to explore and their knowledgecreating activities are given credence by executives The absence of knowledge inhibitors in the culture people are not Page 154 resentful of the company and do not fear that sharing knowledge will cost them their jobs The knowledge management project type fits the culture Building a positive knowledge culture is critical While we believe that all firms in business should have a positive orientation toward knowledge in their cultures many do not In our view the most important factor in establishing a positive knowledge culture is the type of people that a firm attracts and hires Employees who sought and applied knowledge in school and in early jobs will probably continue to do so Unfortunately the US educational system does not turn out a high proportion of such knowledgeoriented employees It is possible of course to pursue knowledge at the expense of other job objectives and this might be a downside of an excessively knowledgeoriented culture We found this type of positive culture in several of the firms we studiedfrom consulting organizations to hightechnology manufacturers to small knowledgedriven organizations like Teltech Given the downsizings in many American firms over the past decade it wouldnt be surprising to find negative attitudes toward knowledge sharing in certain organizational cultures For example employees may feel that their knowledge is critical to their unique value as an employee and thus their continued tenure in the organization Under these circumstances they may be reluctant to share that knowledge We found little evidence of this in our sample perhaps because companies with such cultures might not even attempt a knowledge management project Still it would seem to be a factor that could easily lead to the failure of a project However we noted other aspects of culture that did interfere with a projects objectives At Young Rubicam the chief knowledge officer told us that on the creative side of the business there was great pressure to be dynamic and original The dominant attitude of derogating the derivative thus perpetuated an aversion to sharing and using alreadycreated knowledge In the advertising industry trade journals and industry awards reinforce the value of creativity giving less prestige to work based on campaign efficacygetting a consumer to buy your clients product or service In order to get the creative people to share their knowledge with their peers the firm needed to change its incentive and reward systems 7 While the CKO is gratified by some of the behavior Page 155 changes he has observed it is too early to call this program a success It remains to be seen if and how internal systems can be changed to overcome the norms and expectations that exist at an institutional level Hightechnology firms also struggle mightily with this problem at a large telecommunications firm we studied engineers had the hero mentality respecting only individual design achievements Top engineers viewed it as a sign of weakness to use an existing design an admission that they couldnt do it themselves A third issue is the fit between an organizations culture and its knowledge management initiatives Projects that dont mesh well with the culture probably wont thrive At HewlettPackard for example knowledge management projects are popping up all around the firm but they are highly decentralized The firms culture of highly autonomous business units would not easily support a coordinated topdown project at the corporate level or even a corporatelevel senior knowledge executive Technical and Organizational Infrastructure Knowledge projects are more likely to succeed when they can take advantage of a broader infrastructure of both technology and organization Technological infrastructure is the easier of the two to put in place As describes in detail it consists partially of technologies that are knowledgeoriented such as Lotus Notes and the World Wide Web If these tools and the skills to use them are already present a particular initiative will have an easier time getting off the ground Most of the companies we interviewed employ multiple tools which we feel is appropriate at this early stage of knowledge management Another aspect of technology infrastructure for knowledge management projects is a uniform set of technologies for desktop computing and communications At the simplest level this means a capable networked PC on every desk or in every briefcase with standardized personal productivity tools word processing presentation software so that documents can be exchanged easily throughout a company More complex and functional desktop infrastructures can also be the basis of some types of knowledge management projects as seen in BPs use of videoconferencing technology Building an organizational infrastructure for knowledge management means establishing a set of roles organizational structures and skills from which individual projects can benefit The companies we interviewed generally found this difficult to do perhaps because it involves Page 156 spending money on new roles Some firms however had been able to establish multiple levels of new roles from chief knowledge officers to knowledge project managers to knowledge reporters editors and knowledge network facilitators In Ernst Youngs consulting business for example there are facilitators of twenty two different knowledge networks managers of several new knowledgeoriented organizations that create or distribute knowledge a CKO and several new committees to prioritize knowledge projects and set knowledge strategy Although these new roles and structures are expensive they mean that any new project can take advantage of them for support and get up and running quickly We described these organizational roles in detail in Senior Management Support Like almost every other type of change program knowledge management projects benefit from senior management support We found that strong support from executives was critical for transformational knowledge projects but less necessary in efforts to use knowledge for improving individual functions or processes The types of support that were helpful included the following Sending out messages to the organization that knowledge management and organizational learning are critical to the organizations success Clearing the way and providing funding for infrastructure Clarifying what type of knowledge is most important to the company We found that the executives who championed knowledge initiatives were themselves relatively cerebral and conceptual They were well read and well educated and set the tone for a knowledgeoriented culture A Link to Economics or Industry Value Knowledge management can be expensive and therefore must somehow be linked to economic benefit or industry success Buckman Laboratories a specialty chemicals firm estimates that it spends 25 percent of its revenues on knowledge management Knowledge management can be linked to economic value Ernst Young calculates 6 percent of its revenues and McKinsey Co 10 percent In knowledge businesses like these in which knowledge is Page 157 clearly the key to success with customers the payoff from projects may indeed be quantifiable In more conventional businesses however the calculation of benefit may need to be made more explicit The most impressive benefits of good knowledge management involve money saved or earned Dow Chemicals focus on better management of company patents produced results that showed up on its balance sheets Texas Instruments had similar success when it pursued a strategy of increasing revenues through licensing of patents and intellectual property Benefit calculations may also be indirect perhaps through process measures like cycle time customer satisfaction or even phone calls avoided One pharmaceuticals firm we studied was attempting to manage drug development knowledge in order to reduce the cycle time for the process Several knowledge management projects in the customer support process were attempting to improve customer satisfaction by reducing waiting time for phone support or by providing online knowledge At HewlettPackard for example a knowledge management system for computer resellers has substantially reduced the number of calls for human support and hence the number of people necessary to provide it A Modicum of Process Orientation As we mentioned above the primary objective of some projects we observed was to design a new knowledge management process Even for other types of projects however we feel that adopting aspects of a process perspective is usually advisable The knowledge project manager should have a good sense of his or her customer the customers satisfaction and the productivity and quality of services offered However the project managers in our study did not find it useful in most cases to describe the detailed process steps used in knowledge management This is consistent with previous findings on improving knowledge work processes it is perhaps safe to conclude that knowledge management is knowledge work 8 One firm did take the process approach to a very detailed level describing one organizational learning process four subprocesses fifteen subsubprocesses and fifty three subsubsubprocesses One might argue that this is excessive particularly given that only about 5 percent of the redesigned processes had actually been implemented Page 158 Clarity of Vision and Language Clarity of purpose and terminology is a critical factor with any type of organizational change project but its a particularly important element of good knowledge management The terms used in this realmknowledge information learningare subject to wide interpretation The concept of organizational learning for example can include everything from the most prosaic training to broad changes in culture The successful knowledge management projects we observed had all addressed this issue in some fashion often by excluding particular terms and concepts from their charters As noted above some were careful to exclude the idea of data Chrysler for example tried to ensure that raw data was not added to its repositories of knowledge about engineering and design of key automobile components by drawing this kind of clear semantic distinction Other firms excluded the expressions education and training or cultural change from their project guidelines Nontrivial Motivational Aids Knowledge being intimately bound up with peoples egos and occupations does not emerge or flow easily Employees must therefore be motivated to create share and use knowledge These motivational aids or incentives cannot be trivial as some of our project managers learned One gave out airline frequentflyer mileage for browsing or contributing to a discussion database He found that the free miles were enough to prompt an initial use of the system but insufficient to drive ongoing activity Another manager of an expert network offered chocolatecovered ice cream barsadmittedly a premium brandto any expert who contributed a biography to the system Perhaps needless to say this incentive was insufficiently motivating The success of a project may hinge on the longterm incentives a company provides to its employees Motivational approaches for knowledge behaviors should be long term incentives tied in with the rest of the evaluation and compensation structure Both Ernst Young and McKinsey and Co for example evaluate consultants partially on the knowledge they contribute to repositories and human networks If incentives are shortterm they should be highly visible At Buckman Laboratories managers identify the top fifty knowledge sharers annually in online networks and repositories and reward them with a celebration