Welcome to the third edition of Ideas

– a magazine that celebrates the

ideas that power business success

in Canada today.

Knowledge management is the focus of

this issue of Ideas. Businesses today are

becoming increasingly more agile by imple-

menting knowledge management practices,

which are formal, directed processes that

determine what information an organization has

that can benefit others in the company, then

devising ways of making it easily available.

With the need to gain and maintain a

competitive advantage in today’s marketplace,

the desire to rapidly exploit opportunities for

electronic commerce and the rise of the digital

economy driving business today, the ‘sharing’

aspect of knowledge management has become

essential for Canadian businesses.

According to a recent Ipsos-Reid survey,

a majority of Canadian business leaders indi-

cate that knowledge management practices

have created value by improving organizational

effectiveness, delivering customer value, and

improving product innovation and delivery. The

study also shows that two thirds of Canadian

companies practicing knowledge management

believe it has given their organization a com-

petitive advantage.

I hope this issue of Ideas is beneficial to

you and your business, and helps to provide

even better service to your own customers. If

you have any comments about this publication,

please feel free to send a message to the e-mail

address below.

Frank Clegg

President

Microsoft Canada Co.

Email: ideas@microsoft.com

3issuethree

contents

16

12

Ideas Magazine is published for Microsoft Canada Co. by Plesman Communications, 25 Sheppard Ave. West, Suite 100,Toronto, ON. M2N 6S7

Published May, 2001

For Advertising and Publishing Inquiries:

Joe Tersigni 416-733-7600

E-mail, jtersigni@plesman.com

Mailing Inquiries: msideas@transcontinental.ca

The views expressed in this magazine are those of the contributors for which Microsoft Canada Co. and PlesmanCommunications accepts no responsibility. Readers should take appropriate professional advice before acting on any issueraised. Reproduction in or part without written consent is strictly prohibited. * Copyright rests jointly with Microsoft CanadaCo. and Plesman Communications and is shared with the respective Microsoft partners on pages 20, 22, 24, 26 and 28.

Microsoft, The Microsoft Logo and "Where do you want to go today?" are registered trademarks of and/or trademarks of theMicrosoft Corporation in the US and/or other countries. *2001

16

9

4

4 A wealth of knowledgeOrganizing, moving and sharing intelligence

5 The Web of knowledgeInternet-based KM resources

8 The culture of knowledgeAn environment of free and equal sharing

12 KM ROI Accounting for the value of knowledge

14 The value of knowledgeA primer on knowledge management technology

16 The language of knowledgeKnowledge management from A to Z

22 Partners in knowledgeTim Chandler, Intel Canada

Andrea McGrory, KPMG Consulting

Jim Goodfellow, Deloitte & Touche

& Carl Drodge, Deloitte Consulting

Dave Gendron, Compaq Canada Inc.

32 Five on fiveOur panel of experts shares its views

34 Gems in the hype and fogThe things that count for knowledge

Customer Agreement #1872362

issuethree4

featureby Martin Slofstra

It was in 1959 in a book called The Landmarks

of Tomorrow that highly respected manage-

ment guru Peter Drucker first coined the

term knowledge worker.

At the time, Drucker predicted this

knowledge worker would slowly take over, and

in fact, form a full one-third of the workforce

by year 2000. It was also a prediction filled

with promise.

"The majority of knowledge workers will

be paid at least as well as blue-collar workers

ever were, or better," he wrote. "And the

new jobs offer much greater opportunities to

the individual."

But it wasn’t just the worker. The biggest

implication was that the economy would also

change, from being organized around the flow

of things and the flow of money to the flow

of information.

Well, more than 40 years later, not only

have Drucker’s thoughts proven true, he has

inspired many more others to think in

similar terms, effecting major changes in not

just the worker but how the entire organiza-

tion functions.

More than just knowledge workers, we

have knowledge-based organizations, a knowl-

edge economy and a knowledge society. To be

certain, there is now a wealth of knowledge on

the topic of knowledge.

But it begs a question, what’s new here?

And more to the point, what must the modern

organization do if it wants to become a vital

part of the growing knowledge economy?

Well, most recently, we have the idea of

knowledge management, which implies that

while the information that knowledge workers

create may be abundant, it still needs to be

organized, moved, and most important of all,

it needs to be shared.

As good as any place to start is the CEO.

In his book Business@The Speed of Thought,

Microsoft chairman and CEO Bill Gates writes:

"A company’s high level executives need to

believe in knowledge sharing, or even a major

effort in sharing will fail. Leaders must show

they are not themselves locked in an ivory

tower, isolated from everybody else." A good

portion of the book is devoted to institutional

intelligence, or what Gates refers to as corpo-

rate IQ. "By corporate IQ, I don’t mean simply

having a lot of smart people at your company

— although it helps," writes Gates, rather, "cor-

porate IQ is a measure of how easily your com-

pany can share information broadly and of

how well people within your organization can

build on each other ideas."

But it can’t be just at the top.

In his book Working Knowledge, Thomas

Davenport stresses knowledge should be

everybody’s business, not just senior manage-

ment. "Planning managers, business analysts,

design and manufacturing engineers, market-

ing professionals and even secretaries and

clerks are the most important managers of

knowledge," he writes. "They all need to cre-

ate, share, search out and use knowledge in

their daily routines." In this sense, knowledge

management must be part of everybody’s job.

Another major new trend is the sharing

of this knowledge not only within but also

outside of the organization and out to the

customer. In the just-released book The

Relationship-based Enterprise, Ray McKenzie

writes: "Knowledge sharing reaches a new level

when customers become partners of the enter-

prise. To converse effectively with customers

and clients, however, there must be freer

knowledge and information sharing." How

might this work? An essential quality of good

sales people and a web site is that they know

how to share information freely, quickly and

at low cost. "They know what information to

We have the idea of

knowledge management,

which implies that while

the information knowledge

workers create may be

abundant, it still needs to

be organized, moved, and

most important of all, it

needs to be shared.

A wealth ofknowledge

5issuethree

issuethree

feature

6

T he recent attractiveness of the term knowl-

edge management appears to have been

prompted by three major forces, according

to the Knowledge Management Resource Centre

(www.kmresource.com): Increasing dominance of

knowledge as a basis for organizational effectiveness;

the failure of financial models to represent the

dynamics of knowledge and; the failure of informa-

tion technology by itself to achieve substantial ben-

efits for organizations.

An Ipsos-Reid study of medium and large-sized

Canadian organizations suggests knowledge man-

agement has been a success in most organizations

that have implemented the practices.

Knowledge management practitioners say it has

improved organizational effectiveness, delivered cus-

tomer value and added to product innovation.

The positive impact of knowledge management

also extends to employee satisfaction according to 88

per cent of organizations. Sixty-six per cent reported

a positive impact on employee retention and in gain-

ing a competitive advantage in the marketplace.

The top three KM processes in place are the

development of an Intranet, creating events for

sharing knowledge in the organization and the use

of groupware.

One in five organizations with KM in place

state the Internet and intranets are the sources they

turn to for KM information.

According to the study, organizational culture

plays an important role in the successful implementa-

tion of knowledge management practices and two

in five companies believe it has a very big role in

its success.

Overall, more than half of organizations have

knowledge management in place.

Just over two in five organizations with knowl-

edge management practices in place have a chief

knowledge officer or similar position specifically dedi-

cated to gathering, distributing and leveraging organi-

zational knowledge.

Among companies with knowledge management

in place, the most commonly implemented broad-

based processes involve creating networks for transfer-

ring information between employees, followed by for-

mal procedures for employees to communicate lessons

learned from projects to other employees and creating

databases of best practices.

Other top growth areas include knowledge audits

and procedures for retaining the knowledge of depart-

ing employees.

