Knowledge management strategies that create
value
By Leigh P. Donoghue, Jeanne G. Harris and Bruce
E. Weitzman
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Help There is no one-size-fits-all way to effectively
tap a firm's intellectual capital. To create value, companies must focus on how
knowledge is used to build critical capabilities. A firm that had invested millions of dollars in a
state-of-the-art intranet intended to improve knowledge sharing got some bad
news: Employees were using it most often to retrieve the daily menu from the
company cafeteria. The system was barely used in day-to-day business
activities.
Few executives would argue with the premise that knowledge
management is critical—but few know precisely what to do about it. There are
numerous examples of knowledge-management programs intended to improve
innovation, responsiveness and adaptability that fall short of expectations.
Researchers at the Accenture Institute for Strategic Change have been exploring
the roots of the problem and have developed a method to help executives make
effective knowledge management a reality in their organizations.
Much of the problem with knowledge management today lies in
the way the subject has been approached by vendors and the press. Knowledge
management is still a relatively young field, with new concepts emerging
constantly. Often, it is portrayed simplistically; discussions typically
revolve around blanket principles that are intended to work across the
organization. For example, companies are urged to emulate knowledge-management
leaders such as British Petroleum and Skandia. And most knowledge-management
initiatives have focused almost entirely on changes in tools and technologies,
such as intranets and Lotus Notes.
These approaches have little relevance for executives
contending with the day-to-day reality of running a company. Knowledge
management is complex and multifaceted; it encompasses everything the
organization does to make knowledge available to the business, such as
embedding key information in systems and processes, applying incentives to
motivate employees and forging alliances to infuse the business with new
knowledge. Effective knowledge management requires a combination of many
organizational elements—technology, human resource practices, organizational
structure and culture—in order to ensure that the right knowledge is brought to
bear at the right time.
Many companies have implemented sophisticated intranets,
common repositories and other systems, largely ignoring the complex cultural
issues that influence the way people behave around knowledge. By and large,
those companies have seen little improvement in their ability to manage
knowledge. Too often, companies implement state-of-the-art technology and then
discover that culture and behavior are slow to change.
In short, simplistic solutions and "one-size-fits-all"
approaches leave executives with little in the way of practical advice about
how to transform the entire knowledge-management system. What's more, this
fuzziness makes it difficult for executives to see a clear link between their
knowledge-management investments and business value.
To help executives, the Institute has developed a framework
that associates specific knowledge-management strategies with specific
challenges that companies face. This Knowledge Management Framework is based on
the premise that the focus should be placed on the way knowledge is used to
build the critical capabilities a company needs in order to succeed—on the core
processes and activities that enable it to compete. Enhancing a bank's know-how
in evaluating credit risk, for example, should result in reduced loan losses;
improving a consumer products company's understanding of customer preferences
should increase its percentage of successful new products.
The framework begins by assessing and categorizing the way
work is done in the core process. Work can be evaluated along two dimensions.
First is the level of interdependence involved—that is, the degree to which
individuals and organizations need to collaborate and interact. Second is the
complexity of work involved—the degree to which employees need to apply their
judgment and interpret a variety of information. Using these two factors, the
Institute has identified four distinct categories of work, or "work models":
- Transaction model, in which there is a
low degree of both interdependence and complexity. Work is typically routine,
highly reliant on formal rules, procedures and training, and depends on a
workforce that exercises little discretion.
- Integration model, in which there is a
high degree of interdependence and a low degree of complexity. Work is
systematic and repeatable, relies on formal processes, methodologies and
standards, and depends on tight integration across functional boundaries.
- Expert model, in which there is low
interdependence and high complexity. Work requires judgment and is dependent on
"star performers."
- Collaboration model, in which there is
a high degree of both interdependence and complexity. Work involves
improvisation and learning by doing, and relies on deep expertise across
functions and the use of flexible teams.
Key to Understanding In general, a given core process can be mapped to one of
these four categories. For example, supply-chain management and procurement
tend to fit into the integration model; the work in these processes is often
routine, and activities generally span multiple functions and organizations. In
comparison, marketing and financial management tend to be expert model work,
requiring individuals in one functional area to apply their judgment to solve
unanticipated problems.
However, it is important to note that there are no
hard-and-fast connections between a certain core process and a work model,
because the same process can be performed in different ways. Sales, for
example, can refer to individuals covering their respective territories (expert
model) or to a supplier's multifunctional team working closely with a customer
to maintain retail inventories (integration model). So the key is to understand
how work is performed; it is the nature of the work that determines the
appropriate knowledge-management approach.
Knowing the work model that's associated with the core
process is important because each model presents its own distinct set of
knowledge-management challenges. In the collaboration model, for example, a key
challenge is the achievement of breakthrough innovation. To drive such
innovation, a company needs to encourage risk-taking and bring together a
variety of knowledge domains, such as research, product development, marketing
and manufacturing, in order to solve complex problems. At one biotech company,
the Institute found that increasingly complicated projects and the need for a
growing number of scientific disciplines was making it harder to integrate
activities into a coherent whole. Every point in the chain needs to know not
just what the links above and below are, but also needs to have some idea of
what the whole continuum is.