conference at a resort location Page 159 Some Level of Knowledge Structure Successful knowledge management projects benefit from some degreethough not too muchof a knowledge structure Because knowledge is naturally fluid and closely linked to the people who hold it its categories and meanings change frequently This means that knowledge will usually be resistant to engineering However if a knowledge repository has no structure at all it wont be able to serve its purpose One professional services firm attempted to create a wholly unstructured knowledge repository searchable on all words in the database It was virtually unusable always yielding either too many or too few items Firms building a knowledge base or expert network must therefore create categories and key terms It is often useful to devise a thesaurus to assist users as well At Teltech for example a thesaurus of technical terms allows users to browse and search its expert network through terms that are familiar to them Teltech employees update the system by recording the terms users employ in searches and adding them to the thesaurus daily Therefore the structure of the knowledge always reflects the pattern of use Any knowledge manager should be prepared to redefine the structure of a companys knowledge base frequently Multiple Channels for Knowledge Transfer Successful knowledge managers realize that knowledge is transferred through multiple channels that reinforce each other Some of the firms that had knowledge repositories realized that they had to get contributors together in a facetoface setting on a regular basis In that high bandwidth situation trust can be established structures for knowledge can be developed and difficult issues can be resolved MIT researcher Tom Allen has found in many studies that scientists and engineers exchange knowledge in direct proportion to their level of personal contact 9 In this day of the Web Lotus Notes and systems that cover the world it is easy to forget the need for a common location There is still a strong need for what the US Army calls face time Building a Knowledge Foundation There are doubtless other factors that affect the success of knowledge projects but firms that address these nine steps are clearly well on their way to succeeding While it is impossible to prioritize among these nine based on our qualitative observations of the research sites we do have Page 160 an intuitive feel for the factors that matter most Unfortunately they also tend to be the factors that are most difficult to develop a knowledgeoriented culture human infrastructure and senior management support particularly for transformational objectives Obviously these circumstances are related A senior management team that is committed to knowledge management will probably already have created some aspects of a knowledgeoriented culture and is likely to be open to the idea of establishing an organizational infrastructure for knowledge management Lacking all three of these conditions a firm should only begin knowledge management on a small scale with objectives involving efficiency or effectiveness of a single knowledgeoriented function or process Knowledge managers should also consider carefully the sequence in which they take on these objectives There may be a life cycle to building effective knowledge management practices and processes As with physical construction a firm must first build a foundation While not valueadding in and of itselfno one ever lived in a foundationa certain amount of infrastructure helps to create value later Knowledge environment projects establish the conditions necessary for subsequent knowledgeleveraging projects to thrive How Are Knowledge Projects Different Managers are becoming increasingly familiar with change programs of various types and certainly some of the success factors described above are similar to those of information systems projects reengineering projects empowerment programs and so forth As a concluding topic we focus on how knowledge management projects differ from other familiar types All projects benefit from senior management support but the attributes of senior managers who support knowledge projects vary in our research In general though they are more given to conceptual thinking and have an implicit faith that knowledge management will benefit their organizations although they usually also want to see measurements of the benefit where possible Several of the CEOs in the firms we studied made public comments such as Were in the knowledge business All projects benefit from a sympathetic organizational culture but they do not require the intensively knowledgeoriented culture we found in successful knowledge projects All projects may profit from a process Page 161 orientation but the limits to the value of process in knowledge projects tend to be more pronounced Information systems projects in particular have in common with knowledge projects the need for a combination of technical and human elements However in the knowledge management initiatives we observed the level of human issues and problems was much higher than for most data or information management projects Because of the prominent human element in knowledge a flexible evolving structure for knowledge is desirable Furthermore the motivational factors in creating sharing and using knowledge are critical Data and information are constantly transferred electronically but knowledge seems to travel most efficiently through a human network As we have noted throughout this book successful knowledge management requires an unusual combination of human technical and economic skills These attributes must be present not only in a firms overall knowledge management effort but also in individual projects Its often difficult to round up or inculcate them all into a project team but it can be done One of the encouraging aspects of the knowledge management projects we studied is that half of them appeared to be successful already and perhaps an even higher proportion will ultimately succeed That so many projects are going well at such an early stage in the history of knowledge management bodes well for the longterm prospects of the movement Page 162 9 The Pragmatics of Knowledge Management The great end of knowledge is not knowledge but action Thomas Henry Huxley After enduring many pages of our pontifications about knowledge management youre probably more than ready to get started If your knowledge management efforts have been underway for a while perhaps something weve said has helped to renew or refocus your commitment In any case youre undoubtedly ready for some strictly pragmatic advice about knowledge managementwhere to start how to get help mistakes to avoid In this concluding chapter well discuss several entry points into knowledge management anchors in existing management approaches and a few common pitfalls Common Sense about Knowledge Management The good news about knowledge management is that good sense goes a long way If you sit down and think carefully about it youll probably deduce such wisdom as The place to start is with highvalue knowledge Start with a focused pilot project and let demand drive additional initiatives Work along multiple fronts at once technology organization culture Dont put off what gives you the most trouble until its too late Get help throughout the organization as quickly as possible We will resist the tendency in management books to tell you that knowledge management is totally new that you must drop everything else and adopt our nostrum and that you cant possibly do it without Page 163 lots of highpriced help First of all its not totally new Knowledge management draws from existing resources that your organization may already have in placegood information systems management organizational change management and human resources management practices If youve got a good library a textual database system or even effective education programs your company is probably already doing something that might be called knowledge management All you may need to do is expand or improve those practices to call yourself a knowledge manager You may recall some other managerial enthusiasms that required devotees to drop everything else Forget quality its time to reengineer Forget reengineering its time to think about competing for the future Well forget that Knowledge management coexists well with business strategy with process management with staying close to your customers and so forth It can help you do a variety of things youre already doing better Ultimately knowledge management work needs to be blended in with these other activities or its unlikely to be effective And although both of us consult for some part of our livings we wouldnt say that its impossible to do a good job of managing knowledge without help from consultants In general a company has to make its own decisions about what knowledge is most important to manage how to motivate people to share and use knowledge and what will make a project succeed in its own specific environment Consultants can help with designing and building big knowledge systems mapping knowledge in some detail assessing the current state of knowledge and educating managers and workers about the fundamentals While many people hire consultants because of the ideas they bring to a project our view is that ideas are cheap youve just bought a bunch in this book at about a dime each Its the actual implementation of knowledge management projects thats the hard part and wed argue that it may make more sense to turn outside for help in implementation of a project than in its design It also is sensible to look broadly for help inside the organization As we pointed out in its useful to have some dedicated roles within the organization but for knowledge management to prosper everyone has to help out Even if your firm has established a formal knowledge function there will be many other sources of potential assistance from other functions Information Systems can help with the technology infrastructure Human Resources can help to motivate work Page 164 ers to share and use knowledge and to identify knowledge nodesindividuals teams and networks Finance and Accounting can help figure out how to value knowledge and the efforts to manage it Other functions can help in mastering particular knowledge domains Marketing and Sales with customer knowledge Engineering and RD with product knowledge and Customer Service with service knowledge When youre trying to manage knowledge its no time to be exclusionary the more people and groups that buy into the effort the more likely youll be successful Getting Started in Knowledge Management We subscribe to the belief that its better to accomplish something first and then talk about it than the reverse Many reengineering initiatives weve observed for example were sidetracked when the hype about what they were going to accomplish raised expectations well beyond what was actually possible So in knowledge management its important to start small actually accomplish something and then trumpet whats been achieved 1 Dont talk up your project until you have something worth talking about Dont publish a newsletter produce a video or angle for your projects inclusion in the annual report until you have actually done something worth talking about Knowledge management should start with a recognized business problem that relates to knowledge Customer defections poorly designed products losses of key personnel or a lower win rate for service engagements are all business problems that might be traced to poor knowledge management2 Attacking these problems identifying their knowledge component and using the business