One in five organizations with KM in place state

the Internet and intranets are most important to its

success followed by data warehousing.

Internet-based knowledge management resources

are extensive, lending creedence to the concept that

the value of information is in its being shared. The

following examples are a good start to managing

the knowledge.

share, how, when and why; and they now the

value that sharing creates."

In his book Digital Capital, Donald

Tapscott equates knowledge with capital.

"Simply put, digital capital results from the

internetworking of three types of knowledge

assets: human capital (what people know),

customer capital (who you know, and who

knows and values you), and structural capital

(how what you know is built into your busi-

ness systems)."

Despite a spate of recent books on the

subject, there is still a long way to go. “The

tools to manage knowlege are still in their

infancy,” says Derrick de Kerkhove, a professor

at the University of Toronto and director of

the McLuhan program in culture and technol-

ogy. Still, “it’s hard to ignore the rapid progress

of search engines, our first real go at KM,” he

adds. “Even word processing is a form of KM

and that is certainly useful in the real world

of business.”

Consider De Kerckhove among those who

think Drucker’s early predictions will prove

true but he adds a cautionary caveat.

“There are obviously as many people who

are neither equipped nor interested in knowl-

edge working as there are people who are not

interested in working at all. I think what

Drucker has in mind is that the ratios of the

number of people who work in different sec-

tors of the economy are rapidly changing in

favor of those who deal with information.”

Evidently, the idea of knowledge worker,

and knowledge management, is about to move

into the mainstream. ■

by James BuchokThe web of knowledge

7

The Knowledge Management Resource Centerwww.kmresource.com

A comprehensive collection of KM resources, each of themreviewed and briefly described. Knowledge management can besearched in 17 departments and a bookstore. The KM Bookstore letsyou browse 148 titles on KM and related topics and you can also buybooks at a discount and have them delivered to your doorstep.

The site is an excellent source of quotations on knowledge man-agement including this from Thomas A. Stewart, a member of the boardof editors at Fortune Magazine: "Because knowledge has become thesingle most important factor of production, managing intellectual assetshas become the single most important task of business."

Knowledge Shopwww.knowledgeshop.com

Contains a wide range of papers and reference material related toknowledge management, quality and creativity. The site also offers TheKnowledge Management Mug, a black coffee mug with gold wrap-aroundtext quoting knowledge management practitioners on their definitions ofknowledge management. Quoted are: Charles Savage of Knowledge EraEnterprises Inc., Karl Erik Sveiby of Sveiby Knowledge Associates and theUniversity of Melbourne, Debra Amidon of Entovation International,Charles Armstrong of Know Inc., Hubert Saint-Onge of Clarica, RobertLogan of Gutenberg and Howard Eisenberg of Syntrek.

KMTOOLwww.kmtool.net

This Web site came online in May, 1999 as a resource for planningknowledge management projects which it defines as those that promotesharing and use of knowledge such as ideas, expertise and best prac-tices. It has grown in into a community representing professionals inover 40 countries. A page called ‘What Is KM?’allows sharing of inter-esting links, reading materials, and vendor information. Suggestions,news and ideas can be sent directly to KMTool. It also offers a glossaryof knowledge management terms.

Knowledge On-Line UKwww.knowledge.org.uk

"Knowledge has no tangible corporate value; it rarely appears onthe balance sheet and carries no tax benefit or burden," opinesKnowledge On-Line UK. "But for many organizations, " it continues "it isthe greatest (and sometimes the only real) asset that they possess."

Knowledge On-Line regards itself as the central informa-tion and communication forum for chief knowledge officers and knowledge workers worldwide. It lets youtap into the thoughts of leading knowledge practi-tioners and thinkers.

A link to "Meet the Knowledge Gurus" providesthe thoughts of the people who are shaping theknowledge era. You can also participate in a com-munity of practice. A section called "TheKnowledge World is Opening Up” tracks careeropportunities in the knowledge community.It also contains extensive archives ofnotes and tapes from knowledgemanagement conferences.

The BizTech Network www.brint.com/km/whatis.htmProvides a seven-point business and technology managers' checklist:1. View the organization as a human community capable of providing

diverse meanings to information outputs generated by the techno-logical systems, instead of the traditional emphasis on commandand control.

2. De-emphasize the adherence to the "way things have always beendone" so that such prevailing practices may be continuouslyassessed from multiple perspectives for their alignment with thedynamically changing external environment.

3. Encourage diverse viewpoints by avoiding premature consensus onissues that need deeper analysis of underlying assumptions.Often, viewpoints of persons with differing backgrounds and expertise can provide a much broader focus that is essential for completely grasping the essence of the core issues, particularlywhen the changing context demands a fresh look at what was yes-terday defined as a "benchmark" or a "best practice."

4. Encourage greater proactive involvement of human imaginationand creativity to facilitate greater internal diversity to match thevariety and complexity of the wicked environment.

5. Give more explicit recognition to tacit knowledge and relatedhuman aspects, such as ideals, values, or emotions, for develop-ing a richer conceptualization of knowledge management.

6. Implement new, flexible technologies and systems that supportand enable communities of practice, informal and semi-informalnetworks of internal employees and external individuals based onshared concerns and interests.

feature

7. Make the organizational information base accessible to organiza-tion members who are closer to the action, while simultaneouslyensuring they have the skills and authority to execute decisiveresponses to changing conditions.

Buckman Laboratorieswww.knowledge-nurture.com

Buckman Laboratories is a manufacturer of chemicals for aqueousindustrial systems and works with industries worldwide in chemical treat-ment technologies. The company established a knowledge managementWeb site as a resource for the worldwide knowledge management com-munity including practitioners, newcomers, academics and students.

A link to the Buckman Room provides links to the knowledge shar-ing efforts at Buckman Laboratories itself including downloadable arti-cles. A starter kit recommends materials for those beginning to learnabout knowledge management including a short list of references.

There is a ‘library’ containing articles and links to journals, Websites and other references. Related links include culture change, lead-ership, measurement and information technology and an events board.

eKnowledge Centerwww.eknowledgecenter.com

The Knowledge and Innovation Management Certification TrainingProgram is believed to be the largest KM Certification program in theworld designed to provide education and support to serious KM practi-tioners. More than 1,000 professionals are enrolled in the program,representing more than 500 organizations and governments worldwide.The program covers the management of natural and artificial knowledgesystems in business settings. There are two ways to receive training: e-learning with a four day face-to-face workshop or self-paced e-learn-ing only. The e-learning only option includes an online workshop that simulates the training provided in the face-to-face workshop. The

face-to-face and online workshops are designed to train KMprofessionals on how to plan, analyse, design, manage

and monitor a KM initiative. The goal is to give hands-on exposure which will enable

participants to add value totheir companies and clientsthe day they return to work.

During the program, partici-pants network with other KM professionals from around theworld, receive research supportand gain access to an onlineknowledge response center.

Ernst & Youngwww.businessinnovation.ey.com/mko

Ernst & Young's Managing the Knowledge Organization consortiumbrings together a community of academics and researchers to developa greater understanding of how businesses can better use knowledge tocreate value.

The current focus is on identifying and creating the frameworks andtools essential to a knowledge-based approach to business.

In order to encourage participants to think out of the box, MKObrings thought leaders into the conversation. The Ernst & Young Centerfor Business Innovations attempts to provide a common base fromwhich the consortium goals and activities build.

In this community, participants with diverse backgrounds, experi-ence and perspectives come together at conferences and workshops toengage in the forward thinking conversations and activities. The benefits result from participants’ willingness to share what they are learning and apply their collective experiences and insights to emerging chalenges.

