Knowledge Markets at Work
The idea of rigorously applying market principles to knowledge-management activities is relatively new. As a result, there are few examples of companies that have fully adopted the concept. Among those that have, however, the potential appears to be great.
Consider the case of J. M. Huber, a large privately owned U.S. company with three diversified business sectors. In 1995, its top management introduced an "after-action review process" to capture the lessons learned from projects and events and thus to improve its future performance. Lessons may be specific to a particular business sector when they pertain to areas such as manufacturing processes and procedures. Other lessons — for instance, those pertaining to strategy, safety, or marketing — may be useful across all three business sectors. Members of project teams conduct postproject meetings to answer three basic questions: What happened? Why did it happen? What can we do about it? At the end of the meeting, the team emerges with an action plan and a list of lessons learned to improve future performance. These findings are submitted to a common electronic-document library accessible to all employees through a portal.
Today the process has become part of Huber's culture, and the database contains more than 8,000 reports. Why? Because managers can reach knowledge seekers interested in the same subjects while simultaneously building a reputation with colleagues in other divisions and with top management. Once the market formed, the self-interest of the knowledge creators and knowledge seekers took over. Huber's management says that this exchange of knowledge was instrumental in improving company performance.
There is another type of situation that illustrates the appeal of knowledge markets for groups of high-talent professionals whose work is almost completely knowledge based. This type of situation can be found, for example, in the R&D units of pharmaceutical companies, in the exploration and production units of petroleum companies, in investment banks, and in professional-services organizations such as law and accounting firms.
One such firm had long used a system to share knowledge among its professional staff. As the firm undertook a rigorous effort to apply market principles to this system, content was improved and old material culled, knowledge-domain owners were named, market facilitators were introduced, and the technology platform was upgraded. Signs of productivity gains began appearing almost immediately. Within a few months, the average number of monthly downloads of documents per professional more than doubled, from three to seven. The average number of searches per document downloaded, however, dropped from 5 to 1.2, meaning that users were now finding what they wanted with nearly every search.
A Large Potential
Anecdotal as this account of some of these early efforts may be, the potential for knowledge sharing and productivity gains is plainly there. Some 48 million of the 137 million workers in the United States alone can be classified as knowledge workers; a single company can employ 100,000 or more. Even small companies employing no more than a few hundred knowledge workers have the potential to create company-wide markets to facilitate the creation and exchange of knowledge. Logically, though, the largest opportunities would appear to reside in the largest, most diverse, most geographically far-flung companies that employ significant numbers of professionals who are unlikely ever to meet — let alone to exchange relevant knowledge.
That said, the challenge of creating an effective company-wide knowledge market is daunting. It may take $20 million to $30 million in annual incremental spending to launch an initial-prototype knowledge market in a large company. Most of this sum would go to creating the knowledge-services staff whose members would act as market facilitators. The cost-benefit analysis for this kind of expense would face the same subjective measurement problems that executives have with efforts to assess the impact of IT expenditures. But with U.S. companies spending trillions of dollars annually on the salaries of knowledge workers, not to mention the technology that supports them, anything that would boost their productivity by even 1 percent would justify the investment.
In practical terms, taking the first steps toward building a knowledge market requires the formation of an initial company-wide market in at least one knowledge arena. It could be strategic knowledge about the behavior of competitors, for example, or proprietary functional knowledge concerning marketing or human-resources issues.
Next comes establishing a library that has at least some high-quality knowledge objects. Without that minimum, users will not find it worth their time to go to the knowledge marketplace to search for content. The value of a knowledge marketplace depends primarily on the quantity and quality of the content available to attract demand. Who makes use of a library with only ten poorly written books on the shelf? However, experience indicates that even as few as 750 to 1,000 high-quality documents can attract enough demand to start an effective marketplace. Usually, getting one started will involve a systemic effort to find and upgrade the best existing content in the knowledge arena, plus an effort to supply fresh content that meets the quality standard and shows the potential of scaling up. This endeavor requires top management — through visible recognition, a mandate, or both — to motivate employees with distinctive knowledge and the best communications skills to produce highly valuable showcase content voluntarily. Happily, once a vibrant knowledge market is created, it takes on a life of its own even if it starts small.
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