value of solving them as justification for knowledge efforts are all good ways to get around in managing knowledge The most important factors in deciding where to start are the importance of the specific knowledge domain to the firm and the feasibility of the project For example customer knowledge is obviously central to most organizations and offers obvious and high potential payoffs If this is a weak link in your firm perhaps its a good starting point But if you feel that its so sensitive or difficult a problem that youll never succeed break off a piece of it Try to manage the knowledge about national accounts or customers of a particular product or business unit Then Page 165 you can expand later to add knowledge of other types of customers Perhaps needless to say dont pick a knowledge domain just because its handy or under your control If youre the head of IT as well as a knowledge management enthusiast dont try to manage for example IT support knowledge as your first project unless thats the business of your company as might be the case in an IT outsourcing firm Even if you succeeded no one would pay much attention Knowledge management can also involve a lot of abstract activity that may not ultimately pay off in terms of changed behaviors and tangible results Knowledge mapping for example can consume substantial time and money particularly when it is carried out with a high level of detail Just as many elaborate enterprise data models were never applied in the development of information systems highly detailed and complex knowledge maps may exceed the ability of the organization to use them Here it is extremely important to start smallcreate a knowledge map with minimal detail in a fairly circumscribed knowledge domain In other words do just enough to test the concept If individuals find it useful and begin to refer to it regularly you can create more detail and expand the scope later To make headway with knowledge management its generally advisable to do a number of things along multiple frontstechnical organizational culturalrather than to focus on a single topic Knowledge is too complex a phenomenon to entrust to narrowly targeted change programs The drawback to adopting multifaceted programs however is that seeing change will take longer and results may be less obvious than they would with a singlefocus initiative Leveraging Existing Approaches We mentioned a few paragraphs back that knowledge management had its roots in other areas and that it is folly to pretend that its new Whenever possible firms should try to use existing management approaches and tactics as levers to assist in getting going with knowledge management Existing initiatives and programs can jumpstart knowledge management because many of them have better management of what the organization knows as an important component Virtually every large or mediumsized organization will have one of the types of programs described below already underway Page 166 Leading with Technology Most firms make their first move with knowledge management in the domain of technology They install Notes or an intranet Web and then start searching for content to distribute with these tools Throughout this book weve cautioned against a technology centered knowledge management approach but weve also argued that a technology infrastructure is a necessary ingredient for successful knowledge projects Its also true that most firms implement knowledgeoriented software to serve other purposes as well email data or information display and so forth So its not that starting knowledge management with technology is a waste of time youll have to do it eventually Implementing knowledge management through new technology can be a risky proposition However if youre implementing new technology just for the purpose of knowledge management it may be a waste of money The knowledge behaviors youre seeking from users of knowledge systems may be slow to emerge Getting content into those systems can also take a while Setting up an organizational infrastructure for knowledge managementa necessary step if you want to build up your knowledge capitalmay require hiring new people training them in new skills and creating new processes and procedures Since the market value of say a powerful server for a knowledge repository decreases at about 7 percent a month you may be better off buying the computers and software after youve gotten the other things in place Unfortunately its usually much harder to get organizational consensus for behavior change and new roles than it is for technologyand if you start with technology the other nccessary factors may never materialize One example of a firm that led its knowledge management efforts with technology is Andersen Consulting Despite the cautions above the firm has been largely successful with this approach which still centers on its Knowledge Xchange KX system In the late 1980s Andersen began to lay the technological foundations for knowledge management It adopted Lotus Notes and the Microsoft Office tools so that consultants could share and use documents around the world Starting with senior partners consultants were given laptops and the training to use them In addition to the KX system more and more applications were added Page 167 to the Notes platform including a time and expense reporting system and a personnel evaluation system After putting the technology in place Andersen began to create more knowledge manager roles to develop new knowledge navigation tools and to modify reward and compensation structures to motivate knowledge sharing and use by individual consultants The firm already had a culture oriented to sharing so that wasnt a problem However as one partner put it When youre already asking someone to work an eightyhour week it takes more than a sharing culture to motivate him to hop onto the KX at 11 PM in a hotel room and share what he learned that day Andersen Consulting is a technologyoriented firm of course and a technologyfirst approach would work better there than in most organizations Whats most important however is that Andersen didnt stop at technology but also addressed the other issues that count Leading with QualityReengineeringBest Practices Perhaps the second most popular approach to getting started with knowledge management is to build on a companys quality or reengineering efforts A common objective of such process change programs is to compile and leverage best practices or effective ways to perform a process or subprocess that have been identified inside or outside the company These best practices are often stored in electronic repositories for sharing around the organization and thus can become the nucleus of a knowledge management initiative At Texas Instruments for example sharing best practices became a strong focus after the concept was strongly endorsed by Jerry Junkins then the firms CEO We cannot tolerate having world class performance right next to mediocre performance simply because we dont have a method to implement best practices he noted in a 1994 address 3 In response to Junkinss exhortation the company developed a common set of terms and methods around best practices sharing called the TI Business Excellence Standard TIBEST Early best practices sharing across the firms thirteen semiconductor fabrication plants known as fabs had substantially reduced cycle time and performance variability leading to capacity improvements equal to building a new fab To extend best practices sharing across the entire firm Texas Instruments formed an Office of Best Practices staffed by employees with backgrounds in IT management reengineering and quality The office Page 168 focused initially on building the supply of best practices contacting those with expertise and documenting their knowledge in a card catalogue of best practices information The cardsoriginally on paper later computerizedincluded a brief description of the practice and the problem it solved improvement measures and information about which TI employees to contact for more details Each card was referenced by its key words the business process it involved and TIs internal criteria for worldclass status The goal was not to specify all the needed knowledge about a best practice but rather to provide enough information to allow an interested TI employee to qualify the practice and contact the expert for more details The Office of Best Practices realized that their efforts alone would not be sufficient to facilitate the identification and transfer of best practices so they took other steps to build an organizational and technical infrastructure They identified 138 TI employees around the world as parttime Best Practices Sharing Facilitators to find and document best practices in their areas to communicate them in personal interactions and to promote the use of sharing tools TI gave each facilitator a day of training on such knowledge broker skills as interviewing categorizing documenting and searching TI also created a Best Practices Knowledgebase on Lotus Notes that contained the catalogue a discussion database and external best practices and benchmarks The Office of Best Practices also developed an intranet Web site for broader access within TI As mentioned in the firm held a ShareFair in 1996 at which the first annual Not Invented Here But I Did It Anyway award was presented Fiftytwo nominations were submitted with savings cited of over a billion dollars We are waiting for a company to create an award named after the Spanish proverb Well stolen is half done Despite the success at Texas Instruments and at other firms starting knowledge management with best practices including Chevron and Citicorp we believe that too strong a focus on best practices knowledge can be limiting There are many other types of knowledge that can be shared in organizations customer product and technical knowledge come to mind immediately Its a great idea to use best practices as a springboard to other forms of knowledge management but this can be problematic if they are viewed as the only form of knowledge worth collecting and sharing Moreover firms should not underestimate the difficulties of importing best practices from one part of the organization to anotheror even more so from another company Best practices may Page 169 be so contextual and specific to an organization that they dont take in their new environment Finally best practicesoriented knowledge management programs deal only with articulated and documented practices More tacit knowledge about how work is done is not easily summarized into a best practice and broader knowledge management initiatives are usually required to incorporate certain kinds of complex expertise into organizational knowledge Leading with Organizational Learning To begin knowledge management with a focus on organizational learning would be a good idea but firms rarely do so Depending on what school of organizational learning to which an organization subscribes the concepts and approaches involved may include Thinking about the organization as a system Building and facilitating communities of learning and practice Focusing on issues of personal development and mastery Creating less hierarchical more selforganizing organizational structures Planning with the use of scenarios Each of these concepts has value as a means of advancing knowledge management Since they largely address cultural and behavioral issues which are often the hardest to change they may be a more appropriate initial focus than relatively easytofix problems like technology But it is rare for organizational learning initiatives to lead to knowledge management because many learningoriented organizations ignore the