Microsoft's Vision and Strategies for Knowledge Managementwww.microsoft.com/business/km/resources/vision.asp

As the volume of a company’s business grows, it needs a scalable,

flexible way to leverage intellectual assets into decisive action. It's not

enough for the knowledge to be "out there" — it needs to get into the

hands of every decision-maker, in a time frame and format they can

use. The primary goal of knowledge management is to deliver the intel-

lectual capacity of the firm to the individual knowledge workers who

make the day-to-day decisions that in aggregate determine the success

or failure of a business.

The Microsoft .NET platform is proposed as representing building

blocks to allow organizations to increase their organizational IQ. Ease of

integration removes the walls around "data jails" and frees employees

to act on relevant information. According to Microsoft, the familiarity of

its tools for developers and knowledge workers reduces the need for

training and keeps performance levels high.

Links to Microsoft's vision and strategies for knowledge manage-

ment and an overview of knowledge management provide articles, prod-

uct information and details of events where one can learn more about

the latest developments in KM.

A link to Microsoft’s digital dashboard reveals how to share corpo-

rate, personal, external and team information using the digital dashboard

resource kit 2.0. Microsoft case studies show examples of real world

solutions with details on partners, products and services. ■

issuethree8

feature

In an epsiode of Gilligan’s Island our

hero stumbles upon a bush bearing

seeds that enable him to read peoples’

minds. He shares the seeds with the other castaways and they discov-

er they’re all thinking spiteful thoughts about each other. The moral

is that a group working together can only do so in an environment

where information can be shared freely and equally. In other words,

there has to be a culture for sharing knowledge.

Every company has its own culture. People create culture and no

two are exactly alike. Everybody brings their own unique set of char-

acteristics and knowledge into a work environment. The key is to fos-

ter an environment where others can tap-in and share the knowledge

and intelligence of all employees. The technology to facilitate a knowl-

edge management environment must then tap into that culture. Or,

does the technology require the company to adopt a new culture?

One theory, says Cheryl Carleton, an analyst at IDC Canada,

"is that you can't change the culture of an organization, that you’re

stuck with what you have and you have to select the knowledge man-

agement technology and processes to suit that existing culture."

Hiring new people that fit in with a company’s cultural ideal, then,

9issuethree

featureby John Shoesmith

The culture of knowledge

Clara Angotti,vice president of marketing for

Sage Information Consultants

issuethree10

feature

can only change culture. The flip side, she adds, is that "culture can

only be changed if there is a willingness at all levels of the organiza-

tion to discard established cultural norms. Organizations need to

create climates of trust and security for that will ultimately drive

innovation — and innovation is the ultimate knowledge manage-

ment goal."

The culture argument often begins and ends with the basic tenets

of human nature. For example, there can be a natural resistance by

people in a shared work environment to share the knowledge one has

accumulated over a work life

about the business, customers

and other related work items.

It’s not surprising that an Ipsos-

Reid survey on knowledge man-

agement reveals a strong agree-

ment with the statement

"knowledge is to be used for per-

sonal advantage" skews towards

organizations without a knowl-

edge management system in

place. In fact, 41 per cent of sur-

vey respondents either some-

what or strongly agree

that individuals in their

organizations tend to

view “knowledge as a

source of power,” compared to

57 per cent who either strongly

or somewhat disagree.

But most companies feel

they’re already on the right

track. In the same Ipsos-Reid sur-

vey, 89 per cent of respondents

believed their organization has a

culture that encourages and pro-

vides opportunities for commu-

nicating ideas, knowledge and

experience internally.

Still, there can be a stigma about sharing information, says Clara

Angotti, vice president of marketing at Sage Information Consultants,

a Toronto-based e-business consulting firm that builds leading edge

technology solutions, including business intelligence tools that are

part of a comprehensive knowledge management environment.

"Some want to conceal as much as they can so they can be the stars of

the organization," she says. Companies must, therefore, create the

proper internal culture to best facilitate a strong knowledge manage-

ment environment. This is not about teaching new employees how to

use the photocopier or showing them where the bathroom is: it’s

about sharing information about customers and about how the busi-

ness runs.

One way to build that environment, says Agnotti, is to create

incentives for employees, to make it a reciprocal process. "It’s a real

give and take," she says. "Unless you think you’re going to get some-

thing back that will help you do your job, there will be resistance,

otherwise people will feel they’re just feeding knowledge into a hole,

that they’re not retrieving any knowledge back."

What’s more, those incen-

tives have to be real. "The whole

altruistic way of people sharing

knowledge for the pure goodness

of the organization, well, those

types of things are not good

motivators." IDC’s Carleton

agrees. "You have to address

issues like motivating people to

share their knowledge with

incentive programs that will

reinforce positive sharing behav-

iour and create an environment

of trust."

Angotti believes

another way to create an

environment where

employees want to share infor-

mation and knowledge is to

provide powerful but easy-to-

use technology tools to end-

users. "Unless you have a tool

that makes finding information

easy, there is usually some resis-

tance. If you’ve chosen poor

tools and people are searching

for information on an intranet

and they’re not finding it, some-

one will do that once or twice and then won’t go back."

It’s an obvious philosophy, but it doesn’t always translate across

every company and industry. Even in work environments where the

natural cultural tendency is to share as much information and knowl-

edge as possible, technology can be the roadblock. Take health care,

for example, which is a hugely information-intensive sector.

"There’s so much knowledge being created in the medical world,"

says Doug Campbell, the strategic architect for Alberta Wellnet. "If

you spent an entire week just trying to keep up with all the informa-

tion out there, you could easily do that and still be running behind."

Although he says the desire to share information is there, it’s not

always easy to enable it.

Part of the problem, he says, is the health field "is still very much

an oral culture. They talk to their peers and they’ve said, ‘I’ve tried this

drug and it really works well under these conditions,’ or there’s a lot

of journals and literature about treatments. It’s very much a sharing

culture from that perspective, but that doesn’t translate into informa-

tion management."

Creating the technologies to take advantage of this natural ten-

dency is the challenge. Organizations like Alberta Wellnet help. It acts

as the umbrella organization for a series of province-wide and region-

al initiatives to build an integrated health information network in

Alberta that will facilitate improvements to the delivery of health

services to Albertans by improving access to health information.

But the organization can only do so much, says Campbell. And

medicine is changing rapidly. People tend to have more than one

doctor, creating the need for the sharing of a patient’s medical histo-

ry among different doctors so they’re all working from a common set

of information. As a result, there is a growing need for facilitating that

information transfer. Campbell says one cultural aspect that has to be

changed is the resistance to the technology that will help facilitate

improved knowledge transfer of medical information.

"There’s resistance, there’s skepticism," he says. It’s not that

physicians are intimidated by technology — for example, most doc-

tors are keen on using the latest high-tech diagnostic tools — but

some have yet to put the technologies and the networking that will

bring more automation and improved transfer of medical files into

their practice. "Doctors are very adept at using technology in their

jobs, but it’s information management that they really haven’t

adopted as a discipline that they think will add value to the practice."

But culture aside, funding is also a major issue. "Most physicians,

despite what people think, don’t have a budget to buy the necessary

technology." Providing the right technology will always be para-

mount, but the success or failure in creating an environment for

knowledge management comes from the top. "Management teams

tend to understand that knowledge in people’s heads is a competitive

advantage," says Angotti, "and if they ever lost it, that would be a

huge blow."

It’s a message even our Gilligan can understand. ■

11issuethree

Clara Angotti says she’s never seen anything like it.

"It’s phenomenal the amount of interest we’ve seen in a

product that isn’t even officially out yet," says the vice

president of marketing at Sage Information Consultants about

Microsoft’s SharePoint Portal Server, which will be widely available

in June. "It shows you the pent-up interest in these kinds of knowl-

edge management tools."

