Getting Smart About Knowledge Management

May 4, 1998
Managing intellectual resources can maximize innovation and competitiveness.

Does anyone know what knowledge management is, or care for that matter? Frankly, what could be a bigger snore? For years knowledge management has been a generic term for some vaguely defined activity conducted in the bowels of IS or in the corporate library. What real bearing could it possibly have on the way you run your business? Plenty. As companies become immersed in the World Wide Web, knowledge management is rapidly gaining acceptance as a means to help boost profits, reduce costs, enhance competitiveness, and develop new markets.

"Knowledge management allows you to determine the explicit knowledge that is somewhere in your organization that you can find and leverage rather than having to reinvent the wheel," says Dorothy Leonard-Barton, a professor at the Harvard Business School and author of Wellsprings of Knowledge (1995, Harvard Business School Press).

Du Pont & Co., for instance, is using knowledge management to make its workers more productive and break down the traditional organizational hierarchy on its plant floors. The chemicals giant, along with a number of other companies, also is harnessing knowledge management to organize and understand the potential uses of internally developed technologies, with an eye toward marketing them to other companies.

Hughes Space & Communications Co. is relying extensively on knowledge management to help it shift from a design house to a production house. For GE Capital CSN, the foray into knowledge management has enabled the firm to create an entirely new Internet-based virtual mart through which its industrial subscribers can exchange physical assets. The Big Three automakers all have major knowledge-management initiatives in place, as do dozens of other big corporations including Dow Chemical Co., Monsanto Co., and engineering giant Bechtel Group.

For many of these companies, knowledge management has become the next silver bullet -- in effect, the successor to the reengineering and downsizing efforts that marked the last decade. "A number of firms have pushed the reengineering and processes-redesign work about as far as they can, so thats not going to help them create any benefit," says Peter Novins, a New York-based partner with Ernst & Young. "Knowledge management, properly applied, can be a rich source of ideas to enhance your product line and create whole new businesses."

So just what is "knowledge management"? Novins defines it as "organizing information from disparate sources into a context that reflects the business and the decisions and processes of the business." An IS person is more likely to use it as an umbrella term to refer to a host of technologies and decision-support tools. These include search engines, data mining, and expert systems. These technologies make it easier for corporations to seek out, sort through, organize, refine, disperse and share information. Other vendors provide software that supports these technologies.

For all the hype about these offerings, however, knowledge management is more a way of doing business than it is a piece of software; its more about business processes than systems. The technical solutions being offered under the knowledge-management rubric simply make it possible to address certain business issues more effectively and more comprehensively.

"First we have some enabling technology that now allows us to do this in a way that we werent able to do before, and then we also have things happening on the organization side and the people side that make it more critical that we put in knowledge management," explains Steve Cranford, global partner in charge of knowledge-management solutions in KPMG Peat Marwicks Annapolis, Md., office.

Knowledge At The Top

Senior managers started to see the value of knowledge management once they began cruising the Information Highway. "One of the things thats driving CEOs to understand the importance of knowledge management is that today they can find out information about other companies easier than they can find out information about their own because they get on the Web and do the searching," observes Chris Newelle, executive director of the Lotus Institute, a unit of IBM Corp.s Lotus Development Corp., Cambridge, Mass.

"What senior managers are trying to do with knowledge management is manage intellectual assets the same way they manage physical assets," notes Ron Weissman, vice president of worldwide marketing at Verity Inc., a Sunnyvale, Calif., developer of search-and-retrieval software for the Internet. "For service companies what this means is finding and reusing best practices. If you are doing consulting projects around the world and youve done a good job somewhere, you want to replicate that success and redeploy what youve learned.

"For product companies it means understanding best practices in bringing products to market, cutting cycle time, and improving defect analysis and customer service. The idea is to take the nuggets of information from where youve done things correctly . . . and reapplying this elsewhere."

Where Knowledge Equals Productivity

For many companies, the need for knowledge management was exacerbated as a result of downsizing or restructuring efforts that eliminated personnel. "A number of companies in manufacturing that went through business-process reengineering took out not only a lot of middle management but many of the most senior people in each area, including in some cases the factory floor," says Jack Prouty, a KPMG partner based in Annapolis, Md., who leads the firms strategic-solutions practice. "As a result, 20 or 30 years of experience in the company went out the door and was lost. So now, if companies are growing themselves to success rather than trying to expense themselves to survival, theyre seeing the value of not letting that knowledge get away."

Few organizations are more aggressive or innovative in applying knowledge management to make employees more productive than Du Pont. At its new plant in Richmond, Va., where the company engineers polymers, Du Pont operates with about 70 employees, a fraction of the workers required in a traditional facility of its size. Moreover, theres no customary "stove-pipe" hierarchy of supervisors, no formal departments, and everyone does more than one job. In hiring for the highly automated, largely paperless plant, Du Pont's aim was to staff the facility with multiskilled polymer specialists capable of becoming both specialists and generalists at various tasks. These employees, many of whom change assignments daily, are supported by a knowledge management-based, so-called electronic performance support system from software developer Warren-Forthought Inc., Houston, Tex.

