• Business Intelligence
• Collaboration
• Competitive Intelligence
• Communities of Practice
• CRM
• Culture
• E-learning
• Enterprise Content Management
• Enterprise Search
• Intranets & portals
• Taxonomies

• News
• Events

Feature

posted 19 Jan 2006 in Volume 9 Issue 5

Howling at the moon

Michael Allen follows up his case study of last month with an in-depth discussion of knowledge auditing and corporate culture.

When deposed Rumanian president Nicolae Ceausescu decided to build a grand new palace in downtown Bucharest – a building that would become the third largest on Earth, even bigger than the Palace of Versailles – something obviously had to give way.

And indeed it did. Some 30,000 people were booted out of their homes, which were subsequently demolished. However, in their hurry to get out before the bulldozers crashed into their homes, many left their pet dogs behind.

They were left to fend for themselves, so formed into packs and reverted to type. Today, more than fifteen years after the overthrow of Ceausescu, the dogs are still there, roaming the city in their packs, barking noisily and occasionally attacking people.

The moral of the story is that the changes (and potential opportunities) in our everyday environment can have profound, unexpected and unfortunate consequences; however, an ingrained culture is often stronger than any environment or change to that environment, especially if that change has been imposed from outside.

In this month’s article, I will build upon some of the ideas discussed in last month’s DVLA case study. This examined the knowledge audit as a means of understanding some key issues in defining the culture of an organisation.

Knowledge management (KM) is a fundamental part of this as it enables a review to be made of where the organisational boundaries lie and provides management with a deeper insight into their own organisation’s culture.

As we understand better the critical role of the circulation of information and knowledge – inside the business and externally to suppliers, customers and other stakeholders – we can better review the relationships between tangible and intangible resource allocations.

KM: Toolkit or managerial discipline?
The development of KM in recent years is interesting. After a burst of activity in the 1990’s, we seem to have reached a plateau, with KM variously regarded as a toolkit, a set of IT implementations (such as social network analysis), or a strategic alliance with a likely partner (human resources, information services, IT and so on).

Alongside this, in academia, attempts are being made to define a clear application for epistemology – the philosophical study of knowledge – and its role in practical business activity. Alternatively, the practice of KM is sometimes considered a success if it can somehow be ‘embedded’ into the business, although whether this is at operational or strategic levels, or both, remains unclear.

This notion of embedding presents KM as a generic activity, rather than a discrete set of ideologies, in which the end product of KM is to generate benefit across the whole organisation. If KM is ‘a good thing’ then it becomes equally valid that the concepts of knowledge sharing should be built at a generic level into working practices and mindset approaches, and mixed thoroughly into the organisation’s strategic recipe.

This approach removes one of the key dilemmas for KM practitioners: is it a set of practices, or is it a managerial/academic discipline in its own right, with consistent and agreed central methodologies? This question links in to discussions of subject boundaries: where does KM stop and other functions kick in? How should KM situate itself in an already mature managerial landscape?

These issues may be over-simplified, but the general point is that if a subject has the word ‘knowledge’ in its title, there are always going to be a variety of approaches ranging from philosophy and epistemology, through to network infrastructures and even to storytelling. Where on Earth is the boundary to this disparate set of activities?

However, judging by the number of publications on the subject, together with journals and conferences, there are grounds for believing that while KM may be regarded as having gone off the boil, it is in fact still cooking – just currently occupying a lower profile. On the down side, given that the measurement of KM ingredients has also been an issue for some time, what is actually cooking at any one point in time may be the subject of much argument among ‘the chefs’.

So what is the relevance of KM in terms of supporting business performance? I think the connection is with organisational culture. The culture of an organisation is a powerful means of gaining and retaining a substantial competitive advantage – in any sector of business. Organisational culture, for example, made Intel the world’s biggest semiconductor maker and helped Marks & Spencer to become one of Britain’s most respected retailers – but also, perhaps, contributed to its more recent difficulties.

In last month’s article, I noted the relationship between implementing a KM audit and developing an understanding of the culture of an organisation. However, culture is a dynamic and changing process, and a KM audit should not be regarded merely as a means of evaluating the relative strengths of information and knowledge transfer.

Indeed, information and knowledge transfer are arguably key constituent elements of any business activity – the lifeblood of management – and a KM audit makes an evaluation of these critical areas of business performance. In the earlier article I used the term ‘baseline’ in this context on purpose with a view to discussing cultural progression of an organisation through time. And, of course, a baseline is one boundary to help define KM.

This article aims to provide a macro-level framework for the subject, based on a pragmatic approach to managing knowledge.

