VideoYears after most executives first heard the term, knowledge management remains a fuzzy concept and an elusive corporate goal. No wonder, since few experts can even agree on what it is.
"A lot of people still think of knowledge management as an IT solution to moving information around, and that's a huge mistake," says Morten Hansen, assistant professor of business administration at Harvard Business School. "Others think of it as just sharing knowledge, and the more they share, the better. That's just plain wrong. You can share a lot of mediocre knowledge and get nowhere, just as you can spend an enormous amount of money to build an IT system and not get a benefit equal to the investment."
What is knowledge management really? To Hansen, it is the leveraging of expertise from one area of the company to another to achieve better performance.
Even that simple definition, however, leaves questions open. "Getting into the details of what constitutes knowledge is a tricky proposition, and I don't think anybody's cracked the code," says Bain & Co. partner Mark Horwitch, who is based in Chicago and also is chairman of Bain's knowledge- management steering committee. (Classical finance includes such intangibles as brands, patents, and licenses, and research and development among knowledge assets, of course, but ignores basic operating expertise and employee skills that reside in a corporation.) Combining knowledge and management in one term can create "a false sense of control, comprehensiveness, and accuracy" in the minds of executives, he adds. And finally, there's the nagging sense that what some call knowledge management is just a fancy name for commonsense problem solving.
All the confusion has kept this particular concept on the periphery of popular management initiatives, even as ideas such as total quality management, reengineering, and value- based metrics have flourished. "There's good reason to approach this somewhat skeptically and pragmatically," says Chuck Sieloff, who until his retirement this fall was an in-house knowledge-management consultant for Hewlett- Packard Co. He often encouraged people working on projects in the area "not to even try to sell it as knowledge management, but rather to tie it to other business objectives." Says Sieloff: "It's just too soft a concept for a lot of managers to embrace."
Yet embrace it they must, especially in large, global companies, where failing to harness the collective knowledge of the workforce could represent a shameful squandering of intellectual assets.
How can companies get the most out of the knowledge they have in-house? For starters, say experts in the field, they can make sure all executives agree on just where the repositories of information and skills are in the company, and then begin to develop easy ways for that knowledge to be transferred profitably to other areas of the organization.
Personalize and Codify
Hansen believes that companies manage knowledge through two efforts. In the "codification" approach, they store information in computer databases, where it can be instantaneously accessed by employees throughout the organization. There, companies are collecting, organizing, and disseminating what academics call explicit knowledge: facts, figures, and processes that can easily be recorded. For a plant, that might include valuable information about production runs, machinery operating instructions, or proprietary manufacturing formulas. Hansen calls the second approach personalization--the transferring of knowledge primarily through person-to-person contacts. This is "tacit" knowledge: skills and experience that are embedded in the employees, and thus hard to capture in a database.
The blend of codification and personalization that should be installed depends on the corporation's competitive strategy, according to Hansen. For a business model built on repeating a common activity many times for different customers, more codifying is likely needed. But if success depends more on highly customized solutions for unique problems, or the churning out of a steady stream of new products, more personalization seems appropriate.
While Hansen recommends that companies focus on one strategy or the other--"You can't do it all and do it exceedingly well," he says-- companies adept at knowledge management generally pursue both strategies at varying levels.
Whose Job Is It?
Consider Ernst & Young. The Big Five professional-services firm aims to help its accountants and consultants learn and make decisions faster by drawing on the expertise of colleagues around the globe. To that end, it has installed a broad and highly visible codification strategy, conducted through such computer-based applications as Lotus Notes and various Web sites. On these, Ernst & Young professionals document best practices they have developed, as well as work they have done for their clients, including problems they have solved and the method of solution.
The information is easy to access; "power packs" compiled by managers include such information as sales materials and examples of a unit's best work. But Ernst & Young also makes use of the personalization strategy; the company organizes its professional staff into teams--called community-of-interest networks, or COINs--that are determined by service line, industry, and field of expertise. Within the COINs, Ernst & Young professionals converse formally and informally across divisional lines. "They have regular meetings, and the most successful [COINs] pay a good bit of attention to keeping people informed and making sure they understand our best practices," says Ralph Poole, director of the firm's Boston-based Center for Business Knowledge.
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