SharePoint Portal Server is a flexible intranet portal solution that lets

users locate, collaborate and produce information. It provides a rich,

customizable out-of-the-box "digital dashboard," allowing users quick

access to business-critical information throughout an organization.

Some of SharePoint Portal Server features include scalable enter-

prise search using Microsoft's search technologies and an inte-

grated document management solution. "It has a really great

indexing and searching capability," says Angotti. For example,

when a user conducts a search – and searches can be done on a

company’s intranet, Word documents, even on a company’s e-mail

system – it comes back with what’s called Best Bets.

Some of the other features in SharePoint Portal Server include

subscriptions, category browsing and extensibility using third-party

digital dashboard Web Parts. Customers can also extend SharePoint

Portal Server and add additional Web application functionality.

Serving up knowledge

feature

A very big role

A moderate roleNo role

whatsoever

Role of Corporate Culture in KM

40%

12%48%

TARGET: Business & IT Decision Makers Organizations with 50 or more PCs

Source: Ipsos Reid

issuethree12

featureby Erik Heinrich

KMROI

Dr. Nick Bontisassistant professor of

strategic management,McMaster University

A n epiphany of sorts came to Nick Bontis one day while

employed as a securities analyst for the Canadian Imperial

Bank of Commerce. Why, he wanted to know, did the market

value of so many high-tech companies so greatly exceed their book

value? After all, everything he had ever been taught, and logic told

him that market price divided by book value should always equal

one. But here were dozens of companies on the stock market where

market price not only consistently exceeded book value, but did so in

multiples of ten or more.

That got Bontis thinking, there must be some way to better assess

a company’s true worth given that the value of these companies was not

based solely on physical assets they possessed but also on the knowl-

edge in their employee’s heads. Tte dilemma : How could this newfound

value be measured, and how could this be expressed in financial terms?

There simply was no accounting for the value of knowledge.

After giving the topic some more thought, Bontis decided to

return to his studies and completed a Ph.D. at the University of

Western Ontario’s Ivey School of Business. There, he wrote what he

13issuethree

says was the first doctoral dissertation on intellectual capital, and the

idea that intangible assets such as employee experience and expertise

have real value that can be measured.

Bontis, now a professor at McMaster University and president of

a software firm, spends a lot of time thinking about how to measure

knowledge. And to be sure, there is no shortage of ways. One such

measure could be e-mail volume which could be viewed as an indica-

tor of knowledge sharing versus knowledge hoarding. Another might

be human capital effectiveness, defined as the revenue and profit per

employee, “I can come up with a million measures,” says Bontis. But

ultimately, the ones that matter are the ones that can be combined

with financials. “All measures end up as dollars,” he says. The trick

then is figuring out how much to invest in a knowledge management

(KM) solution that delivers the goods, while at the same time mea-

suring the related return on investment (ROI).

"Increasingly customers are wanting to understand the business

value behind a technology investment," says Peter Rakoczy, director of

Microsoft Consulting Services in Canada. "A few years ago, it was

more a leap of faith. But today a business discipline has evolved

around technology decisions."

Traditional accounting methods, designed to capture the value of

transactions and physical assets, lack meaning in the new economy,

where intellectual property can be a competitive advantage.

For example how do you put a value on a KM solution that

enables a company to blow its competition out of the water by slash-

ing in half its time-to-market with a breakthrough product? Or how

do you measure the value of discovering lucrative market niches you

never knew existed?

It may be difficult to attach a dollar figure to these kinds of

things. But they are nevertheless critical to long-term survival in the

Web economy.

The good news is there are companies out there that have suc-

cessfully calculated the value of investing in KM solutions, and they

are shining a light for others to follow. Not only that, they are help-

ing IT professionals provide answers to bottom-line-oriented bosses

who like to ask: What am I getting for all this money I’m spending?

"Results vary from company to company," says John Carnduff,

chief strategy officer with Navantis Inc., a Toronto-based company

that specializes in integrating KM solutions. "But the return can easi-

ly exceed 10 times the original investment."

A case in point is Shell International Exploration and Oil (SIEO),

a unit of multi-national resource giant Royal Dutch/Shell Group of

Companies. SIEO, based in The Hague, Netherlands, invested $6 mil-

lion in a KM solution over a period of three years beginning in 1997.

The point of the exercise was to facilitate an improved exchange of

knowledge and information among some 10,000 employees in

numerous offices scattered around the global.

To that end, SIEO created three working communities (surface,

sub-surface and wells) for its core operations, and another 10 com-

munities for support functions such as finance, procurement, human

resources and health, safety and the environment.

After conducting a review of its operations in 2000, SIEO conclud-

ed its KM solution was generating annual benefits of at least $300 mil-

lion — 50 times the original investment in its first full year of operation.

"We hook up people who are working in related disciplines

around the world so they can problem solve and share ideas," says

Arjan van Unnik, head of SIEO’s KM initiative. "But the trick is to go

further than connecting people in the same disciplines. We get excel-

lent cross-fertilization among, for example, pipeline engineers and

corrosion engineers. This exchange of ideas means more complete

solutions, and that’s how we get great value."

But how exactly did SIEO come up with its ROI figure? The short

answer is random sampling. SIEO looked at the questions being asked

by drilling and production engineers in its wells community. It then

asked a random sample of those engineers to estimate the value of

answers they received thanks to the KM solution and extrapolated

those values to the entire community based on the total number of

questions asked.

[ ]Story telling is very important in creating a buy-in for KM initiatives. And when you calculate

your ROI, revise your final estimate downward substantially so it can stand up to any challenge.

YES - ROI41% ROI (mean)

5%

NO 84%

Source: Ipsos Reid

YES - dollar savings$41,278 saved (mean)

7%

Don’tKnow4%

Have you been able to calculate return on investment of a dollar amount in process savings due to your organization’s

investment in knowledge management processes?

Impact of KM on Process Savings

issuethree14

A primer on knowledgemanagement technologyby Erik Heinrich

Advances in information technology over the last ten years have

made it possible for companies to collect a staggering amount of

data about virtually every aspect of their business, from suppliers

and customers, to call-centre activities and accounts receivable.

The question is: What do you do with all this knowledge once you have

it? As the quantity of information has grown by leaps and bounds, so too has

the need to manage it. After all information is not much good to anyone if it

just hogs space on desktop computers and servers. And that’s why knowl-

edge management (KM) has become the cornerstone of any organization’s

IT strategy.

John Carnduff, chief strategy officer

with Navantis Inc., says the automation

of document-handling is one of the

biggest advantages of KM technology.

“It frees people up to do higher-value

work,” says Carnduff. “And that adds to

the existing knowledge base of a compa-

ny.” For example, if a worker spends

three minutes retrieving a document

instead of one hour, that’s 57 minutes

he can use to add value to a project as

knowledge expert.

"Knowledge management is about capturing the intellectual property

of an organization and leveraging it across as many people as possible," says

Peter Rakoczy, director of Microsoft Consulting Services in Canada.

Rakoczy divides the intellectual capital inside companies into three

categories: tacit knowledge, which resides in people’s heads, explicit knowl-

edge, which is stored in document form, and potential knowledge, which

a company may or may not recognize it has.

Each of these categories requires a different KM tool for a company

to fully leverage its business value. For example tacit knowledge is best

exchanged between people using collaborative KM solutions such as

e-mail and instant messaging. Explicit knowledge is best served by a doc-

ument management system that allows people to conduct random search-

es across a variety of platforms based on a key word or phrase.

And finally, potential knowledge, the toughest nut to crack, is

normally accessed using an on-line analytical processing (OLAP) tool that

enables management to drill down into databases and flip information

around on a multi-dimensional matrix. This type of exercise can spot

important trends and uncover information gems that lead to swift busi-

ness decisions, and ultimately better ways to have an organization’s

intellectual capital deployed.

