Capitalizing on Knowledge

David Skyrme

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780750650113
• eBook ISBN: 9781136422928
• Topic: Business
• Subtopic: Information Management
• Index: Business

Many organizations are embracing knowledge management as a source of strategic advantage. But already people are asking: "what comes next?" Likewise almost every large organization is heavily involved in e-commerce and turning their organizations into e-businesses. At the moment most e-commerce is focused on selling traditional products and services through the new medium of the Internet. However, the more an organization evolves into an e-business, the more they can exploit knowledge flows between themselves and their marketplace. This book draws together the two strands of knowledge and e-business into the emerging field that this book has called k-business. A k-business is one that turns an organization's knowledge assets into knowledge products and services and uses the Internet to market and deliver them online. Despite its newness, the Delphi Group have forecast that within 5 years person-to-person information e-commerce (a major aspect of k-business) will be a $5 billion business leveraging $50 billion in sales of other products and services. Capitalizing on Knowledge aims to give professionals and managers early insights into how to develop successful k-businesses. It takes a critical and balanced view of the building blocks of a k-business including knowledge productizing, e-commerce enablers and Internet marketing. It draws on lessons from successes and failures in the dot.com landscape and of the early pioneers of knowledge markets. The writing style engenders interest and readability supported by diagrams, screen images, check lists and frameworks. There are 'points to ponder' to stimulate thinking and decision-making. Five case studies and over 50 illustrative examples provide insights into the application of the book's concepts. No other book brings all the elements of a k-business together in one place to provide a thought provoking yet practical companion for those who want to capitalize on their knowledge.

Chapter 1

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Knowledge inside-out

The value of what you know can only be seen in what you do.

(Klas Mellander, Chief Designer, Celemi)

In just a few years knowledge management has gone from consultants’ hype to an established management strategy. Many people are now talking about a ‘second generation’ of knowledge management. Views of what this is vary widely. Some consider that it is an emphasis on organizational learning rather than managing knowledge in databases and over intranets. Others consider that it is a focus on innovation through better conversion of new knowledge rather than better deployment and use of existing knowledge. Whatever your own perspective on the next generation, there is little doubt that most organizations are a long way from fully institutionalizing knowledge management or exploiting their knowledge. The central premise of this book is that an important area of under-exploitation is that of converting an organization’s internal knowledge assets into externally marketed knowledge-based products and services, in other words a knowledge business. To do this organizations must turn their knowledge inside-out.

This chapter summarizes developments in knowledge management, a prerequisite for building a knowledge business. It starts by reviewing its recent evolution and main characteristics. Examples are given of organizational benefits and the knowledge strategy levers by which these are achieved. Although multi-faceted and broad in scope, knowledge management is epitomized by several increasingly used practices. These include sharing best practices, developing expertise directories, using intranets to improve access to knowledge repositories, and nurturing communities of practice. Another defining characteristic of knowledge management is the perspective of knowledge as a valuable organizational asset. The concept of value is therefore explored from two perspectives – the intrinsic value of knowledge as well as value added through its use. Ways of increasing value are introduced. One that will be reiterated throughout the book is that of relevance and customization to users’ needs.

The next part of the chapter deals with the interface between an organization’s knowledge management programme and its external environment. This is explored from two perspectives: the outside-in and the inside-out. The first refers to harnessing customer knowledge, and the second to capitalizing on an organization’s knowledge externally. This leads to the concluding part of the chapter, the consideration of the core elements of a k-business.

The evolving knowledge agenda

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All indications are that knowledge management is still in its early growth phase. Its emergence as a formal management activity started in 1995, with a high profile international conference, and the publication of the groundbreaking book by Nonaka and Takeuchi.¹

Intangible value

The balance sheet of Glaxo Wellcome, the world’s largest pharmaceutical company, showed that it had $10 billion in assets at the end of 1999. Yet its value as expressed by its market capitalization was over $50 billion. Much of the difference is accounted for by its knowledge assets – its patents, its R&D pipeline of new drugs, and its leading scientific know-how.

Since 1997, when many senior managers viewed knowledge management as a passing fad, it has gradually been adopted as a mainstream activity by many organizations. From its early acceptance in pharmaceutical firms, oil multi-nationals, high technology companies and management consultancies, it is now prevalent in most large corporations and many public sector bodies. Why this burgeoning interest? Part is due to the growing recognition of the value of intangible assets. Many knowledge intensive companies, such as biotechnology and software companies, have a stock market value 5–10 times higher than that of their physical assets. Another is that many organizations, having gone through periods of restructuring and downsizing, have realized only when it is too late the extent to which they have lost knowledge held in people’s heads. A further factor is that technology, and especially the Internet, makes it easier to connect people to share knowledge and also to disseminate information quickly and cheaply. By accessing and reusing knowledge more effectively, pioneers of knowledge management have applied it to achieve significant benefits, ranging from faster product development to better customer service (see Table 1.1).²

