VideoWanchai, a crowded inner-city area on Hong Kong island. Huddled around two formica-topped tables in a jam-packed local restaurant sits a group of young men dressed in ubiquitous, Giordano-style clothes: short sleeved shirts, jeans or chinos, and running shoes. They look like students, but the papers and manuals on the tables belie their profession: service engineers, listening in informal surroundings to their team leader, exchanging comments as they slurp ngai cha and bowls of congee for breakfast.
No, these are not members of an organization that is saving costs by making its employees work for their breakfast. Rather, meeting over breakfast is just one example of a concerted effort to spread information, an attempt to adhere to an organizationwide knowledge management strategy to better use employees' capabilities and experiences, create efficiencies in business practices, and, if possible, generate more revenue and greater customer satisfaction.
The organization in question is Fuji Xerox in Hong Kong. It has roughly 200 service engineers working throughout the territory, and they are split into what it calls "empowered work groups." Each group comprises up to ten service engineers. None of them has office space, and they move freely around their "patch" — a group of about 200 customers to whom they are responsible for servicing certain machines. The engineers receive calls from the Fuji Xerox call center during the day and, when they meet next morning, together decide when and how they will respond. As they deal with different customers, they build up a pattern of customer profiles and preferences. The more they meet, the more they share their individual knowledge of customers and the quirks of the machines they are responsible for fixing.
The advantages to the organization may not be immediately obvious but there are three to note. First, Fuji Xerox has avoided the higher overheads associated with a traditional organizational pyramid that includes submanagers, assistant managers, managers, group heads, and so on. Second, it has bypassed that same hierarchy that slows down the transmission of decisions and decision making. Third, it is persuading — cynics might say coercing — its engineers to work together for the greater good of the work group and, ultimately, the entire organization.
Says Ramagopal Rao, managing director of Fuji Xerox in Hong Kong: "The engineers have a level of trust in each other because they are targeted, assessed, measured, and evaluated as a group. They have no choice but to rely on each other. That fosters an enormous amount of interaction, and it makes them share what they know," he says. It also frees up the service managers to handle three or four such work groups. Under the more traditional structuring of Fuji Xerox's sales force in Hong Kong, once a team reaches eight people it has to have a manager. In the service engineering division, there is one manager for every 30 people "without having an impact on the quality of what they do and how they do it," says Rao.
Since the early 1990s, when companies began to question how to leverage one of their biggest assets — employees — knowledge management (KM) has developed from a theory preached by management consultants into a formalized discipline taught in university and practiced by thousands of companies worldwide. It has many definitions. Karl-Erik Sveiby, often described as one of KM's founding fathers, says KM is the art of creating value from intangible assets. Cindy Johnson, director of the Office of Best Practices at U.S. digital manufacturer Texas Instruments, says it is about recognizing that companies compete based on the knowledge of their employees. Geoff Trotter, Ernst & Young Hong Kong's director of knowledge, says simply in a client presentation that it is "the process of identifying and using knowledge to gain competitive advantage."
However you define it, KM is booming. In a report published by U.S. technology research group IDC in 2000, KM services revenue was forecast to grow at a compound annual growth rate (CAGR) of 41 percent from 2000, resulting in a global market worth almost $13 billion by 2005. More staggering was the 129 percent CAGR report forecast for Asia, which was just getting to grips with KM solutions. Western Europe is now the leading market for KM outside the United States, but take-up in Taiwan and Korea, and now Hong Kong and Singapore, is continuing to drive KM's growth in Asia. According to the IDC report, a move away from hierarchical business structures toward flatter organizations has pre-empted more knowledge sharing within Asian companies that are required to manage relationships worldwide.
One certain driver for continued growth is the fallout from corporate fraud in the United States. Calls for a new way of standardized accounting are giving rise to a demand for KM from managers looking at organizational strengths and values in terms of intangible assets, not just financial indicators. "Companies that perform well financially are likely also strong in the management of their intangible assets," says Waltraut Ritter, director of research at advisory company Knowledge Enterprises in Hong Kong and Singapore, and chairperson of the Hong Kong Knowledge Management Society. "Normally, financially strong companies have a good company culture, good people, good management, and corporate governance. But it's difficult for finance people to prove the link," says Ritter.
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