A similar procedure was carried out in the other

communities and at the end of the exercise, SIEO had a hard

ROI number.

Going forward, SIEO is no longer concerned about ROI

because the KM solution has paid for itself many times over.

And while the cost of operating the technology is expected to

be about $12 million in 2001, that figure is a fraction of the

incremental benefits, beyond the $300 million already calcu-

lated, SIEO expects to reap in the coming years.

For example, SIEO expects its KM solution to result in

a quicker roll-out of technologies worldwide, continued

improvements in the dissemination of best practises, lower

training costs and a closer working relationship with business

partners who will be invited to participate in the various com-

munities over time.

What advise does van Unnik have for a company about

to take the KM plunge? "Look for success stories," says van

Unnik. "Story telling is very important in creating a buy-in for

KM initiatives. And when you calculate your ROI, revise your

final estimate downward substantially so it can stand up to

any challenge.

Ontario Power Generation, a supplier of 85 per cent of

the electricity consumed by the country’s most populous

province, is another company that has embraced KM as the

key to its future. It made the decision in 1999 when it realized

it had to streamline and standardize document management

in the run-up to deregulation in the energy sector.

At the time, Ontario Power Generation, which employs

15,000 people and operates 80 generating stations, had more

than 100 document-management systems in place. Because of

the complicated nature of its IT infrastructure –— which

includes more than one ERP system inherited from its prede-

cessor Ontario Hydro — it was unable to install a single elec-

tronic document management system across the entire com-

pany. Instead it invested $8 million in three separate solu-

tions: one for its nuclear group, one for its fossil fuel and

hydro-electric groups, and one for its corporate group.

It’s too early to say how big an ROI Ontario Power

Generation can expect to reap from its investment in knowl-

edge management, but if the corporate group is any indication

it will be substantial.

Roll out of EDMS technology in the corporate group —

which employs 3,000 people in a variety of support functions

including legal counsel, HR and regulatory affairs — began in

February and is expected to be completed by year’s end. "

We need to practise what we preach," says Cathy Walker,

The valueof knowledge

Carnduff: KM “frees people todo higher-value work.”

15issuethree

feature

manager of document management solutions at Ontario Power

Generation. "And right now we’re in the process of doing just that."

The initial benefits will largely stem from the simplification of

e-mail communication. For example, employees will all work from the

same version of a centrally-stored document, rather than sending as

many as 5,000 copies of the same document to each other as an

e-mail attachment.

This will save space on company servers and cut down on the

propensity of people to print out attachments. Combined with a tool

that forces people to save e-mails on their desktop or post them

to a shared directory, Walker estimates annual savings will be in the

six-figure range.

That’s not bad for a $1 million investment, but it doesn’t stop there.

Indeed, the biggest bang for

the buck will come from

time saved. "Some 50 to 60

per cent of a knowledge

worker’s time is spent look-

ing for information," says

Walker. "If you can cut that

in half you get huge produc-

tivity improvements."

Within the corporate

group of Ontario Power

Generation, this kind of

reduction would result in

about 26,250 hours saved

per week, the equivalent of

14 person years. Assuming

an average annual salary of

$60,000, that translates to

savings of $45 million a year.

This kind of figure

dovetails with a study

released by Framingham,

Mass.-based research firm

IDC that estimates the knowledge deficit per employee in Fortune 500

companies is expected to rise to $8,775 in 2003 from $7,500 in 1999.

With so much data supporting KM solutions, why have more

companies not jumped on the KM bandwagon?

"In 1999 everyone had their heads down over Y2K," says Wayne

Simpson, president of Mississauga, Ont.-based 80-20 Software Canada,

a distributor of KM solutions. "Now that the upgrades have been

completed, companies are wondering what to do with their new IT

infrastructures. One obvious answer is adding KM software because

unstructured data is growing in leaps and bounds."

Says Microsoft’s Rakoczy, "KM doesn’t always have to be a huge

investment. There is often an opportunity to leverage the technology

you already have."

Bontis argues that all it takes is a fractional amount of improve-

ment or knowledge flow to make a significant contribution to the

intellectual capital utilization of a corporation. Some bottlenecks are

technological, not everybody has access to e-mail, for example, but in

general, cultural and organizational barriers can also come into play.

To that end, Bontis is already thinking about the next stage of KM,

and new types of measures.

Phase two of knowledge management, he believes, will come

from the integration of human resources and IT. “Asking what we can

do to get the best efforts from employees is probably the most com-

plex question business

managers have to ask them-

selves,” he says. And fur-

ther to that, it is a human

resources question not a

KM or an IT question.

“The bottom line is very

important, but we need

to come up with methods

that encompass qualitative

measurements in addition

to quantitative.”

Bontis says that

according to a major

research study which

looked at employee values,

commitment and satisfac-

tion at 26 large organiza-

tions, the major finding was

the importance of leader-

ship. “Employee behaviours

are a reflection of manage-

ment’s behaviours. If you

have a knowledge hoarding problem in your organization, the symp-

tom is probably found in your boardroom.” Add to that, says Bontis,

the number one reason people are leaving organizations is that they

feel their talent is not being leveraged enough. Again, it’s an HR and

KM issue.

Companies are recognizing the important role KM solutions play

in helping define their competitive advantage. Now they are also able

to measure the significant savings and benefits these solutions gener-

ate to arrive at an ROI any chief executive can feel good about. And

that’s the key to any successful KM strategy. ■

issuethree16

Knowledge Management from A to Z

Artificial IntelligenceDevices and applications that exhibit human intelligence and behaviorincluding robots, expert systems and language processing. It alsoimplies the ability to learn or adapt through experience.

Asset ManagementLeveraging the cost of ownership of patents by maximizing the potentialof their use for further innovation and using proper analy-sis of a portfo-lio's worth to provide the strongest immediate returns.

Best PracticesSharing work and experiences using technology to archive written workin repositories. Also creating opportunities to capture tacit knowledge.

Business IntelligenceA set of concepts, methods and processes to improve business deci-sions using information from multiple sources and applying experienceto develop an understanding of business dynamics.

CephalicThe approach to decision-making found in command-and-control orga-nizations that route decisions through a central brain or "head."

Core RigidityOpposite of core competency. Defining any core competency too nar-rowly may turn it into a core rigidity. Core rigidities are unques tionedassumptions about an organization's products, policies, or positioningwhich lead to complacency and inhibit new innovation.

Corporate AmnesiaThe loss of collective experience, embedded tacit knowledge and accu-mulated skills, usually through excessive downsizing and layoffs.

Corporate InstinctA company's collective sixth sense. Corporate instinct enables a company to respond instantaneously to market opportunities, cus-tomer needs and competitive manoeuvres.

Digital Nervous SystemThe computing infrastructure used to inform and support the decision-making process of an organization.

Discontinuity of KnowledgeA phenomenon that occurs when experienced knowledge workers movefrom one position to another (inside or outside of an organization) with-out having adequate time of knowledge manage-ment facilities totransfer their tacit knowledge to co-workers.

Effective EngagementThe process by which prospects and customers interact with an organi-zation (customer support, sales, etc.) in a manner that allows forincreased customer satisfaction and increased opportunity.

Explicit KnowledgeOne of the two types of knowledge, whose taxonomy was most notablyespoused by Michael Polanyi. Explicit knowledge is knowl-edge that iseasily codified and conveyed to others.

Free AgencyThe lowest level of granularity in a free market work force. Free agentsare effectively organizations of one, which come together temporarily toform project-based alliances.

The languageof knowledge

21issuethree

Human CapitalThe collective value of an organization's know-how. Humancapital refers to the value which results from the investmentan organization must make to recreate the knowledge inits employees.