Culture and the KM audit
I am suggesting in this article that there are four generic KM activities in organisations which lead to specific and measurable outcomes (see table, The four generic KM activities). These activities will, over time, have a significant impact on the overall culture of the business and can be tested against a rolling process of audit. This aspect of my analysis is concerned, therefore, with the ‘knowledge maturity’ of an organisation and the ways in which the varying knowledge activities are utilised in supporting key business process.

These four generic criteria also facilitate discussion on measures and outcomes for the investment we make in KM activities. These measures are concerned with recorded knowledge, and with learning knowledge – roughly comparable to ‘explicit’ and ‘tacit’ knowledge, which incidentally are always difficult terms to sell to an executive board.

Two further sets of measures are concerned with compliance and with best practice. Compliance supports intangible benefits of corporate responsibility, reputation and image. Best practice/benchmarking supports the validity of the process in looking outside the organisation for comparison and external evaluation.

A fifth category, a periodic KM audit, enables practitioners to assess the impact that the first four categories are making in the knowledge environment of the organisation. If these four are strategically placed measures and are competently and consistently designed, then the impact will be reflected in a culture that gradually adapts to meet new internal and external challenges. This whole process should be ‘future-facing’; in other words, the measures must be clearly linked to the stated vision of where the business is aiming to move to in the future.

The precise measures of each KM factor will be industry specific. However, they will allow for comparisons across individual organisations in that sector and, indeed, at a more general level, across industry sectors. These measures will also facilitate comparison within the organisation through time and, in my view, help to define a level of knowledge maturity in an organisation. Thus there are four sets of KM measures, and an impact assessment measure which uses a periodic KM audit:

TABLE: The four generic KM activities

The cross-functional nature of a KM audit, previously exampled in terms of access, motivation and value, adds strength because of the process of assessing cultural change. The combined KM implementation measures and reporting in the audit becomes a relational attribute.

That is to say that the audit reflects internal cultural change in areas such as access, motivation and the value of knowledge in the business. The externally-facing measures in the table above help to position the company in terms of how the tangible and intangible assets are actually contributing to organisational performance. The combination of using KM measures against an evaluation of cultural change allows for comparisons to be made across the industry sector in order to stay in the top KM quartile in any comparative evaluation.

This process turns a KM audit into a living – iterative – process. It may also persuade internal and external stakeholders to see KM a means of delivering measurable value to the company by internal and external stakeholders.

Within this framework KM can indeed be used as a toolkit, an IT process, or a change programme depending on business needs at the time. Emphasis on different elements will vary according to need, but the overall picture is balanced. Also, in differing geographical cultures the relative value of two categories may differ; a firm operating globally may chart different approaches to value in recorded and learning knowledge between, say, Chinese and German business units. The emphasis will vary from measure to measure, but the process is holistic.

Thus the four identified generic categories of KM impact significantly on the ways in which intellectual resources are used, and the ways in which outcomes are assessed. This approach to KM can also help to reconcile some of the arguments on the relationship between individual and corporate learning. The impact of staff-development programmes, which are often isolated somewhere in a training budget, should be seen in the context of the recorded and learning measures, and the ways in which this investment contributes to the bottom line of the business.

In this framework, I have aimed to set out a view of progress in the capture and utilisation of the internal and external knowledge environments of the business. As organisations identify the need to change and transform, the process allows for analysis to be made of the appropriateness of structures and systems, and choices to be implemented at strategic level. To some extent it validates the notion of ‘transformational change’, and removes it from the area of rhetoric or grand vision.

So far, this article has been largely concerned with KM at the organisational level, with a clear aspiration for the subject to be seen at a strategic level of business. It is time now to explore a little more the links with IT and communications. There is also the scope, in the longer term, to take a future look at the potential of KM: this might be seen as its second-generation plan.

Information technologies are a key enabler for KM: indeed, many vendors claim that a knowledge-management implementation can be fully met by installing software. In terms of a STEP analysis (a study of the key external drivers in the social, technological, economic and political environments) information and communication technologies of course have enabled massive social and economic change, but the varying STEP factors are interlinked and mutually supportive. The growth of P2B (person to business) trade via the Internet, for example, is not universally growing at the same rate across Europe for a variety of reasons: there are a mix of social and other factors which are combining to generate particular growth in the UK.

However, not all the potential value of IT-enabled business is taking place, or even projected. Web-based transactions have been largely concerned with process and are based on transaction-cost economics. It is significantly cheaper to push interaction time down the line to the customer and reduce costs accordingly – especially if automated self-service systems are in place. Codifying knowledge has made a significant impact here. Internally, at this level, communication systems enable the transfer of high volumes of information. But at a deeper level, business models remain the same – or very similar.