In the expert model, on the other hand, the organization
usually needs to focus on getting results from its star performers. To do so,
companies must contend with issues such as attracting and motivating talented
individuals and overcoming "silos" of information. For example, at one expert
model company studied by the Institute, individuals had a tremendous amount of
knowledge about products, but each person rarely knew what the others were
doing. In one product area, managers discovered seven redundant research
projects.
In essence, the framework allows executives to gain a
better understanding of their current knowledge-management practices—which in
most companies have evolved in an ad hoc, unconscious manner—and to identify
the knowledge-management challenges associated with their core processes. From
that specific diagnosis, it is a short step to prescribing specific remedies,
because each set of challenges points to a handful of potential
knowledge-management strategies.
For example, the challenges in the transaction model are
centered on the need to codify knowledge and ensure consistent performance.
Possible knowledge-management strategies would therefore include "automation"
that embeds knowledge in systems, or perhaps "routinization," in which
knowledge is built into policies and procedures, and training is aimed at
standardizing workers' behavior. In the integration model, where the challenge
is to orchestrate activity across various parts of the organization, executives
might consider the adoption of standard processes or methodologies that
integrate performance across functions. Or they might use softer measures that
focus on the use of cross-functional teams, shared goals and feedback systems.
In the expert model, knowledgeable individuals are key.
Here, executives may recruit star performers away from other companies, or may
choose to focus on programs that develop stars internally through long-term
career-progression programs, apprenticeships, mentoring and training. And in
the collaboration model, where the challenges revolve around creating
breakthrough innovations, the choices may include "action-learning" strategies
that encourage discovery through "skunkworks" and pilots, or
"knowledge-linking" strategies that focus on learning through consortia and
alliances.
The framework also makes it
possible to address all elements of the knowledge-management system as a
whole—technology, human resource practices, organization and culture—because it
focuses executives' attention on the capabilities their organizations need
rather than on component solutions. Also, attention is shifted from broad,
vague issues to a well-defined set of challenges that are specific to their
business. They have a manageable number of targeted options from which to
choose, which makes it easier to formulate an integrated approach to changing
organizational structure, technology, human resources and the world culture.
In addition to guiding improvements in today's core
processes, the framework can also be used to help companies evolve and adapt to
new conditions. Markets, customers, technology and competition are always
changing. To thrive, companies must change over time as well, or their core
capabilities may well become core rigidities that lead to obsolescence. As they
strive to move in new directions, executives can use the framework to
understand the knowledge-management systems that new capabilities will require.
In the silicon-chip industry, for
example, the design of new microchip manufacturing processes has always been
considered something of an art—a collaborative model type of effort involving a
small cadre of experts, extensive experimentation and rapid learning to get it
right. Now, however, with most personal computers selling for less than $1,000,
chip makers need to move to lower-cost approaches—and to an integration model
of knowledge management, where the focus is on standardization, repeatable work
and continuous improvement. The framework can help companies envision what
their new knowledge-management approach should look like under their new
strategy, and plot out a path that will take them there.
At one highly successful financial services company,
executives are using the framework to help identify today's
knowledge-management challenges and constraints in the area of product
development, and to help shape the company's approach to tomorrow's products.
Currently, the company develops products under an expert model, with
knowledgeable individuals driving the process. Although this model has been
appropriate for incremental product development—essentially, enhancements and
extensions of existing offerings—it has rarely produced a real product
innovation.
The company believes that it may be falling behind in terms
of bringing true breakthrough products to market, particularly in the area of
eCommerce. Executives want to build on traditional strengths to keep improving
existing products, but they also recognize that they will need to take a
different approach if the company is to maintain product leadership in its
industry. So in the creation of electronic commerce products, the company is
considering a move toward the collaboration model and the use of a
skunkworks-style operation that relies on multidisciplinary teams and team
incentives, rather than individual experts.
Executives are also beginning to experiment with external
alliances as a way to bring new knowledge into the company. Using the framework
as a guide, the company has been able to gain a sophisticated understanding of
how to improve its current knowledge-management systems and, at the same time,
develop a sense of how it can manage knowledge to forge new capabilities for
the long term.
That kind of evolutionary ability will become increasingly
important in the coming years, as the demands of new markets and new
competitors drive continuing shifts in corporate strategies. To support those
strategies, companies will have to build new capabilities more and more
rapidly—and so the ability to manage knowledge to support that change will be
critical.
Having completed a long term assignment as a
research fellow with the Accenture Institute for Strategic Change, Leigh
Donoghue, a senior manager, has rejoined the Change Management
Competency. Jeanne Harris is an associate partner in the
Process Competency and a senior research fellow at the Accenture Institute for
Strategic Change. Bruce Weitzman, a senior manager in the Strategic
Services Competency, led Knowledge Management research for the Accenture
Institute for Strategic Change. Back to
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