"To compete globally in todays world youve got to work smarter," says Steve Nann, who functions primarily as manager of the plants information-technology systems. The system contains the knowledge and information workers need to prepare for and perform each of their jobs. That information has been culled from Du Pont's various corporate and manufacturing systems including everything from operational and maintenance procedures and directions to safety requirements and work orders. It also provides training support for an employee who is taking on a new task and may be uncertain of whats required.

And it's easy to access and use, Nann says. "It provides our employees with what they need to know and empowers them to live up to their potential."

The Innovation Factor

Knowledge management is also becoming an important factor as corporations strive to bolster competitiveness through innovation. "Any technology-based company competes on innovation today as much as it does on production," says Harvard Business Schools Leonard-Barton. "And the activities that give rise to technical innovation are basically the management of knowledge flow."

That flow, for example, could come from research people transferring knowledge that has been acquired thorough experimentation and prototyping to the development people, who can translate it into product-design development, suggests Leonard-Barton. Or it could arise through brainstorming sessions.

So how does knowledge management figure into these kinds of information exchanges? Lotus Newelle cites a global company that has established a virtual conference room -- what Lotus refers to as a team room -- in which the companys brightest citizens collaborate and communicate using Lotus Notes groupware, database, and communications technology. They strategize about trends and issues in their regions that impact the companys business. Each month the company's head of strategy extrapolates the top 10% of the ideas aired in this virtual forum and presents them to the corporate board as part of a project called Future Watch.

"At the end of the day the goal of knowledge management is the creation of new ideas," offers Newelle. Knowledge management is also useful as a means of gathering valuable information and ideas from customers and, in some instances, working with them to develop new products and services.

"A lot of your best ideas are coming from your leading-edge customers," Newelle adds. The Internet and corporate extranets, which make corporate information accessible to select outsiders, facilitate this exchange. But many argue theres another key step required to put corporate knowledge to work.

"Now that youre receiving information, the question is what are you going to do with it," says Tom Trimmer, president of grapeVINE Technologies LLC, a Troy, Mich.-based maker of software that collects and screens Internet information. "Does it dead-end at your desk? Can you flag it and get it out to people? Collaborating and sharing is where knowledge management is really useful. You need to be able to put all this together in an integrated package." grapeVINE and other vendors supply software to support this integration.

Knowledge Management As A Change Agent

Several years ago, Hughes Space & Communications was forced to change directions to reduce the cost of the satellites it produces by as much as 20% a year because of market forces.

"We were moving our whole paradigm from being that of a design-house agent to more of a production house," explains Arian Ward, head of collaboration, knowledge, and learning at the El Segundo, Calif., firm. Instead of relying on new designs, design reuse became the goal. Like most manufacturers, Hughes had systems to store at least some design versions.

"What was missing was the context," says Ward. "In order to make a reuse decision, you have to look at the design in the context of how it was going to be used or how it was used. We didn't know about all of the dialogues and meetings and e-mail conversations and everything else that went into those decisions, and that was a major problem. People were being asked to risk their jobs and reputations doing a design that . . . had to work, but they werent given enough context to [be sure they werent] making a bad decision."

Hughes' solution was to implement a knowledge-management approach as part of a corporate reengineering effort. The result? Today the various engineering and design subcultures and individual groups within the diverse organization are exchanging and building upon the knowledge that the company needs to become effective at reusing its own design capital.

Getting Started

Each company may have different objectives in moving to knowledge management, but here are some pointers from the experts to achieve success. For starters, Dorothy Leonard-Barton, a professor at the Harvard Business School, says you need to "know what critical knowledge is part of your core capabilities and where it resides. Then you must protect it." Such protection is critical today with so much being outsourced.

As an example, Leonard-Barton cites a manufacturing firm that now outsources much of its manufacturing operations, but refuses to outsource its mold design because thats what gives the company its competitive edge.

Next, says Jack Prouty, KPMG Peat Marwick partner, its important to look at knowledge management in the context of your overall strategy and integrate your knowledge-management approach within that strategy. "For example," he says, "say one of your critical strategies is to become more customer-focused. Your knowledge-management capabilities should then be targeted to building greater customer intimacy."

And don't underestimate the cultural factors. Often employees believe the old adage that knowledge is power; theyre reluctant to share what they know for fear of losing authority or even their jobs. Any knowledge-management approach must offer incentives and assurances to get around these obstacles. Some companies appoint so-called chief knowledge officers to deal with knowledge management. Others put the operations under IT.

But what matters, says Ernst & Young partner Peter Novins, is that "somebody has to have responsibility and accountability for making sure that the knowledge is being used, collected, and organized; that value is being added in some way to it; and that it is getting to whoever needs it."

Novins also stresses that the knowledge-management approach has to be integrated into the way people do their everyday work to be effective. "The idea is to make it as transparent and easy to use as possible, both to contribute content back into the structure and to be accessing and using the content in order to get the work done," he says.

Finally, Novins says that for knowledge management to work, top management must get fully behind it. "In most cases if you really want a robust environment for sharing relatively complex knowledge, youve got to dedicate some resources to it," he asserts. "It doesn't happen by magic."

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