possibilities for structuring and leveraging knowledge Only a few firms such as CocaCola and Monsanto are working simultaneously on organizational learning issues and the more tangible knowledge management problems Peter Senge the influential author of The Fifth Discipline has argued recently that organizations seeking to manage knowledge have placed too much emphasis on information technology and information management 4 We agree However the world of organizational learning places too little emphasis on structured knowledge and the use of technology to capture and leverage it In fact the word knowledge may appear somewhere in Senges thoughtful book but it is not in the Page 170 index We believe that without an approach to managing structured knowledge organizational learning is too conceptual and abstract to make a longterm difference to organizations Therefore we can say that taking the organizational learning route to knowledge management is similar in one respect to the other starting points Its an important component of knowledge management successmaybe even more so than others But by itself its insufficient Leading with Decision Making What makes knowledge valuable to organizations is ultimately the ability to make better the decisions and actions taken on the basis of the knowledge If knowledge doesnt improve decision making then whats the point of managing it For this reason a few organizations are taking a decisionoriented approach to knowledge management They are attempting to monitor and track who knows what when to determine how knowledge is reflected in specific decisions While we admire the effort to link knowledge to decisions its a tricky business for at least two reasons First its just very difficult to link specific knowledge or even information to specific decision outcomes As James March the eminent scholar of organizational decision making has pointed out this rational view of knowledge and decisions means that the analyst needs very good information indeed Determining the optimal information strategy code investment or structure requires complete information about information options quality processing and comprehension requirements It requires a precise specification of preferences that resolve complicated tradeoffs over time and space 5 Such circumstances are of course rarely present in real life Even if we are aware of all that was going on in the decision makers head theres another problem with linking knowledge to decisionspolitics Weve often mused for example that one way to determine the value of knowledge would be the same way organizations measure the value of qualityby calculating what it costs when its absent Just as the value of quality is really the cost of poor quality the value of knowledge equals the cost of stupidity Just think of all the poor decisions managers have made in our organization and how much richer the firm would be if the right knowledge had been applied to those decisions Then think of how short your career would be in the organization if you attempted to measure the cost of stupidity Senior managers in particular might balk at the idea of examining their decisions in Page 171 detail to understand what knowledge they applied and how the decision turned out There are exceptions however The US Army examines the relationship between knowledge and decisions in the context of its After Action Reviews AAR Both enlisted soldiers and officers are asked what they knew about a situation and how they decided to act based on their knowledge The army considers the link between knowledge and decision making to be a critical aspect of learning from experience However as we discussed in the army has developed an admirable culture that allows for this type of discussion without blame or recrimination A key assumption of the AAR is that the highest level of learning results when mistakes are made and acknowledged The army is also scrupulous about separating anything that happens in an AAR from careerevaluation processes If your organization has this type of culture then tying knowledge to decision making makes a lot of sense If it doesnt watch out for politics General Motors is the largest corporation that is attempting to link knowledge and decisions of course its also the largest corporation period Due largely to the efforts of market researcher and information manager Vince Barabba GM is actually interviewing managers to learn what knowledge they used when making key decisions Barabba also established a process several years ago specifying the types of information and knowledge that engineers should use in making new car development decisions 6 Although GM is still in the early stages of linking knowledge and decisions Barabba reports no political problems yet from managers objecting to having their decisions examined Leading with Accounting Its no secret that accounting systems are a poor reflection of the intangible and intellectual assets of corporations A few firms have grown sufficiently impatient with this situation to create their own internal accounting for knowledge and intellectual capital As weve mentioned the insurance company Skandia has been the most aggressive adopter of this approach Leif Edvinsson the firms Director of Intellectual Capital has become a strong advocate of changing accounting systems to reflect intellectual capital He has even written a book on the subject7 He has also convened other firms with the purpose of beginning to change the accounting system in Western economies While we agree with Edvinsson and others that the accounting system Page 172 needs work we dont recommend this area as a place to start managing knowledge We dont see much evidence that accounting systems and practices are going to change anytime soon and for an individual company to adopt such change as a cause would be a Sisyphian exercise Even firms such as Microsoft that clearly have substantially more knowledge capital than physical capital are not advocates of overhauling the system 8 Selecting the Right Anchor In deciding where to anchor your knowledge management approach its important to lead with a style that is consistent with the firms culture Some firms are strongly technologybased for example IBM or Andersen Consulting and hence its reasonable for them to build knowledge management on top of technology initiatives and plans Other firms will be more oriented to finance and accounting to quality or to Take a hard look at your culture before launching a knowledge initiative organizational change programs What may be appealing conceptually as an anchor for knowledge management may not in reality fit the culture Therefore knowledge managers should spend some time assessing their organizations culture before deciding the foundation on which to base a knowledge management effort9 If you want knowledge management to thrive and become institutionalized your organization must ultimately adopt multiple anchors for knowledge management Any of the approaches described above may be sufficient to get a knowledge initiative off the ground but keeping it in the air will require the support and skills of many different groups around the company No single approach will give it the institutional base that it needs to prosper over time Knowledge Management Pitfalls Despite the value of good management sense in knowledge management we see many organizations that have gone astray We will devote the rest of the chapter then to describing the most common pitfalls firms encounter in the knowledge management business We usually know Page 173 that a company has lost its way when we hear a concise sentence or two that sums up an entire knowledge management problem syndrome Since these catchphrases often take the form of conventional wisdom wed like to rebut them one by one and point out why you shouldnt fall for them Weve referred to some of these misconceptions elsewhere in the book but having all our caveats listed in one place may be useful Like all myths the fact that each expression has some element of truth makes them even more seductive If We Build It They wont come At least your building it has little to do with whether they will come or not It of course is an information based system for storing and distributing knowledge You can buy as many Notes or Netscape licenses as you want you can create a very attractive Web page you can even put some Javabased interactive applications on your systembut it doesnt mean anyone will use or get value out of your investments in technology and sophisticated programming Remember our 3313 rule if youre spending more than a third of your time effort and money on technology youre neglecting the other factors that will help them to comethe content the organizational culture the motivational approaches and so forth Almost every day we see implementations of Lotus Notes that cant get beyond email or intranetbased knowledge repositories to which no one will contribute their knowledge Weve made this point often and thats because an excessive focus on technology is the most common pitfall in knowledge management When firms take their eyes off knowledge they default to technology because its easier to buy implement and measure Lets Put the Personnel Manual Online This failure syndrome sounds something like the following Now that weve got our Intranet up and running weve got to populate it with knowledge Gee how about the personnel manual the procedures manual our cafeteria menus and the campus shuttle bus schedule We cringe The Web and Notes are exciting technologies Were they developed for this Well grudgingly admit that digitizing this boring content has some efficiency advantages and were as much in favor of saving trees as Page 174 anyone But dont call it knowledge and dont call the system on which you install these yawninducing tomes a knowledge management system Simply putting your paper documents online will weaken your terminological currency and should you later decide to put some real knowledge into this repository no one will notice Lets use the technologies that have sparked the rise of knowledge management to store and disseminate real valueadded insightladen wisdominducing knowledge Be aggressive and vehement in arguing for worthwhile content Your knowledge base will grow more slowly but no one will chuckle when you call it that None Dare Call It Knowledge As most of us learn quickly enough in grade school we live in an antiintellectual society In companies where a few lonely individuals are pursuing knowledge management the concession to knownothingism often sounds something like this Were afraid to use the term knowledge because everyone in the company is so pragmatic So we call it best practices There is a certain logic in trying to adapt to the dominant culture but we think its self defeating to try to conceal what youre doing by calling it something else If the word knowledge is suspect in your organization your knowledge management program probably wont succeed anyway Heres why its a bad idea to refer to knowledge as best practices benchmarks information resources or whatever pragmatic euphemism your boss happens to prefer First of all none of these terms do justice to the entire domain of knowledge If you call it best practices for example how about the knowledge of a customers business situation and needs that involve no practice at all If you call it something related to information youll be dragged back into the corporate information systems morass that really involves data More importantly the inability to use the word knowledge suggests that the senior management of your firm doesnt buy into the big idea behind knowledge managementthat what people know and can