Knowledge management strategies that create value

1 48 Outlook 1999, Number 1 There is no one-size-fits-all way to effectively tap a firm s intellectualcapital. To create value , companies must focus on how Knowledge is used to build critical that had invested millionsof dollars in a state-of-the-artintranet intended to improveknowledge sharing got some badnews: Employees were using it mostoften to retrieve the daily menu fromthe company cafeteria. The systemwas barely used in day-to-day busi-ness executives would argue with thepremise that Knowledge management iscritical but few know precisely whatto do about it. There are numerousexamples of Knowledge -managementprograms intended to improve innova-tion, responsiveness and adaptabilitythat fall short of at the Accenture Institutefor Strategic Change have been explor-ing the roots of the problem and havedeveloped a method to help executivesmake effective Knowledge managementa reality in their of the problem with knowledgemanagement today lies in the way thesubject has been approached by ven- Knowledge management strategies that create valueBy Leigh P.

2 Donoghue, Jeanne G. Harris and Bruce A. Weitzmandors and the press. Knowledge man-agement is still a relatively youngfield,with new concepts emerging con-stantly. Often, it is portrayed simplisti-cally; discussions typically revolvearound blanket principles that areintended to work across the organiza-tion. For example, companies areurged to emulate Knowledge -manage-ment leaders such as British Petroleumand Skandia. And most Knowledge - management initiatives have focusedalmost entirely on changes in toolsand technologies, such as intranetsand Lotus approaches have little relevancefor executives contending with theday-to-day reality of running a com-pany. Knowledge management is com-plex and multifaceted; it encompasseseverything the organization does tomake Knowledge available to the busi-ness, such as embedding key informa-tion in systems and processes,applying incentives to motivateemployees and forging alliances toinfuse the business with new knowl-edge.

3 Effective Knowledge manage-ment requires a combination of manyorganizational elements technology,human resource practices, organiza-tional structure and culture in orderto ensure that the right Knowledge isbrought to bear at the right time. Many companies have implementedsophisticated intranets, commonrepositories and other systems, largelyignoring the complex cultural issuesthat influence the way people behavearound Knowledge . By and large,those companies have seen littleimprovement in their ability to man-age Knowledge . Too often, companiesimplement state-of-the-art technologyand then discover that culture andbehavior are slow to short, simplistic solutions and one-size-fits-all approaches leave execu-tives with little in the way of practicaladvice about how to transform theentire Knowledge - management s more, this fuzziness makes itdifficult for executives to see a clearOutlook 1999, Number 14950 Outlook 1999, Number 1process can be performed in differentways.

4 Sales, for example, can refer toindividuals covering their respectiveterritories (expert model) or to a sup-plier s multifunctional team workingclosely with a customer to maintainretail inventories (integration model).So the key is to understand how workis performed; it is the nature of thework that determines the appropriateknowledge- management approach. Knowing the work model that s associ-ated with the core process is importantbecause each model presents its owndistinct set of Knowledge -managementchallenges. In the collaboration model,for example, a key challenge is theachievement of breakthrough innova-tion. To drive such innovation, a com-pany needs to encourage risk-takingand bring together a variety of knowl-edge domains, such as research, productdevelopment, marketing and manufac-turing, in order to solve complex prob-lems.

5 At one biotech company, theInstitute found that increasingly com-plicated projects and the need for agrowing number of scientific disciplineswas making it harder to integrate activ- Expert model,in which there is lowinterdependence and high requires judgment and is depen-dent on star performers. Collaboration model,in which there isa high degree of both interdependenceand complexity. Work involves improvi-sation and learning by doing, and relieson deep expertise across functions andthe use of flexible teams. Key to understandingIn general, a given core process can be mapped to one of these four cate-gories. For example, supply-chainmanagement and procurement tend tofit into the integration model; the workin these processes is often routine, andactivities generally span multiple func-tions and organizations.

6 In comparison,marketing and financial managementtend to be expert model work, requir-ing individuals in one functional areato apply their judgment to solve unan-ticipated , it is important to note thatthere are no hard-and-fast connec-tions between a certain core processand a work model, because the sameIntegration model Systematic, repeatable work Highly reliant on formal processes,methodologies or standards Dependent on tight integrationacross functional boundariesComplexity of work Level of interdependenceRoutineIndividualactorsTr ansaction model Routine work Highly reliant on formal rules, procedures and training Dependent on low-discretion workforce or automationExpert model Judgment-oriented work Highly reliant on individual expertise and experience Dependent on star performersCollaboration model Improvisational work Highly reliant on deep expertise across multiple functions Dependent on fluid deployment of flexible teamsSOURCE: ACCENTURE ANALYSISC ollaborativegroupsInterpretation/judgmen tKnowledge management Framework: Work modelsThe characteristics of the type of work will help determine which model works between their Knowledge -manage-ment investments and business value .

7 To help executives, the Institute hasdeveloped a framework that associatesspecific Knowledge -managementstrategies with specific challenges thatcompanies face. This Knowledge Man-agement Framework is based on thepremise that the focus should beplaced on the way Knowledge is usedto build the critical capabilities a com-pany needs in order to succeed on thecore processes and activities thatenable it to compete. Enhancing abank s know-how in evaluating creditrisk, for example, should result inreduced loan losses; improving a con-sumer products company s under-standing of customer preferencesshould increase its percentage of suc-cessful new products. The framework begins by assessingand categorizing the way work is donein the core process. Work can be eval-uated along two dimensions. First isthe level of interdependenceinvolved that is, the degree to which individualsand organizations need to collaborateand interact.

8 Second is the complexityof workinvolved the degree to whichemployees need to apply their judg-ment and interpret a variety of infor-mation. Using these two factors, theInstitute has identified four distinctcategories of work, or work models : Transaction model,in which there isa low degree of both interdependenceand complexity. Work is typically rou-tine, highly reliant on formal rules,procedures and training, and dependson a workforce that exercises little dis-cretion. Integration model, in which there isa high degree of interdependence anda low degree of complexity. Work issystematic and repeatable, relies onformal processes, methodologies andstandards, and depends on tight inte-gration across functional 1999, Number 151mance across functions. Or theymight use softer measures that focuson the use of cross-functional teams,shared goals and feedback the expert model, knowledgeableindividuals are key.

9 Here, executivesmay recruit star performers awayfrom other companies, or may chooseto focus on programs that developstars internally through long-termcareer-progression programs, appren-ticeships, mentoring and in the collaboration model,where the challenges revolve aroundcreating breakthrough innovations,the choices may include action-learning strategies that encouragediscovery through skunkworks andpilots, or Knowledge -linking strate-gies that focus on learning throughconsortia and framework also makes it possi-ble to address all elements of theknowledge- management system as awhole technology, human resourceities into a coherent whole. Every pointin the chain needs to know not justwhat the links above and below are,but also needs to have some idea ofwhat the whole continuum the expert model, on the other hand,the organization usually needs to focuson getting results from its star perform-ers.

10 To do so, companies must contendwith issues such as attracting and moti-vating talented individuals and over-coming silos of information. Forexample, at one expert model companystudied by the Institute, individuals hada tremendous amount of knowledgeabout products, but each person rarelyknew what the others were doing. Inone product area, managers discoveredseven redundant research essence, the framework allows exec-utives to gain a better understandingof their current Knowledge -manage-ment practices which in most compa-nies have evolved in an ad hoc,unconscious manner and to identifythe Knowledge - management challengesassociated with their core that specific diagnosis, it is ashort step to prescribing specific reme-dies, because each set of challengespoints to a handful of potentialknowledge- management strategies .