Knowledge BazaarA form of knowledge market in which sellers are essentially undiffer-entiated and buyers assume all quality and serviceability risks.

Knowledge Chain Corporate instinct stems from the flow of knowledge through fourdefinitive stage in this chain: Internal awareness, internal respon-siveness, external awareness and external responsiveness.

Knowledge ConciergeA title adopted by some organizations for individuals who have theresponsibility of facilitating the transfer of knowledge across com-munities of practice.

Knowing EnterpriseAn enlightened organization that uses its instinct and self-awareness;an enterprise that has intimate, constantly renewed knowledge aboutitself, its capabilities and opportunities.

Knowledge Half-LifeThe point at which the acquisition of new knowledge is more cost-effective and offers greater returns than the maintenance of existing knowledge.

Organizational AbandonmentThe process by which new innovations replace current productsbefore the current product is out of its profit zone.

Return-on-TimeA metric for assessing if a knowledge chain is working. Since instinctreduces the time required to go through this cycle, it increases acompany's velocity and return-on-time.

Suggestive SoftwareSoftware that is able to deduce a user's knowledge needs and sug-gest knowledge associations that the user is not able to make.

Tacit KnowledgeOne of two types of knowledge. Tacit knowledge is experiential know-howbased on clues, hunches, instinct, and personal insights; distinct fromformal, explicit knowledge.

Touch PointsThe priority areas for the application of knowledge management; typical-ly interactions with customers, suppliers and employees.

Velocity of InnovationThe rate at which an organization is able to conceive of and introducenew product to market. Innovation is driven by business markets that arebattling time to beat their competitors to the next product innovation.

Virtual OrganizationA company without walls and without many permanent employees; it relieson contractual relationships with suppliers and a contingent work-force.

Virtual TeamA recombinant structure for work that pulls people and resources togeth-er quickly to solve a particular internal or external problem.

Work CellA collection of roles within an organization that crosses functional barriers. Individuals in these cells are distinguished by their flexibility and adaptability.

WorkflowOne of the tools used for the creation of process assets — a proactivetoolset for the analysis, compression and automation of business activities.

The languageof knowledge

issuethree22

partnerby Tim Chandler

On the edgeTim Chandler is the e-business data center solutions manager for Intel Canada

Good news, bad newsToday’s economy is truly information driven.

Getting the right information to the right people at the

right time is a key to success in virtually every corner of

the global marketplace. Knowledge management can

help to understand customers, tighten up a supply

chain or launch an innovative new service — but only

if information can be extracted, analysed, organized,

understood and shared. Unfortunately, in the current

hyper-competitive climate, information is good

news/bad news proposition.

The good news is that there’s more information

available than ever before. E-businesses are collecting

and storing terabytes of customer data: spending

habits, demographic profiles, Internet usage patterns,

you name it.

As a result, the size of the average decision support

system (DSS) database is estimated to be in the midst of

a 24-fold increase in just three years. And that’s just

looking at one indicator.

The bad news is that there’s so much information

that it can be downright counterproductive. In a flood

of e-mail messages, documents, presentations, faxes,

voice mails, databases, enterprise resource planning

(ERP) systems and Web pages, employees have a hard

time finding what they need when they need it.

Companies are hard pressed to convert that infor-

mation into more insightful analysis, faster decisions

and better businesses processes.

Meanwhile, the flood of information continues to

rise, and the e-business economy increases the need for

knowledge management practices to share information

and collaborate across the entire supply chain.

The ability to successfully manage information —

to retrieve what’s important and filter out what’s

not, to access it "just in time," as needed, and share

it with a diverse community of users — is becoming a

critical differentiator.

In the fast-changing global economy, success goes to companies that are quick to spot emerging

opportunities and make the most of them. To help them do that, companies are collecting more data

than ever before. But without the right knowledge management tools, it’s hard to transform a tidal

wave of documents, mail messages, databases and Web pages into a competitive business edge. Now,

advances in business analysis, visualization and collaboration—running on a balanced architecture with

powerful PCs—provide new ways to extract, organize and communicate valuable information.

Seeing is believingA wide range of knowl-

edge management approaches,

from document management

systems to corporate-wide re-

engineering efforts, are aimed

at solving the information

problem. As well, a number of

established and newer knowl-

edge management practices

are receiving more and more

attention. (See chart).

These range from the

ubiquitous Internet/Intranet

solution to workflow, and

although adoption rates vary

widely, all have a future.

More recently, a new and

emerging technology offering

solutions is business analysis

and visualization (BAV) tools.

BAV adds value to data min-

ing, business intelligence (BI)

and other applications that

produce structured data, by

analyzing the data and presenting 3D visualizations and animations

of the results.

Companies are collecting massive amounts of customer data, and

state-of-the-art business intelligence applications can churn through

the data.

But before a company gets any practical value out of the results,

it has to understand them and their implications—and it has to do it

in Internet time.

Market forecasts based on historical data can be useful, but more

often, what a fast-paced business needs is to see what happened today,

so it can make adjustments and have an impact immediately.

Advanced business analysis and visualization provide the knowl-

edge management solution. While simple charts and graphs have

been used to enhance database, DSS and spreadsheet analysis for

years, a new generation of BAV applications takes advantage of today’s

more powerful PCs and net-

works to transform analytical

data into dynamic, interactive

visual displays.

Gleaning insightsEmployees using these

tools are better able to explore

data relationships and depen-

dencies, to identify trends

and exception conditions,

and also, to analyze and

understand the implications

drawn from studies of billions

of customer transactions and

data points.

Businesses, in the mean

time, are better equipped to

explore market intelligence,

analyze trends, understand

their customers and examine

the likely impact of business

decisions.

Knowledge management,

specifically BAV technologies,

are used by more and more companies to gain a competitive edge in

a variety of ways.

For example, e-commerce companies can analyze traffic patterns

and sales results and evaluate the effectiveness of promotional efforts;

phone companies can spot patterns that indicate attempted fraud;

brick and mortar retailers can glean insights from consumer behav-

ioral analysis and use them to launch innovative e-commerce

sales and marketing strategies; and banks are now able to develop

sophisticated techniques for identifying high-value customers that

will enable them to offer a more complete portfolio of financial and

investment services.

Taken altogether, this new generation of knowledge management

applications and practices are becoming an integral part of

making Canadian companies more competitive within the global

business environment. ■

23issuethreeissuethree

KM Practices Receiving Attention

Based on what you have heard others sayand/or what you may have read about, whatKnowledge Management practice would you sayis receiving the most attention these days?

Inte

rnet

/In

tran

et

Sha

ring

Inf

orm

atio

n/id

eas

Dat

a W

areh

ousi

ng/

Dat

abas

e M

anag

emen

t

Col

labo

rati

on

Doc

umen

t M

anag

emen

t

Trai

ning

Gro

upw

are

Pro

ject

Man

agem

ent

Wor

kflo

w

Cus

tom

er S

ervi

ce/Sup

port

Oth

er

DK

/N

S

[ ]Today’s economy is truly information driven. Getting the right information to the right

people at the right time is a key to success in virtually every corner of the global marketplace.

15%

9%

5% 5%4% 4%

3%

1%

24%

16%16%

20%

Source: Ipsos Reid

issuethree24

partnerby Andrea McGrory

However, many companies are finally beginning

to realize the true value of this untapped wealth of

knowledge. And the timing couldn’t be better, as the

growth of e-commerce is making it more important

than ever for companies to act now to harness this

internal power.

The e-commerce revolution is impacting business

on several fronts:

• Customers are expecting timely customized service

anytime, anywhere;

• Employees are reeling from the demands of doing

more, faster with the same resources and are seeking

balance between their work and personal lives; and,

• Businesses are being forced to be ever more adaptive

and innovative.