learn more valuable than any other business resource Eventually these philistines will cut back the funding for your Information Resource Center or your Best Practices Database when they find out what youre really up to Page 175 So we say call it what it is and false downtoearth American pragmatism be damned Dont be afraid to put knowledge manager on your resume Spend your time arguing about the worth of knowledge up front rather than fighting rearguard skirmishes later And if your company doesnt like the word knowledge put knowledge manager proudly on your resume and look for one that does Every Man a Knowledge Manager This problem relates to the last The telling remark here goes something like We think knowledge management is everybodys job So were not going to build up some big staff organization of knowledge managers to do the work everyone should be doing Obviously this misconception has more than a grain of truth in it or we wouldnt have said something similar to it in It should be everyones job to create share and use knowledgeto some degree Lets face reality here Every engineer in your organization should be creating and using new product development knowledge But not every engineer can or will do a good job at writing down what he or she knows Every person should reflect on life but not everyone can write poems or novels about their musings Knowledge management will not succeed if there are no workers and managers whose primary jobs involve extracting and editing knowledge from those who have it facilitating knowledge networks and setting up and managing knowledge technology infrastructures The next time someone says this to us we plan to retort So since its also everybodys job to monitor costs and enhance revenues youve also eliminated the finance and accounting organizations Justification by Faith T his ones a little less common than the others but just as false We know its in effect when we hear Our CEO is a big believer in knowledge management So we dont feel the need to justify our knowledge management work with numbers or anecdotesweve got faith Well faith may propel us into Heaven but it wont help us keep our knowledge manager jobs for long Every week or two we run into a former Page 176 manager of reengineering whose boss previously had faith in that conceptand these people are looking for jobs today Even if your senior management team is gungho about knowledge the crunch will eventually come A new CEO will come in the company will have a bad quarter some hot new fad will come along And a powerful person will utter the fateful words Exactly what are all these knowledge managers doing for us So even if no one is interested today start trying to measure the worth of what you do If possible convert the knowledge you manage into cold hard figures cash that the company has made or saved because they were fortunate enough to have you as a knowledge manager If this seems impossible though remember even accountants get creative these days do some serious anecdote management with sworn testimony from the regional sales manager that This sale would not have gone through without the knowledge in your Xpert Xchange Consider reprinting these remarks in your monthly newsletter If your company frowns on internal boosterism keep these numbers and anecdotes in your drawer until you need them Restricted Access Here is another fateful catchphrase Our focus is on creating better access to our knowledge The authors of this book are perhaps alone in the world in their distaste for the term access We feel that access is oversold overblown overdone Do you really Try not to get mesmerized by the mantra of access think that the reason no one ever looked at the market research reports was because they had to walk up a flight of stairs to get to them That the sales force didnt consult white papers on product performance because they had to make a phone call to get a copy Sure its amazing how lazy we all can be and weve seen the research suggesting that certain types of workers engineers are the most notorious will travel only a few furlongs to seek needed knowledge Better access does increase the likelihood that knowledge sources will be consulted But its just the first step and often the easiest one The next time someone on your project team uses the Aword speak up with some substitutes How about attentionas in how do we get anybody to pay attention to what were doing How about appetiteis Page 177 anyone really hungry for our knowledge Why not affiliationa bit of a circumlocution but how can we get people to feel sufficiently loyal and trustful to share their knowledge with the rest of their co workers Bottoms Up In some organizations one hears this sort of spiel Knowledge management isnt a hierarchical thing in our company We dont need senior management approval theyre not the ones with the knowledge anyway Knowledge is flattening the organization chart making our organization more democratic These are often the companies where we read later that the CEO in this supposedly flat company has engineered himself a very large number of stock options For thousands of years knowledge has been strongly associated with hierarchy and we see no evidence that things are any different today Those who know have power those who have power will have control over who knows what Knowledge management is a highly political undertaking Youll have to tread lightly in giving access theres that word again to knowledge to those who formerly lacked it Or you will almost certainly run afoul of someone powerful to whom your knowledge management activities are threatening A slight variation on this syndrome is the false notion that knowledge management can thrive without support from senior executives True you might be able to build a small knowledge repository in some outoftheway domain like purchasing or the research lab without senior managements support But its impossible to transform our company through knowledge management unless the CEO and his or her management team is standing on the front lines of knowledge management with you A Last Word There are undoubtedly other problem syndromes we could discuss but we believe its important to keep the list fairly short Then it will be a bit easier to catch yourself before falling into these relatively few common pitfalls We also dont want to imply that knowledge management is fraught with peril This is not rocket science in fact an executive at the Jet Propulsion Laboratory once told us that even rocket science isnt that hard anymore Its good sense and managerial basics As long as you work along multiple fronts and dont believe that any one tool or Page 178 approach is the answer to knowledge management success your knowledge management effort has a good chance of thriving Then your organization will be able to say truthfully that it really is managing its most valuable asset Just as balance is necessary in using different approaches to knowledge management balance is required in trading off knowledge management with other change approaches and with simply getting the daytoday work done in an organization If success in business is a mix of learning and doing we must be careful not to spend too much time acquiring and managing knowledge for its own sake Knowledge and learning must always serve the broader aims of the organization Otherwise it becomes at worst a liability and at best a distraction Just as we shouldnt undertake any action without examining what can be learned from it we shouldnt learn anything without relating it to practice A healthy tension between knowledge and action is the key to organizational and probably individual success Page 179 Notes Introduction 1 See for example Richard Rumelt ed Fundamental Issues in Strategy Boston Harvard Business School Press 1993 Giovanni Dosi and Franco Materba eds Organization and Strategy in the Evolution of the Enterprise London Macmillan 1996 and Cynthia Montgomery ed Resourcebased and Evolutionary Theories of the Firm Boston Kluwer 1995 2 The first modern economist to analyze these and related knowledge issues was Fritz Machlup See his threevolume Knowledge Its Creation Distribution and Economic Significance Princeton NJ Princeton University Press 198084 A book edited by Machlup The Study of Information Interdisciplinary Messages New York Wiley 1983 is a fine and still useful collection of expert essays on information and knowledge 3 The best summarizations of the fad problem are in Robert Eccles and Nitin Nohria with James Berkeley Beyond the Hype Rediscovering the Essence of Management Boston Harvard Business School Press 1992 and in Eileen Shapiro Fad Surfing in the Boardroom Reading Mass AddisonWesley 1995 4 The results of that work can be read about in James McGee and Laurence Prusak Managing Information Strategically New York Wiley 1992 Thomas H Davenport Process Innovation Boston Harvard Business School Press 1993 and Thomas H Davenport with Larry Prusak Information Ecology New York Oxford University Press 1997 5 Sidney G Winter On Coase Competence and the Corporation in The Nature of the Firm ed Oliver Williamson and Sidney Winter Oxford University Press 1994 189 6 See for example books published in 1997 by Tom Stewart Doubleday Currency and Leif Edvinsson and Michael Malone HarperCollins both entitled Intellectual Capital For a more academic collection of essays on the subject see Georg von Krogh and Johan Roos eds Managing Knowledge London Sage 1996 For a collection of articles on knowledge management tools see Rudy L Ruggles III ed Knowledge Management Tools Boston ButterworthHeinemann 1996 Similar collections on knowledge management and organizational design are Paul Myers ed Knowledge Management and Organizational Design Page 180 Boston ButterworthHeinemann 1996 and Larry Prusak Knowledge in Organizations Boston ButterworthHeinemann 1997 Chapter 1 1 Alan M Webber Whats So New About the New Economy Harvard Business Review JanuaryFebruary 1993 27 2 If youre interested in pursuing the idea of wisdom see Robert J Sternberg ed Wisdom Its Nature Origins and Development New York Cambridge University Press 1989 3 We know that data is a plural noun but weve chosen to use the more popular singular usage 4 Information about CALL comes from a study by Lloyd Baird John Henderson and Stephanie Watts of the Boston University School of Management and from a book by Gordon R Sullivan and Michael Harper Hope Is Not a Method New York Random House 1996 5 Witness for example the contrast between how Richard Pascale no Tolstoy but an astute observer of people and organizations described Hondas entry into the US market and how it was described by consultants and other strategists This debate is chronicled in CMR Forum The Honda Effect Revisited California Management Review Summer 1996 78117 6 Karl E Weick Sensemaking in Organizations Thousand Oaks Calif Sage Publications 1995 3435 7 Karl Weick Cosmos vs Chaos Sense and Nonsense in Electronic Contexts Organizational Dynamics Autumn 1985 57 8 Ikujiro Nonaka and Hirotaka Takeuchi The KnowledgeCreating Company New York Oxford University Press 1995 58 9 Thomas H Davenport Saving ITs Soul HumanCentered Information Management Harvard Business Review MarchApril 1994 121 10 Three recent volumes make these points with extensive evidence and analysis Organization for Economic Cooperation and Development Employment and Growth in the KnowledgeBased Economy Paris OECD 1996 Peter Howitt ed The Implications of KnowledgeBased Growth for MicroEconomic Policies Calgary University of Calgary Press 1996 Gunnar Eliasson ed The KnowledgeBased Information Economy Stockholm Industrial Institute for Economic and Social Research 1996 11 Webber Whats So New