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Knowledge Management: It’s Really About People

William Spencer, of the National Security Agency, stands before a crowd of business managers. It’s 3 p.m., usually the time during a conference when participants slyly sink into the plush couches of the hotel lobby and lower their eyes to half-mast. In Spencer’s lecture room the rows are filled and barely a spine rests on the back of a seat; he has just posed an intriguing question.

In 1996 Intel Corporation had $17 billion in tangible assets on the books—these are classic books, the kind that measure land, labor and capital. On that same day the market value of Intel was $110 billion. In what assets do the remaining $83 billion reside?

Unaccustomed to the silence that greets him, Spencer paces a bit across the front of the room. He peers out at the crowd, waiting, then decides to solve his own riddle. “They’re the assets that walk out the door every day at five.” More silence, a nod or two, but also some skeptical glances. “You see, that’s the trick to knowledge management,” Spencer continues, “It’s about people. The other trick of course is getting your assets to walk back in at nine o’clock the next morning.”

Defining Knowledge Management
Spencer’s formal definition of knowledge management goes something like this: it’s what companies do to identify and deploy strategies and processes to create, identify, capture and leverage vital skills, knowledge and information throughout the organization to enable people to best accomplish their missions. Companies can use knowledge management to improve the functioning and, ultimately, the value of their company. Sounds logical enough, but there is one catch: it doesn’t work like most familiar management techniques. Certainly not compared to the management tactics of the industrial era where products were punched out in a vacuum. Think of Henry Ford’s Model T: One car for one man for all time, and you can have any color you want as long as it’s black. (See the sidebar on this page to determine where you fit on the industrial — knowledge management scale.) Knowledge management simply isn’t as clear-cut. It’s a new way of harvesting success, nourishing the foundation for long-term growth.

Like Intel, many companies today are valuable because of how well their products and employees serve customers; many of the successful users of knowledge management are champions of quality management as well. But they succeed at both by knowing what customers want and when, plus a number of other factors. Often, a company can only learn these things from the employee willing to understand and share the nuances of the customer’s needs with everyone else.

“Quality management revolutionized businesses around the world through a determined focus on the quality of goods and services,” Spencer says. “And experience has confirmed that focusing on product and service quality from the very earliest stages yields faster production, lower costs, higher profits and overall competitive advantage.” In some ways, then, knowledge management evolved from quality management. Yet according to Spencer, there are significant differences between the two techniques.

“The first is that quality management is rooted in manufacturing. Its traditional tools and techniques are most proficient at measuring, analyzing and improving the movement of tangible goods, things,” says Spencer. “In knowledge management the most important processes often create or convey intangible assets, knowledge.”
The second difference is that knowledge-intensive processes are inherently messy and difficult to describe and measure; to achieve and convey the intended results, they require feedback. “It’s the difference between explicit and tacit knowledge,” says Spencer. “A quality process for making a machine part, for example, goes through specific operations, in a specific order. Explicit, measurable criteria define whether each step is complete and accurate, and you’re pretty sure the resulting part will do what the customer needs it to do.”

And knowledge processes? “They’re non-routine. Knowledge is conveying an actionable understanding. It’s the sense that people make from information and context. Think of a position paper or a report. To get to the end result, you’ve got to edit, do more research, rewrite and reevaluate so many times. The result isn’t the product of step-by-step processes. It emerges from a complex series of knowledge processes; it’s a matter of making the right information and resources available at the right time.

Six Different Kinds of Knowledge-based Companies
How do you know if knowledge management can work in your company? To identify potential areas for knowledge management, Spencer points to six kinds of knowledge originally identified in the International Benchmarking Clearinghouse study of Emerging Practices in Knowledge Management.

Knowledge as a business.
In this type of business, products and services are almost exclusively based on knowledge and how it is delivered to customers; improving knowledge as a productive resource is essential to growth. These businesses learn as much and as fast as possible by benchmarking, sharing and implementing best practices, learning from experience and emphasizing continual learning and personal growth. Company policies should reward work groups for picking up and using strategies and practices from other groups and other companies. Such actions show initiative and innovation.