In the online world, broken processes are instant-

ly transparent to your customers, business partners and

employees. This means we need to work smart and let

knowledge be the essential ingredient in every aspect of

e-business – knowing your customer, building smart

products, being organizationally smart and leveraging

and building employee knowledge.

Where to Start?Recent surveys conducted by Dr. Nick Bontis,

Assistant Professor of Strategic Management, McMaster

University, and one of Canada’s leading KM experts,

reveal the average business leverages less than 2% of its

intellectual capital. Imagine the productivity gains if

we could just double this.

Becoming a knowledge centric business is not easy.

A good starting point is to look from the outside in.

This is very much an external re-engineering exercise

that requires senior management involvement. People

at the front are critical to manage the in and out flow

of information. Every employee should understand

how their job links to the customer.

"We are bombarded by data which is often just

useless information," says Bontis. "We are starving for

knowledge that we can convert to wisdom."

Knowledge at workAndrea McGrory is a principal with KPMG Consulting.

K nowledge is power, so the last thing workers want to do is have their power usurped

by giving up what they know. Luckily for them, they haven’t had to really worry about

this. In fact, according to recent studies, only two per cent of what people know is being

leveraged in the workplace.

Current Non-Users of KM

ANTICIPANTICIPAATED USETED USE

Are there any plans toimplement KnowledgeManagement practiceswithin your organiza-tion within the next 12 months?

PERCEIVEDPERCEIVEDIMPORTIMPORTANCEANCE

In your opinion, do the decision makers in your organizationagree that sharingemployees’ acquiredknowledge mightimprove the efficiencyof many processed and tasks within the organization?

Don’t Know 7%

NO61%

Source: Ipsos Reid

NO6%

YES91%

YES32%

Don’t Know 3%

A B

A

B

issuethree26

journey for your company, you need to take a moment to

understand basic KM theory.

Essential currencyMany executives have the mistaken impression that

the goal of knowledge management is to create a set of

electronic filing cabinets.

Yet KM should be viewed as an asset that embodies

more than the capturing and organizing of data and

information.

That’s because "knowledge", used as a widely-applied

concept, has the potential to draw information from an

array of sources. Information is found, for example, in

books and databases. Yet knowledge, an essential curren-

cy in today’s competitive business world, also resides in

people (the human capital in any organization): their

skills, intuition and judgement used to solve problems. In

addition, knowledge is inherent in the ability to capture

and manage information contained within an organiza-

tion’s technology.

Intellectual capitalEssentially, therefore, knowledge manage-

ment is the management of an organiza-

tion’s intellectual capital and consists

of three major components. These are:

strategy; people and processes; and

supporting technologies.

The three components of KM function

can also be represented as three faces of a

cube, representing the potential capacity of

the system.

T here is a general consensus within large organiza-

tions today that their management team does not

have proper access to the information needed to

effectively manage and direct the business. Further,

many of these organizations have heard of the concept of

knowledge management (KM) and think perhaps it

is something that can

enhance their compet-

itiveness. Yet, there

seems to be confusion

as to exactly what KM

encompasses, and fur-

ther, exactly how it can

be aligned to an organiza-

tion’s own business strategy.

But before considering the KM

partnerby Jim Goodfellow & Carl Drodge

A voyage of discovery

Jim Goodfellow is national director, innovationand knowledge management, Deloitte & Touche.Carl Drodge is the practice leader for data warehousing services at Deloitte Consulting.

27issuethree

[ ]KM is a journey of discovery. It starts with making the commitment to undertake what can

be an exciting, yet challenging journey toward creating new value in your organization. Each

step along with the way offers the chance for new insights and learning.

• Strategy determines what knowledge is needed to create value for

customers, solve business needs and how this knowledge can be

used to achieve a competitive advantage. This is the "business

imperative" face of knowledge management.

• People and processes is composed of two key facets: production

(which is the acquisition, creation and capture of information)

and consumption (which is how information and knowledge is

used to acquire new customers and deliver services).

This is the "who does what" face of knowledge management.

• Supporting technologies consists of how information technolo-

gies (software and hardware) , together with data management

techniques, are used to manage the information stored in the

system or linked to external systems. This is the "technology"

face of knowledge management.

Greater urgencyIn a global knowledge economy, such as we are now expe-

riencing, organizations cannot create value for their clients

with yesterday’s news. So the need for reliable, trustworthy informa-

tion has taken on a new urgency.

Added to his challenge is the new imperative for information to

be "current."

Knowledge is changing rapidly and needs to be captured, digest-

ed and transferred internally, or communicated externally to clients,

in a timely (sometimes almost instantaneous) manner.

Moreover, the new economy’s focus on margins, productivity

and innovation has shifted the processing of information more than

ever on to suppliers.

Concurrently, as clients demand more for less, the role of KM

takes on greater emphasis as organizations work to maintain their

competitive lead.

Aligning strategy Still, any KM system within an organization needs to be

aligned with the enterprise’s business strategy. KM cannot be a stand

alone concept.

If it is not driven by business needs and strategies, then it will not

gain acceptance within the organization. Nor will it command the

respect it needs to garner ongoing commitment throughout the entire

spectrum of the organization.

STRATEGY: What knowledge

is needed to createvalue for customers

and competitive advantage?

PEOPLE & PROCESSES:

Who needs to createacquire, capture, anduse this information?

INFORMATION TECHNOLOGY: How does this

information need to be organized, stored and distributed?

1

23

The Knowledge Cube

This acceptance is important since organizations must continual-

ly bring new knowledge to their clients (demonstrating the value-add

of their services).

In addition, organizations must also possess the skills to apply

this knowledge to solve their clients’ business problems and thereby,

enhance their clients’ ability to compete.

Sharing corporate knowledge can be harder than it sounds.

Initially, there will be a multiplicity of questions within any organiza-

tion, each question worthy of examination.

These can include: "Why do we need KM? Who will use it and what

will they do with it? Which levels of our organization will need access to

the knowledge asset? What will they do with these capabilities? "

As any organization moves along on the KM journey, it must be

able to answer these questions, if only to be able to provide

the business case for the time and effort devoted to the possibility of

creating a KM system.

As stated, KM is a journey of discovery. It starts with making the

commitment to undertake what can be an exciting, yet challenging

journey toward creating new value in your organization.

Each step along with the way offers the chance for new

insights and learning. ■

issuethree28

partnerby David Gendron

Right time, right placeDavid Gendron is canadian knowledge management and messaging solution manager for Compaq Canada Inc.

Before data residing in various sources around the

world is of any value, it must be transformed

into information. And, from that information,

pertinent knowledge must be absorbed that allows users

to make more rapid and informed decisions. Benefits to

business manifest themselves through improved effi-

ciencies, streamlined processes and better customer

relationship building, all of which, individually or col-

lectively, translate into a competitive advantage.

Therefore the management of knowledge has assumed

mission-critical importance, particularly in enterprise-

level organizations now faced with global competition.

Business Drivers Essentially, the business drivers

for knowledge management are

consistent with corporate goals that

create a foundation for success. An

organization needs to manage the

knowledge assets of the corpora-

tion. It needs to promote the cre-

ation, sharing and leveraging of cor-

porate knowledge. And, it needs to

foster innovation through knowl-

edge sharing and collaboration

within and across various communities of knowledge.

Yet, in an era when information is almost limitless,

failing to manage this information and the knowledge

that flows from it, can literally starve an organization

into decline.

Key Challenges Essentially, there are four basic reasons why knowl-

edge management has taken on such importance.

The first is information overload. This is where

users are so inundated with information from the web,

e-mail and direct access to company databases, not to

mention the traditional sources of seminars, person-to-

person, reports, articles, memos, and voice-mail, that

it's a major challenge to sort and select what they need.