About the New Economy 26 12 Quoted in Nonaka and Takeuchi The KnowledgeCreating Company 7 13 Emily Thornton Japan Lays Off Its Robots Far Eastern Economic Review Hong Kong March 21 1996 Reprinted in World Press Review July 1996 3132 Page 181 14 Lee Berton Many Firms Cut Staff in Accounts Payable and Pay a Steep Price Wall Street Journal September 5 1996 1 6 15 Quoted in Richard Tanner Pascale Managing on the Edge New York Touchstone 1990 16 Webber Whats So New About the New Economy 2627 17 Liz Seymour Custom Tailored for Service VF Corporation Hemispheres March 1996 2627 18 Debra M Amidon Rogers Analog Devices Invests in Intellectual Assets Knowledge Inc June 1996 3 19 Paul M Romer Two Strategies for Economic Development Using Ideas and Producing Ideas Proceedings of the World Bank Annual Conference on Development Economics The World Bank 1993 64 20 This has been illustrated with respect to a knowledgeoriented system in M Lynne Markus and Mark Keil If We Build It They Will Come Designing Information Systems that Users Want to Use Sloan Management Review Summer 1994 1125 21 This issue is well illustrated in Wanda Orlikowski Learning from Notes Organizational Issues in Groupware Implementation in Knowledge Management Tools ed Rudy L Ruggles III Boston ButterworthHeinemann 1996 231246 22 Nonaka and Takeuchi The KnowledgeCreating Company 115 Chapter 2 1 It is actually what economists call a quasi market since its transactions cannot be enforced by formal contracts 2 See Whites comments in Richard Swedborg ed Economics and Sociology Princeton NJ Princeton University Press 1994 3 This concept of search is slightly modified from James March and Herbert Simons Organizations Oxford Blackwell 1993 and many subsequent works based on their insights 4 See Thomas H Davenport Robert G Eccles and Larry Prusak Information Politics Sloan Management Review Fall 1992 53 65 5 Michael L Tushman and Thomas Scanlan Characteristics and External Orientations of Boundary Spanning Individuals Academy of Management Journal 24 no 1 1981 8398 6 For the importance of gossip to organizations see James March Gossip Information and DecisionMaking in his collection Decisions and Organizations Oxford Blackwell 1988 7 See Jim Matarazzo Closing the Corporate Library Washington DC Special Libraries Association 1987 Page 182 8 An interesting analysis of trust as an economic and social value is Francis Fukayamas Trust New York Free Press 1995 9 John Seely Brown and Paul Duguid Organizational Learning and CommunitiesofPractice Toward a Unified View of Working Learning and Innovation Organization Science no 1 February 1991 4057 10 March and Simon Organizations 11 Ikujiro Nonaka and Hirotaka Takeuchi The Knowledge Creating Company New York Oxford University Press 1995 81 12 See Carlos Cipolla Guns Sails and Empire Lawrence Kansas Sunflower Books 1984 13 For a full description of this concept see David J Teece Richard Rumelt Giovanni Dosi and Sidney Winter Understanding Corporate Coherence Journal of Economic Behavior and Organization 23 1994 130 14 Quoted by Karl Weick Sensemaking in Organizations Thousand Oaks Calif Sage Publications 1995 38 15 Nonaka and Takeuchi The KnowledgeCreating Company 75 16 Nonaka and Takeuchi The KnowledgeCreating Company 173 Chapter 3 1 Thomas H Davenport Sirkka L Jarvenpaa and Michael C Beers Improving Knowledge Work Processes Sloan Management Review Summer 1996 5365 2 Ikujiro Nonaka and Hirotaka Takeuchi The KnowledgeCreating Company New York Oxford University Press 1995 Dorothy LeonardBarton Wellsprings of Knowledge Boston Harvard Business School Press 1995 3 A thorough analysis of this type of acquisition is provided in Joseph Badaracco Jr The Knowledge Link Boston Harvard Business School Press 1991 4 These institutions are beginning to look seriously at this issue however See for example Real Millers OECD booklet and Organization for Economic Cooperation and Development Employment and Growth in the KnowledgeBased Economy Paris OECD 1996 5 LeonardBarton Wellsprings of Knowledge 171 6 See for example DJ Teece The Multinational Corporation and the Resource Cost of International Technology Transfer Cambridge Mass Ballinger Publishing Co 1976 7 Joseph Badaracco Jr The Knowledge Link 5 8 See M Gibbons et al The New Production of Knowledge London Sage 1996 for recent thinking in this field 9 Doug Smith and Robert C Alexander Fumbling the Future New York William Morrow 1988 Page 183 10 Nonaka and Takeuchi The KnowledgeCreating Company 181 11 LeonardBarton Wellsprings of Knowledge 6364 12 Ibid 59 13 Nonaka and Takeuchi The KnowledgeCreating Company 99 14 Information about IDEO comes from Robert Sutton and Andrew Hardagon Brainstorming Groups in Context Effectiveness in a Product Design Firm Administrative Science Quarterly 41 no 4 1996 685718 and conversations with the authors 15 Stuart Kaufmans At Home in the Universe New York Oxford University Press 1996 and John Hollands Hidden Order Reading Mass AddisonWesley 1966 are good places to pursue these ideas 16 Richard H Thaler The Winners Curse Princeton NJ Princeton University Press 1997 17 Quoted in LeonardBarton Wellsprings of Knowledge 29 18 LeonardBarton Wellsprings of Knowledge 31 260 19 Quoted in Nonaka and Takeuchi The KnowledgeCreating Company 79 20 A school of strategic thinking often called the resourcebased theory of the firm provides much of the strategic and economic focus for what we are saying here See for example Edith Penrose The Theory of the Growth of the Firm 2d ed New York Oxford University Press 1995 and Cynthia Montgomery ed The ResourceBased Theory of the Firm Boston Kluwer 1995 21 See Nitin Nohria and Robert Eccles Networks and Organizations Boston Harvard Business School Press 1994 for an excellent summary of recent thinking regarding networks in organizations 22 David Krackhardt and Jeffrey Hanson Informal Networks The Company behind the Chart Harvard Business Review July August 1993 104111 and Erik von Hippel The Sources of Innovation New York Oxford University Press 1988 Chapter 4 1 Sidney G Winter Knowledge and Competence as Strategic Assets in The Competitive Challenge ed DJ Teece Cambridge Mass Ballinger 1987 170 2 The classic works on this subject are Michael Polanyis The Tacit Dimension New York Doubleday 1957 and Personal Knowledge Chicago University of Chicago Press 1984 3 There is a voluminous and somewhat vituperative literature on the subject of whether tacit knowledge can be effectively captured since it is at the heart of the debate about artificial intelligence We are ill equipped technically to enter this fray For some representative arguments pro and con see Peter Baumgartner and Sabine Payr eds Speaking Minds Princeton NJ Princeton University Page 184 Press 1995 and Stephen Graubard ed The AI Debate Cambridge Mass MIT Press 1988 4 Carol Hildebrand Guiding Principles CIO July 1995 5 There is specific software available for mapping knowledge routes and flows IBMs network analyzer Aegis and Blue Marble are examples 6 Thomas H Davenport Some Principles of Knowledge Management Strategy and Business Winter 1996 reprint no 96105 7 Hildebrand Guiding Principles 6 8 The Economist April 20 1996 Reprinted in World Press Review July 1996 9 Karl E Weick Sensemaking in Organizations Thousand Oaks Calif Sage Publications 1995 127 10 See his Dynamic Memory Cambridge University Press 1982 and with R Abelson Scripts Plans Goals and Understanding Hillsdale NJ Lawrence Erlbaum Inc 1977 11 D McLoskey Rhetoric and Explanation in Economics Cambridge University Press 1993 Robert Eccles and Nitin Nohria with James Berkley Beyond the Hype Rediscovering the Essence of Management Boston Harvard Business School Press 1992 12 Weick Sensemaking in Organizations 6061 13 Cited in Dorothy LeonardBarton Wellsprings of Knowledge Boston Harvard Business School Press 1995 171 14 Interview with Gordon Petrash and Thomas Stewart Your Companys Most Valuable Asset Intellectual Capital Fortune October 3 1994 15 For a discussion of this issue see Thomas H Davenport Saving ITs Soul HumanCentered Information Management Harvard Business Review March April 1994 122123 16 In Speaking Minds 307 Chapter 5 1 David V Gibson and Everett M Rogers RD Collaboration on Trial Boston Harvard Business School Press 1994 The subject of technology transfer at MCC is described in technology transfer at Sematech is described on pages 521527 2 Memorandum from Jeff Conklin to Craig Fields cited in Gibson and Rogers RD Collaboration on Trial 326 3 Marilyn Redmond interview with authors Sematech Austin Tex May 1996 4 Alan M Webber Whats So New About the New Economy Harvard Business Review JanuaryFebruary 1993 28 5 An interesting study on this subject comes from Ronald Purser William Passmore and Ramakrishnan Tenkasi The Influence of Deliberations on Page 185 Learning in New Product Development Teams Journal of Engineering and Technology Management 9 no 2 1992 128 6 How Japan Remembers The Economist April 20 1996 52 7 Britton Monasco and Lewis Perelman Booz Allens Global Knowledge Strategy Knowledge Inc 1 no 1 1996 4 8 IBM Consulting Group The Learning Organization Managing Knowledge for Business Success The Economist Intelligence Unit New York 1996 108109 9 Gerald T OConner et al A Regional Intervention to Improve the Hospital Mortality Associated with Coronary Artery Bypass Graff Surgery Journal of the American Medical Association March 20 1996 841845 10 David Kanouse and Itzhak Jacoby When Does Information Change Practitioners Behavior International Journal of Technology Assessment in Health Care 7 no 2 1988 30 11 Thomas Allen People and Technology Transfer The International Center for Research on the Management of Technology August 1990 5 12 Information about 3Ms culture is drawn from interviews with 3M managers in Austin Texas and The Learning Organization 4144 Chapter 6 1 Christopher Bartlett Managing Knowledge and Learning at McKinsey Company Harvard Business School case study 1996 2 Tom Peters Liberation Management New York Knopf 1992 408 3 Dorothy LeonardBarton Wellsprings of Knowledge Boston Harvard Business School Press 1995 4 We learned about the OwensCorning situation through interviews with the firms managers and in Nancy Lemon Climbing the Value Chain Online 20 no 6 November December 1996 13 5 We have argued this before in an article called Blow Up the Corporate Library International Journal of Information Management Winter 1993 405 412 6 Homa Bahrami The Emerging Flexible Organization Perspectives from Silicon Valley in Knowledge Management and Organizational Design ed Paul S Myers Boston Butterworth Heinemann 1996 6465 Chapter 7 1 On expert systems in business see Edward Feigenbaum Pamela McCorduck and HP Nii The Rise of the Expert Company New York Times Books 1988 on casebased reasoning see Janet Kolodner CaseBased Reasoning San Mateo Calif Morgan Kaufman Publishers 1993 Page 186 2 Robert L Sproull Foreword in Paul Harmon and David King Expert Systems Artificial Intelligence in Business New York Wiley 1985 ix 3 Harmon and King Expert Systems 12 4 Quoted by Theodore Roszak in The Virtual Duck and the Endangered Nightingale Digital Media June 5 1995 6874 5 Kolodner CaseBased Reasoning 563 6 Grandon Gill Early Expert Systems Where Are They Now MIS Quarterly 19 no 1 March 1995 5181 7 M Mehler Boeing Leaves Past Behind with Production Redesign Investors Business Daily May 23 1995 A8 8 In the interest of full disclosure Thomas H Davenport is a director of Inference Corporation 9 Bruce Arnold Expert System Tools Optimizing Help Desks Software Magazine 13 no 1 January 1993 10 For a discussion of these tools see J Conklin and ML Begelman gIBIS A Hypertext Tool for Exploratory Policy and Discussion Proceedings of the 1988 