Transfer of knowledge and best practices.
Here, knowledge must be available at the point of action, where decisions are made and action taken. Think of your front line employees: They may not be empowered, they don’t determine the direction of their duties or of the company in general. But they’re in power, talking to your customer and deciding what information to give him. If the front line employee doesn’t have the benefit of knowledge that the product development manager does, the benefit of that information won’t reach the customer. You can transfer knowledge, for example, by connecting people to people through a company yellow pages, or maintaining an electronic database of reports from seminars and workshops.

Customer-focused knowledge.
This applies to almost any business—the better a company understands its customers, the better those customers can be served. “Our content, the customer’s context.” In other words, it’s your product or service, but it’s defined by what the customers needs are. Think of computer programs for inventories. A program designed for an auto parts store will differ significantly from that designed for an auto dealership because of characteristic differences in their businesses, even if they have the same goal.

Personal responsibility for knowledge.
Some businesses’ survival depends on individuals acting intelligently in all situations. Think of an emergency medical technician and the thoughtfulness that must accompany her every action. To build, share and apply what the technician knows, she must be supported, trusted and held responsible for the knowledge entrusted to her.

Intellectual asset management.
Intellectual assets give a competitive advantage and provide income if marketed effectively. Dow Chemical is a leader in intellectual asset management, working doggedly to protect their patents. The result? Dow has earned considerable revenue from licensing agreements, plus savings by terminating the costs of maintaining patents no longer valuable.

Innovation and knowledge creation.
In this field, competitive advantage comes from unique knowledge and expertise, and survival depends on continually creating new knowledge and embedding it in products and services. Basic and applied research and development are critical, along with speed, risk-taking and special attention to decision processes and organizational culture. Because much of the knowledge is tacit, this is a field where trust and relationships among people are central.

The Building Blocks of Knowledge Management
Whichever knowledge relates to your organization (and there could be more than one) consider these four building blocks for effective knowledge management:

Learning: Systematic gathering of knowledge from ourselves, our customers, our partners and external sources. Develop a system for determining what knowledge is most critical, how it compares to current and future needs. Make sure learning considers both explicit and tacit knowledge.

Linking: Employees should be connected to their field outside of the company. Develop a mechanism for staff to gain specialized knowledge—conferences, seminars, professional organizations. Make sure staff know about tasks and processes when they need it and in a form they can use.

Leveraging: Make the most out of what you know. If one person in the company knows something, ensure the entire company can share in that knowledge. Facilitate brown bag lunches in which employees can share what they’ve learned at a recent seminar. Create pathways and means of sharing information between employees to maximize the potential of employee knowledge.

Leading: Learning and sharing knowledge need to be set squarely within the foundation of a company, so that team and individual incentives to learn and value knowledge are part of the organizational structure.
If you decide to implement knowledge management, keep these tips in mind:
- Create sensible strategies and processes, and make sure they reflect the mission of your company. If processes don’t have a positive impact on company goals, question if time would be better spent on others that directly relate to a desired end result.
- Identify sources of knowledge. Seminars, conferences, any kind of external resources are fair game. And don’t forget the creativity of your staff. Through experience, they’ve gleaned insight into products and services.
- Capture the knowledge that employees already have. How can they use it to improve service and quality?
- Finally, leverage knowledge to its maximum benefit. Apply knowledge to other areas of organization by providing access, like a company-wide yellow pages listing staff expertise.

To make learning and knowledge profitable, you must ensure the highest payoff for what you know. One of the essential goals of knowledge management is to make the organization as a whole smarter and more responsive. Ideally, information dispersal among employees should be good enough that a customer can get needed information from anyone within the organization. Sharing and growing knowledge enables people to best accomplish the mission of the organization, and if you can do it as well as Intel, that could add up to a pretty valuable asset.