Table 1.1 Benefits of knowledge management with some typical examples

Benefit	Example
Faster access to knowledge	Through its knowledge centres, American Management Systems estimates that its consultants now find the information they need eight times faster than if they did it themselves
Better knowledge sharing	By concentrating on improving the flow of knowledge from its field engineers, Xerox generates 5000 useful tips per month. In France it has achieved a 5–10 per cent savings in service costs
Cost savings	Chevron credits knowledge sharing as an important contributor to saving $200 million a year in energy costs
Cost avoidance	Sharing best practice between its semiconductor fabrication plants has enabled Texas Instruments to save investing in a new plant (over $500 million)
Increased profitability	Integrating customer knowledge at the Middle Market Banking Group of Chase Manhattan Bankhas resulted in better relationships and more profitable customers
Less down-time for maintenance and refurbishment	Better sharing of lessons learned by BP reduced a refinery shut down time by 9 days, resulting in a cost savings of $9.6 million
Shorter time-to-market	Better sharing of product and customer knowledge allowed Hewlett-Packard to bring the DeskJet to market months earlier than similar printer models
Improved customer relationships	Capturing the ‘best work’ of the previous 30 years has helped Burston Marsteller achieve a leading position in public relations. Its ‘perception management’ knowledge base has helped it gain new clients
Faster revenue growth	By developing new measures of intellectual capital and goaling its managers on increasing its value, Skandia has grown its revenues much faster than the insurance industry average
New business opportunities	Through collaborative knowledge sharing with universities, DuPont gained unexpected knowledge that has resulted in the development of a completely new range of polymers

The net result of these developments is that at the end of 1999 over a third of large companies had a formal knowledge management programme in place while a similar proportion were in the throes of planning one. Analysis of recent surveys indicates that knowledge management is delivering business benefits but faces a number of ongoing challenges (see below).

Knowledge management in organizations: state of play (1999–2000)

• 80 per cent of all companies have some knowledge management (KM) projects.
• 40 per cent of organizations have a formal KM programme in place; an additional 30 per cent were planning to create one.
• The main benefits perceived are better decision-making, faster response to key business issues and better customer service.
• Knowledge management is viewed as a significant contributor to competitive advantage, marketing, improving customer focus, innovation, revenue growth and profit.
• The largest funding source for KM projects is a central corporate budget, followed by the MIS function, then marketing.
• Key technologies that support knowledge management are Internet/intranet, data warehousing and mining, document management systems.
• Key activities within a KM programme are (in order of frequency):
  

  creating a knowledge strategy
  

  KM training and awareness
  

  implementing an ERP (Enterprise Resource Planning) system
  

  sharing of best practice
  

  benchmarking KM status
  

  establishing formal KM networks
  

  rewarding people for knowledge sharing
  

  developing communities of practice
  

  creating knowledge centres.
• 25 per cent of organizations have a Chief Knowledge Officer, although half of these do not have a dedicated budget or staff.
• Main difficulties and challenges (in order of frequency):
  

  no time to share knowledge
  

  information overload
  

  not using technology to share knowledge effectively
  

  reinventing the wheel
  

  difficulty of capturing tacit knowledge.

Sources: Annual Knowledge Management Survey 1999, KPMG (2000); Beyond Knowledge Management: New Ways to Work and Learn, The Conference Board (May 2000)

Despite its growing adoption, there are still a large number of organizations that have not systematically developed their knowledge agenda. Even those organizations that are recognized as leaders in knowledge management believe they have much to do before knowledge management is organization-wide and an integral part of daily business activities. KPMG’s analysis for its 1999 knowledge management survey indicated that 43 per cent of the 423 organizations polled were only at the first stage (knowledge chaotic) of its five-stage model of knowledge maturity, with only 10 per cent at the two most advanced stages (knowledge managed and knowledge-centric).³

Two thrusts and seven levers

Can NASA put a man on the moon?

No longer, according to Geoffrey Petch. The blueprints for the Saturn rocket have been lost and much of the knowledge of the 400 000 engineers that made the first moon landing possible lies in documents that are devoid of meaning without the contextual and personal knowledge of those who generated them. NASA now has a programme of ‘knowledge archaeology’ to excavate and add meaning to the repositories of information, in order to prepare for a future manned landing on Mars.

Source: ‘The cost of lost knowledge’, Geoffrey Petch, Knowledge Management, Freedom Technology Media Group, October 1998

What knowledge strategies are organizations usin...

Table of contents

• Front Cover
• CAPITALIZING ON KNOWLEDGE
• Title Page
• Copyright
• Contents
• List of case studies
• List of knowledge nuggets
• Preface
• 1 Knowledge inside-out
• 2 E-business: a platform for knowledge
• 3 K-business: new markets, new models
• 4 Online knowledge markets
• 5 Productizing knowledge
• 6 Marketing revisited
• 7 The 10Ps of Internet marketing
• 8 Developing a successful k-business
• 9 Directions and dilemmas
• Appendix A K-business readiness assessment
• Appendix B Online market evaluation template
• Appendix C Website evaluation template
• Appendix D Website project plan checklist
• Glossary
• Bibliography
• Index