Conference on Computer Supported Cooperative Work Portland Or 1988 np Chapter 8 1 Dave DeLong and Michael Beers participated in this research project as well Both of them wrote drafts of working papers from which we draw in this chapter 2 The broader project was called Managing the Knowledge of the Organization and is managed by Ernst Youngs Center for Business Innovation in Boston Fifteen companies sponsored this program in 1996 3 The information about Texas Instruments is from Ikujiro Nonaka and Hirotaka Takeuchi The KnowledgeCreating Company New York Oxford University Press 1995 4 Lynne Zucker The Role of Institutionalism in Cultural Persistence in The New Institutionalism in Organizational Analysis ed Walter W Powell and Paul J Dimaggio University of Chicago Press 1991 83107 See also Cyert and March A Behavioral Theory of the Firm 2d ed Cambridge Mass Blackwell 1992 for a discussion of organizational learning 5 Thomas H Davenport with Larry Prusak Information Ecology Mastering the Information and Knowledge Environments New York Oxford University Press 1997 6 For an attempt to relate learning and financial performance see Robert Kaplan and David Norton The Balanced Scorecard Boston Harvard Business School Press 1996 7 Randy Russell Providing Access The Difference between Sharing Infor Page 187 mation or Just Reporting Information Strategy The Executive Journal 12 no 2 Winter 1996 2833 8 Thomas H Davenport Sirkka Jarvenpaa and Michael C Beers Improving Knowledge Work Processes Sloan Management Review Summer 1996 5365 9 Many of these studies are reported in Thomas J Allen Managing the Flow of Technology Cambridge Mass MIT Press 1977 Chapter 9 1 In operations research circles this is known as a seed select and amplify approach 2 For an example of what can happen when knowledge is lacking in financial services see Chris Marshall Larry Prusak and David Shpilberg Financial Risk and the Need for Superior Knowledge Management California Management Review 38 no 3 Spring 1996 77102 3 Information about the Texas Instruments example came from discussions with company managers and from the firms Information Technology Award Nomination Information Document ComputerWorld Smithsonian Awards TI Office of Best Practices January 1997 4 Peter Senge The Fifth Discipline The Art and Practice of the Learning Organization New York DoubledayCurrency 1990 Senges arguments about knowledge management are also available in a videotape Creating Transformational Knowledge Cambridge Mass Pegasus Communications 1996 5 James G March A Primer on Decision Making New York Free Press 1997 27 6 This dialoguedecision process is described in detail in Barabbas book Meeting of the Minds Boston Harvard Business School Press 1995 7 Leif Edvinsson and Michael Malone Intellectual Capital New York HarperCollins 1997 8 Microsofts Chief Financial Officer Mike Brown argued against such changes in an address to the Knowledge Imperative conference Ernst YoungStrategic Issues Forum San Diego California December 10 1996 9 For a useful categorization of cultural types see Edgar Schein Three Cultures of Management The Key to Organizational Learning Sloan Management Review Fall 1996 921 Page 189 Index A Accounting as focus for beginning knowledge management 171 172 Acquisition of knowledge 5356 Action and knowledge 2 Adaptation knowledge generated through 6265 Aeschylus 5 Akers John 9091 Allen Thomas 98 159 Altruism and price of knowledge 3334 American Airlines xii American Express 137 Analog Devices 16 Andersen Consulting 58 121 132 133 167 171 and knowledge management jobs 110 and Knowledge Xchange repository 7 121 132 166 Apple Computer 50 59 Aristotle ix Artificial intelligence 125128 140141 Artificial scarcity and knowledge markets 4344 Assignees 8990 100101 ATT xii and purchase of NCR 54 B Badaracco Joseph Jr 56 Barabba Vince 171 Beliefs and values and knowledge 1112 Best practices as focus for beginning knowledge management 167169 Boeing 63 127 138 Bold Beranek Newman 133 Bonfire of the Vanities 32 Booz Allen Hamilton 96 119 Boston Harbor tunnel project and New Zealand tunnelers 99 Boundary spanners 9899 See also Brokers British Petroleum 64 99 Andrew Project of 22 knowledge management principles reflected by Virtual Teamwork Program 24 lessons learned through Virtual Teamwork Program 2324 and Thief of the Year award 53 Virtual Teamwork Program of 1924 35 39 45 72 77 128 149 155 Broad knowledge repositories 130137 Broderbund and Gizmo Tapper 586 LC 139 Brokers 9899 168 and knowledge markets 2930 Brown and Root 22 Browne John 19 23 Brownian motion theory of knowledge exchange 91 Buckman Laboratories 114 116 121 130 156 158 Business firm definition of 13 Buyers and knowledge markets 28 C Canon 64 Case examples British Petroleum Virtual Teamwork Program 1924 HewlettPackard 123125 Javelin Development Corporation 41 42 Microsofts knowledge map 7477 Monsantos Knowledge Management Architecture 8587 3M 104106 Casebased reasoning CBR xiv Page 190 Casebased reasoning CBR continued applications of 138139 technology of 127128 Chaparral Steel 109 ChaseManhattan Bank 77 and ATMs 16 Chemical Bank See Chase Manhattan Bank Chevron 168 Chief knowledge officer CKO 114122 personal characteristics of 116117 reporting relationships of 117118 tasks and responsibilities of 114116 Chief learning officer 114 118 Chrysler Corporation and Engineering Books of Knowledge 7 18 34 132 158 Citibank 39 and ATMs 16 Citicorp 168 Clarity of vision and language as factor for success 158 Clough Arthur Hugh 25 CocaCola 16 119 169 and knowledge management jobs 110 Common ground and knowledge transfer 97100 Common sense about knowledge management 162164 Communities of practice and knowledge markets 3839 Company Watch 133 Compaq 139 Comparison and knowledge 6 CompuServe 130 Computer networks and knowledge exchange 1819 Connections and knowledge 6 Consequences and knowledge 6 Constraintbased systems 137138 Consultants and knowledge management 163 as rented knowledge 7 Consumer Reports 40 Conversation and knowledge 6 Coopers Lybrand 119 132 Core competencies ix 64 Core rigidities 64 Corporate asset knowledge as 1219 Corporate coherence and knowledge markets 49 Corporate knowledge ix Corporate librarians as knowledge brokers 29 Corporate Memory Systems 142 Corporate size and knowledge management 1718 Creative abrasion 61 Creative chaos 60 Cross John 20 CSIRO 57 94 Cultural mismatch as barrier to technology transfer 98 Customer Support Consortium 139 D DaiIchi Pharmaceuticals 46 92 Data definition of 23 Data management evaluating 2 Data mining 141 Decision makers and politics 170 Decision making as focus for beginning knowledge management 170 171 Dedicated resources knowledge generation through 5859 Demerest Mark 118 DeSimone Livio 105 Dialog 130 Digital Equipment Corporation 44 50 63 137 138 Dow Chemical xiii 85 114 116 119 157 Downsizing and knowledge scarcity 4344 and sharing knowledge 154 Drew Dick and Scotch tape 105 Drucker Peter xiii 2 4 Dun Bradstreet 133 E EC 55 Eccles Bob 81 Economics as lens to see organizations 27 Economics or industry value link to as factor for success 156157 EDS 119 Page 191 Education and position and knowledge markets 3637 Edvinsson Leif 116 119 171 EL Products 55 83 Electronic knowledge yellow pages 45 77 148 Embedded knowledge 83 Emerson Ralph Waldo 52 Erikson Erik 34 Ernst Young xiii 77 94 111 116 119120 132 145 156 158 and Center for Business Innovation 58 and Center for Business Knowledge 111 and knowledge management jobs 110 Executives questioning own knowledge 6162 Experience and knowledge 78 Expert systems ix 120 125128 137 Experts 78 136 148 Explicit knowledge evaluating 8485 External knowledge as type of knowledge repository 146 F Face time and US Army 35 100 159 Facetoface meetings and knowledge transfer 9495 159 FASB 55 Fast Company magazine 16 Federal Drug Administration xiv Fidelity Investments 141 Fifth Discipline The 169 Focused knowledge environments 137 138 Ford x 14 133 Fortune magazine xiii 14 France 16 Franklin Benjamin ix Frictions most common 9697 Fry Art and PostIt Notes 105 Fusion knowledge generated through 5962 G Gatekeepers 9899 See also Brokers GATT 55 General Electric 118 General Motors 121 171 Gibson David V 89 GrapeVINE 125 133 147 Grapevine Technologies 133 Graphical IssueBased Information System 142 Greek Agora 46 Grimes 55 83 Ground truth 82 and knowledge 89 Guare John 74 H Haiti 8 HewlettPackard xii xiv 27 8283 120 121 123125 133 136 138 139 144 155 157 and Connex 124 and Electronic Sales Partner ESP system 123124 147 and knowledge management jobs 110 113 and Trainers Trading Post 147 Hirshberg Gerald 60 62 Hoeschst 57 HoeschstCelanese 6667 HoffmannLaRoche xiv 113 and knowledge map 73 Right First Time knowledge project of 69 Honda 69 Hoover 133 Hughes Aerospace 28 Hughes Communications Knowledge Highway 73 Hughes Space and Communications 71 Huxley Thomas Henry 162 Hypertext Markup Language HTML 134 I IBM xii 14 81 9091 171 and purchase of Lotus 53 and purchase of ROLM 56 IBM Consulting xiii 58 110 119 IBM Global Services 77 IBMs Deep Blue 84 Ideas and potential for growth 17 IDEO 61 Illusions of accuracy 910 Individual Inc 133 Page 192 Industryuniversity consortia 5657 Inference Corporation and CBR tools 139 Informal internal knowledge as type of knowledge repository 146 Informal networks and knowledge markets 3738 Information definition of 35 incompleteness of 40 Information management quantitative measures of 4 Information technology 4 using wisely 4546 Innovation 60 Insights xii and knowledge 2 International Harvester x Internet x 4 18 39 47 78 130 131 Intuition and rules of thumb 1011 IRS 3 J Jacoby Itzhak 98 102 Japan corporate structure of 92 Java 173 Javelin Development Corporation 4142 Jet Propulsion Laboratory 177 Jobs Steve 50 59 Johnson Jerry 16 Judgment 10 Junkins Jerry 167 K Kaka Ryuzaburo 64 Kanouse David 98 102 Kao 49 Kerr Steve 118119 Knowledge in action 612 and the antiintellectual society 174 asymmetry of 4041 codifying different types of 70 compared to atomic particle 56 and complexity 910 as corporate asset 1219 definition of 5 embedded 83 and experience 78 and ground truth 89 how managed xii and judgment 10 kinds of 9596 localness of 41 mapping of 7280 modeling of 80 and rules of thumb and intuition 10 11 as sustainable competitive advantage 1517 and values and beliefs 1112 a working definition of 16 Knowledge access and transfer 148149 Knowledge boom ix Knowledge brokers See Brokers Knowledge chart 133 Knowledge codification basic principles of 6872 and coordination 6887 Knowledge components and SolutionBuilder 139140 Knowledge consulting ix KnowledgeCreating Company The xiii 19 52 60 Knowledge engineering 128 Knowledge engineers 111 Knowledge environment 149150 Knowledge exchange and computer networks 1819 Knowledge fairs and open forums 93 95 Knowledge generation 5267 acquisition 5358 adaptation 6265 dedicated resources 5859 fusion 5962 networking 6567 Knowledge in systems codifying 8487 Knowledge management xiv and consultants 163 and corporate size 1718 common sense about 162164 a decisionoriented approach to 169 five principles of 62 getting started in 164 leveraging existing approaches to 165172 leading with accounting 171172 Page 193 leading with decision making 170 171 leading with organizational learning 169170 leading with qualityreengineeringbest practices efforts 167 169 leading with technology 166167 selecting the right anchor 172 pitfalls of 172177 pragmatics of 162178 technologies for 123143 artificial intelligence 125128 broad knowledge repositories 130 137 casebased reasoning CBR 127 128 constraintbased systems 137138 expert systems 125128 focused knowledge environments 137138 implementing 128130 limitations of 141143 longerterm