Legacy of the industrial revolution
Some of the key structural issues of the industrial age still remain. These include boundaries of functional versus geographic divisions, and ownership criteria between public/private/hybrid. This is despite many experiments in matrix, networked and clustered structural environments. As management guru Tom Peters has implied, the potential of IT and communication is not necessarily translated into business practice. Indeed information overload negatively affects progress in many organisations. KM, with its emphasis on communities of practice, knowledge sharing, lessons learned and all the other features is rightly seen as a good bet on handling some of these issues.

The cliché of IT challenging the basic structure of the firm are well known: new technologies ought to enable greater levels of remote access, home working and employee-centric activity. This would certainly be useful. The cost of commuting to the (broadly) nineteenth century models of industrial working methods are huge in time costs per worker per year. Costs of infrastructure and energy are similarly occupying a high proportion of gross domestic product. Yet, as we approach a world with fewer natural resources to literally fuel mass urban transportation, and we live in an age which has been labelled ‘the knowledge economy’, still we retain old habits. The UK is essentially a service economy, yet we continue to travel to the foundry to make things. Even in a service environment, we have retained the factory model of the firm.

This is because of a number of factors. Sunk cost investment in both travel infrastructure and in the social psychology of commuting are significant barriers to change. Also, the communication systems that do exist, although highly advanced, may not be geared to the needs of business. While the much-prophesised integration of mobile and data communication devices is technologically feasible, and in some cases in production, mobile phones are aimed at a different market. The issues around consolidation in this area may be changing in the UK as Government and the private sector invest in broadband. The main problem lies in the ability to engage with customers in a secure environment, especially when considering transfer of personal identification information (of particular importance to the public sector).

A primary reason why organisational structures remain very similar to the Victorian industrial world of Mr Hardcastle and Mr Gradgrind is at the heart of our understanding of the role of second-generation KM. It is in the fact that organisations need to gain both a high level of communications infrastructure and a high level of KM maturity in order to make meaningful assessments on the boundaries of the firm, and on distributed work environments.

This new ground will be based on outputs, rather than on attendance in the office. Whereas traditionally organisations have used the cost of transactions as the basis for decisions on in-sourcing, outsourcing or off-shoring, the second generation of KM has the potential to assist in a more fundamental review of key business functions. While it is outside the scope of this article, IT and communications convergence issues ought to soon address many of these issues of security, flexibility, mobility and content capacity.

When these two areas of concern are reviewed together, they form a matrix (the Knowledge Utility Matrix) that should help KM practitioners to map out their organisation’s relative position, and what they need to do to address their organisation’s knowledge environment more effectively.

TABLE: The Knowledge Utility Matrix

Convergence

Dungeons: companies trapped by a combination of poor IT infrastructure and a low KM perception;

Common rooms: companies have invested highly in being able to communicate, but have not made the link from information handling to knowledge management;

Battlements: companies may possess the long term vision, but are locked into old fashioned structures and delivery systems;

Anterooms: companies use these spaces as a means to assess new market opportunities and social value, based on a review of knowledge maturity in the business, the available technologies, and the vision of the organisation.

The new platforms for working ought to encourage creativity and innovation. The knowledge-utility matrix can be used to pose questions on identifying the boundaries of the organisation, based around use of knowledge and decision processes, rather than ‘e-enabling’ existing services. The relationships of suppliers and customers may be energised by asking questions of the organisational structures, and systems design of existing operations. The central focus of developing the new paradigm is to see the organisation not in terms of structures, buildings or systems, but in terms of people, decisions, and outcomes. For some areas of the economy, particularly those which seek to be part of the knowledge economy, the potential for re-addressing some basic paradigm frameworks can be made.

The suggested model for the future of second-generation KM is therefore based on a pragmatic view of how we understand the cultural component of business, and the value of information and knowledge. This view is predicated on the potential of the culture of an organisation to build competitive advantage. We can make this initial (baseline) evaluation by means of a knowledge audit, judging the results in terms of such factors as access, value and motivation which we have noted.

The outcomes of KM can be examined at an analytical level. The four suggested measures can be ‘checked’ against the initial KM audit, which acts as an indicator of progress within the organisation when aligning cultural attributes to overall corporate aims and desired values. Collectively these define the knowledge maturity of the organisation, enabling management to better understand the levels of information and knowledge interchange within, and across, the borders of the firm.

I have suggested that a similar process of technological maturity in communications is required. However, it is the high level of psychological change at organisational level that needs to be in place in order to address the means and motivation – and confidence – of organisations to make strategic choices on managing the corporate paradigm.

Such considerations are not mere idle speculation. With profound and potentially far-reaching changes in the global economy, KM can provide the organisational glue to enable companies to compete more equally with companies from emerging ‘tigers’, such as China and India. Fail to face up to that challenge and organisations risk being left behind, much like the dogs of Bucharest.