analysis systems 140 141 realtime knowledge systems 138 140 Knowledge management principles reflected by Virtual Teamwork Program of British Petroleum 24 Knowledge management projects in practice 144161 success in 151153 primary attributes used to define 151 types of 145151 knowledge access and transfer 148 149 knowledge environment 149150 knowledge repositories 146148 projects with multiple characteristics 150151 Knowledge management tools key dimensions of 129130 Knowledge management workers 109 112 Knowledge manager 147 163 174 Knowledge map 7273 165 assembling 7374 example of 74 Knowledge markets xii developing 4548 inefficiencies of 3942 pathologies of 4345 artificial scarcity 4344 monopolies 43 trade barriers 4445 payment scenario for 31 peripheral benefits of 4850 political economy of 2730 brokers 2930 buyers 28 sellers 2829 price system of 3036 promise and challenge of 2551 recognizing 26 signals of 3639 trust as essential condition of 35 value of creating and defining 47 48 Knowledge movement x Knowledgeoriented culture as factor for success 153155 Knowledgeoriented personnel 108109 Knowledge problem not expecting software to solve 26 Knowledge project manager activities performed 112113 Knowledge projects differences among 160161 factors leading to success with 153 160 clarity of vision and language 158 knowledgeoriented culture 153 155 a link to economics or industry value 156157 a modicum of process orientation 157 multiple channels for knowledge transfer 159 nontrivial motivational aids 158 senior management support 156 some level of knowledge structure 159 technical and organizational infrastructure 155156 Page 194 Knowledge repositories 146148 market value of 166 types of 146 Knowledge roles and skills 107122 chief knowledge officer CKO 114 122 knowledge management workers 109 112 knowledgeoriented personnel 108 109 managers of knowledge projects 112 114 Knowledge sharing versus knowledge hoarding 2829 Knowledge stock 4950 Knowledge structure as factor for success 159 Knowledge technologies implementing 128130 Knowledge transfer 88106 and common ground 97100 culture of 96104 and facetoface meetings 9495 multiple channels for as factor for success 159 and organization size 89 and physical proximity 100 and shared language 9899 strategies for 8997 knowledge fairs and open forums 9395 talk rooms 9293 water coolers 9091 and talk rooms 9293 and trust 97100 and velocity and viscosity 102104 and water coolers 9091 L Land Edwin 50 Latin America 74 Learning organization ix Lee Jeans 16 LeonardBarton Dorothy xiii 52 55 60 61 64 102 109 LexisNexis 130 Lincoln National Life 120 121 Loder Drew Associates 15 Loder Richard 15 Longerterm analysis systems 140141 Lotus Development 81 Lotus Notes xi 4 18 53 77 86 87 92 96 109 115 123126 131 132 134 136 142 147 155 159 166 168 173 Lumley Ted 80 103 M Macintosh 59 MacPherson CB 34 Managers of knowledge projects 112114 functions performed 112113 Mapping knowledge 7280 politics of 7980 technology of 7779 March James 27 38 41 170 Marketplaces building 4647 Marx Karl 27 Massachusetts General Hospital Molecular Biological Institute 57 Matsushita Electric Ltd 15 19 and automatic breadmaking machine 6061 Matsushita Konosuke 15 McCloskey Donald Deidre 81 McDonalds 58 McDonnell Douglas Corporation 63 126127 McDonnell John F 63 McKinsey Company xiii 77 108 110 156 158 McLuhan Marshall 4 Medium Is the Message The 4 Merck 58 Meritocracy of ideas and knowledge markets 49 Message as information 3 Microelectronics and Computer Corporation MCC 89 100101 142 Microsoft 14 54 and SPUD project 7477 149 Microsoft Office 166 Mill John Stuart 27 Minsky Marvin 126 Mizukami Tomiaki 15 Mobil Exploration and Producing 80 Mobil Oil 27 103104 Modeling knowledge and variables affected by management action 80 Monopolies and knowledge markets 43 Page 195 Monsanto 65 119 169 Knowledge Management Architecture project of 8587 Motorola 58 N Narratives value of 8183 National Cooperative Research Act of 1984 57 National Semiconductor 136 NationsBank and Project Agora 46 NCR and purchase by ATT 54 56 NEC 15 Netscape 173 Networks 3 knowledge generated through 6567 Neural networks 140141 NewsPage 133 Nietzsche Friedrich 88 Nissan Design International 60 Nohria Nitin 81 Nonaka Ikujiro xiii 12 19 43 49 52 60 61 98 Nontrivial motivational aids as factor for success 158 Northwestern University 11 NYNEX 29 O OECD 55 Olsen Ken 44 50 Online thesaurus 134 135 159 Online yellow pages 45 77 148 OneSource Information Services 133 Organization culture and knowledge management initiatives 155 Organization size and knowledge transfer 89 Organizational chart versus knowledge map 72 Organizational knowledge 12 as focus for beginning knowledge management 171172 harmonizing not homogenizing 86 studies of xiii OwensCorning and Knowledge Resource Center 111 P Peetz John 116 119 People roles of in knowledge technologies 129 PeopleSoft 77 139 Personal Internet Newspaper 133 Peters Tom 108 Petrash Gordon 85 116 119 Physical proximity and knowledge transfer 100 PIMS method 55 Plato ix Platt Lew xii Polanyi Michael 71 Polaroid 50 Polavision 50 Political science as lens to see organizations 27 Position and education and knowledge markets 3637 PostIt Notes 105 Pragmatics of knowledge management 162178 Price system of knowledge markets 30 36 altruism 3334 reciprocity 32 repute 3233 trust 3436 Price Waterhouse 132 Primus corporation 139 Process orientation as factor for success 157 Product and service convergence of 13 15 Prusak Larry childhood story of 71 81 Q Quality movement x Quality program as focus for beginning knowledge management 167169 Quinn James Brian 14 R RD departments 58 Raychem and Internal Information Interview Network 96 Realtime knowledge systems 138140 Reciprocity and price of knowledge 32 Redundancy 43 Reengineering and knowledge market infrastructure 45 Reengineering program as focus for beginning knowledge management 167169 Page 196 Rental of knowledge 5658 Repute and price of knowledge 3233 Requisite variety 60 Resolve and knowledge 2 Restrac 77 Resumix 77 Reuters 139 Rodgers Dave 134 Rogers Everett M 89 ROLM 56 Roman Forum 46 Romer Paul xiii 17 Rosenblum Judith 119 Rudd Nick 118 121 150 Rules of thumb and intuition 1011 Rwanda 8 S Sandia National Laboratories 44 Sandpoint Systems 133 SAP software package 57 77 Schank Roger 11 81 Schoeffler Sid 55 Searchandretrieval knowledge management 134135 Sears 63 Seemann Patricia 69 Sellers and knowledge markets 28 29 Sematech 8990 149 152 Senco Products 69 Senge Peter 169 Senior management support as factor for success 156 Sensemaking in Organizations 9 Sequent Computer 118 120 147 and Knowledge Depot 134 Sequent Corporate Electronic Library SCEL 134 Service and product convergence of 13 15 Shared language as essential to knowledge transfer 9899 Sharing knowledge and downsizing 154 Sharp 59 Silicon Graphics 147 Simon Herbert A 41 Six Degrees of Separation 74 Skandia 114 116 119 120 149 171 Skill sharing and coronaryartery bypass surgery 9798 Skillview 78 Slack time for learning and thinking importance of 93 SMART Support Management Automated Reasoning Technology 139 Snowball sample 7374 Social Security Administration 3 Sociology as lens to see organizations 27 SolutionBuilder 139140 Somalia 8 Standard Life 65 Stasey Robert 16 Status of the knower 100101 Steelcase 14 Stewart Tom xiii Strategy focus ix Structured internal knowledge as type of knowledge repository 146 Stupidity cost of 170 Sturgeon Theodore 62 64 Success Factor Systems 78 Success in knowledge management projects primary attributes used to define 151 Sun Microsystem 147 Sustainable competitive advantage 1517 T Tacit knowledge capturing 8183 and codification 7072 Takeuchi Hirotaka xiii 12 19 43 49 52 60 61 98 Talk rooms and knowledge transfer 92 93 Talk value of 39 Taurus design team x Techknowledgy 123 Technical and organizational infrastructure as factor for success 155156 Technical communicators 111 Technologies limitations 141143 Technology as focus for beginning knowledge management 167 169 Teltech Resource Network Corporation 136 148 150 154 159 Page 197 Texas Instruments 157 and Not Invented Here but I Did It Anyway award 53 168 and Office of Best Practices 167168 and Share Fair 46 168 and TI Business Excellence Standard TIBEST 167 3M 14 104106 Time 74 Time Life Information Center 74 79 Timex 27 Tolstoy Leo 9 Trade barriers and knowledge markets 4445 Trafalgar House 22 Trajecta 141 Transfer transmission absorption and use 101102 Trilogy Development Group 138 Trust and knowledge transfer 97100 and price of knowledge 3436 TWA Flight 800 131 U Ungson Geraldo 49 US Army and After Action Review AAR program 8 171 and Center for Army Lessons Learned CALL 8 100 and face time 35 100 159 US GDP and changing global economy 13 V Values and beliefs and knowledge 1112 Veblen Thorstein 27 Velocity and viscosity and knowledge transfer 102104 Verifone 8283 VF 16 Vietnam War 8 Virtual offices 91 Virtual Teamwork Program of British Petroleum 1924 W WalMart 63 6465 Walsh James 49 Wang An 50 Wang Labortories 50 63 War and Peace 9 War stories 82 Ward Arian 28 7172 73 Water coolers and knowledge transfer 9091 Webber Alan 14 16 9091 Weick Karl 9 11 81 82 Well stolen is half done 53 168 Wellsprings of Knowledge xiii 52 102 White Harrison 27 Williams Ted 71 81 Winter Sidney xiii 13 70 Wisdom and knowledge 2 Wolfe Tom 32 Work environment changes in 56 Workforce diversity 60 Workforce morale and knowledge markets 49 World Bank 101 World Wide Web x 86 109 115 123 126 130133 135 136 142 143 155 159 166 168 173 Wunderman Cato Johnson 118 121 X Xerox 14 139 Xerox Palo Alto Research Center PARC 58 59 and graphical interface computer 59 Y Young Rubicam 118 119 121 150 154 Z Zadeh Lofti 87 Zildjian cymbal company 16 Page 198 Other Books by Thomas H Davenport and Laurence Prusak Thomas H Davenport Cyrus F Gibson and Barbara Bund Jackson with contributions by Thomas H Davenport The Information Imperative Managing the Impact of Technology on Businesses and People 1987 Thomas H Davenport Process Innovation Reengineering Work through Information Technology 1993 Laurence Prusak Laurence Prusak with James McGee Managing Information Strategically 1994 Knowledge in Organizations Editor 1997 Thomas H Davenport and Laurence Prusak Thomas H Davenport with Laurence Prusak Information Ecology Mastering the Information and Knowledge Environment 1997 Page 199 About the Authors THOMAS H DAVENPORT is a professor of business at the University of Texas at Austin and the director of the schools Information Management Program Previously he was a partner in Ernst Youngs Center for Information Technology and Strategy director of IT research at McKinsey and at CSC Index He has also taught at Boston University Harvard Business School Harvard University and the University of Chicago Davenport has published widely in the IT and general management press he is the author or coauthor of three other books see facing page and of articles in journals including the Harvard Business Review Sloan Management Review and Management Review LAURENCE PRUSAK is a managing principal with IBM Consulting Group in Boston and the groups worldwide competency leader for knowledge Before joining IBM he was a principal in Ernst Youngs Center for Business Innovation a teacher of social and economic history at several universities and a researcher and librarian at Harvard Business Schools Baker Library He has lectured widely and is frequently quoted on organizational knowledge issues by such periodicals as Fortune Business Week and CIO Prusak is also published in books see facing page and journals including the International Journal of Information Management Sloan Management Review and California Management Review