The second concern in managing knowledge has

been posed by staff turnover. With the baby-boom

reaching retirement age, companies are losing long-

time veterans with 30 to 40 years of company experience

and possibly five years or more of function experience that

previously provided context to company information.

In addition, as the remaining workers move from the

traditional office into their homes or cars to conduct busi-

ness, proximity is lost. They can longer lean over the cubi-

cle to ask a question or solicit advice. Both experience and

proximity are being lost to new work habits, attrition, and

career mobility, and are not immediately replaceable.

Next, decentralized decision-making and empower-

ment initiatives have shifted much of the decision making

from executive levels to the rank and file to enable

employees to directly and effectively deal with customer

and process issues. This creates a need for immediate

knowledge that, often, must cross functions and tran-

scend hierarchies. There is no longer any place for silo

mentalities and knowledge workers must know what

information is stored, where it is stored, and how to get it

through automated "smart" systems that link, sort and

suggest useful information.

Finally, timeliness has assumed critical importance

when it comes to decision making. As trade agreements

such as the General Agreement on Trade and Tariffs

(GATT), and the North American Free Trade Agreement

(NAFTA) have created global competition, acting quickly

and decisively in an informed manner can often

mean the difference between business success and failure

for organizations.

So the challenge of managing to get the right

information to the right people at the right time and

within the right context is of paramount importance.

And, understanding the components of knowledge

management is the first step to developing and deploy-

ing a successful system.

Three Components Knowledge management involves three interrelat-

ed and interdependent components: people, content

and technology.

Knowledge is the only

instrument of production

that is not subject to

diminishing returns.

- J.M. Clark

29issuethree

People, the producers and users of the knowledge, must have the

right tools, training and education to gather, store, access, understand

and assimilate timely, accurate and relevant knowledge required for any

given task.

Content deals with information available or process descriptions.

This content is most commonly found in:

• Messaging systems

• Collaboration and workflow initiatives

• Business intelligence

• Databases

• Intranet (corporate) information

• External Web sites

Technology is the means to store, search, sort and deliver rele-

vant information that will become knowledge in the hands of prop-

erly trained users. Since transferring and translating the information

via technology into knowledge has become a critical success factor for

most organizations, hardware and software technology must be reli-

able, robust and flexible.

Successfully integrating all three components into an efficient

knowledge management system requires technology solutions that fit

within, and complement your business needs.

Today and TomorrowThe technologies to engage today to create a knowledge man-

agement system can include:

• Portals

• Communities

• Workflow management

• Documentation management

• Integration of legacy data

In addition, be aware of developments in expertise networking

and location, such as those developed by Orbital Software, which pro-

vide a scalable, person-to-person infrastructure for Internet and cor-

porate portals that bring people and information together so users can

ask questions, find experts and share knowledge. Data visualization

applications, such as those provided by Cartia, can lend graphic effec-

tiveness, and knowledge communities can be created with the help of

applications such as Knowledge Track and Plumtree.

Trying to do all things at once in the field of knowledge manage-

ment is improbable, if not impossible.

Instead, look at your organization's big picture, the solutions

you can bring in, and the business benefits that will drive to your

bottom line.

In other words, find the information leverage points that will

provide the maximum benefit.

Next, focus on content and decide who needs what information,

when they will need it, and the specific and doable actions required to

fill this need. Tie it directly to the business objectives of the corporation.

Finally, know your network and who actually owns the content

as well as who consumes the content. Managing this content accord-

ing to your needs is key.

In theory, yesterday may be viewed as recognizing the need for

knowledge management, today as an era when portals and commu-

nities of interest are being developed to serve these needs, and

tomorrow as debuting leading edge tools such as smart personal

knowledge assistants.

Business Benefits While relatively recent, knowledge management systems are

already being implemented and organizations are enjoying a positive

return on their investment. How is this recognized?

Investment return comes in the form of measurable efficiency

improvements in sales, service and product development. It happens

when improved decision making takes place at lower levels (the front

ranks) where employees are able to address customer issues thanks to

knowing the customer's history and concerns.

It also manifests itself when improved morale happens because

employees are able to take charge and better manage their responsi-

bilities in line with stated corporate priorities and goals.

The major payoff, however, comes through an increase in cus-

tomer loyalty as a result of customers dealing with company repre-

sentatives who are knowledgeable about them, and better understand

their total concerns and needs.

When viewing the rapid recognition of knowledge management

as a key, strategic corporate goal among organizations around the

world, along with the on-going technological developments to

support knowledge management, it's obvious that it will play an ever-

increasing role in serving the information needs of both large and

small organizations. ■

[ ]The major payoff, however, comes through an increase in customer loyalty as a result of

customers dealing with company representatives who are knowledgeable about them, and

better understand their total concerns and needs.

issuethree30

nowledge management potentially integrates

information from a variety of sources into a

heterogeneous solution that maps to an organi-

zation’s mission statement. This includes such vital

areas as customer service, executive decision-making,

human resources, marketing, and operations. The

information, for the most part, exists in departments

and divisions within the organi-

zation, however, it is quite rea-

sonable to expect some linkages

to external data sources as well.

From a systems perspective, this

data comes from online transac-

tion oriented systems, summa-

rized data stores, document man-

agement systems, and back-end

systems. From a 40,000-foot view,

this approach appears almost

intuitive, and many organizations

start building the solution with-

out understanding the costs,

rewards, risks, and tradeoffs of the

process as a whole. Achieving the

full view is a complex and

challenging undertaking, and if

done incorrectly, can negate

the benefits offered by simpler

knowledge management solu-

tions. Achieving success in this

arena is a factor of expectations

management, technology, and

people relationships.

Defining a broad vision for

knowledge management is fine

for putting a stake in the ground,

but trying to achieve it in a meaningful timeframe can

be a different proposition. Many of the mega data ware-

housing projects of the 1990s are good case studies of

what can happen when a 40,000-foot solution is initi-

ated as a single big bang trying to reach into all parts of

an organization at the same time. A significant number

of these projects ended up producing little of value, and

certainly delivered under-whelming results when

assessed on a cost/benefit basis. The problem was trying

to do too much, in too short a timeframe, and without

enough resources. The broad vision may have been

achieved with more frequency, if it had been accompa-

nied by measurable and achievable objectives that

translated into a string of short-term goals.

Another relatively unique area of consideration in

knowledge management is in the area of ownership.

How this is handled will dramatically alter the end

results of the initiative. By definition, knowledge man-

agement requires information from different parts of an

organization, and occasionally from external sources as

well. The level of co-operation and access received from

each group providing the data, while they are main-

taining their operational activities, determines the

quality of the knowledge management solution. There

are three resourcing models to consider.

In the first model, a separate dedicated team is

established and led by a senior executive with a report-

ing relationship to upper management to give it credi-

bility. The organization of the team could be a mix of

technical knowledge management experts and others

who have good contacts in different parts of the orga-

nization. These contacts are vital for gathering and

mapping information that feeds the knowledge man-

agement solution. This model challenges the dedicated

team to win buy in from other groups that are pressed

by their own operational deadlines to divert meaning-

ful resources to the knowledge initiative’s deadlines.

In the second resourcing model, objectives are

established for different groups within the organiza-

tion. Each group produces a solution that has the capa-

bility of rolling up within the organization. This offers

the advantage of smaller and consequently more man-

ageable deliverables to be built by individual teams that

know their business. The weakness with this approach

is a lack of an overall enterprise view.

partnerby Sanjiv Purba

Mitigating the riskSanjiv Purba is practice director for Microsoft consulting services – e-solutions, Canada. He can be reached at spurba@microsoft.com.

You are your greatest invest-

ment. The more you store in

that mind of yours, the more

you enrich your experience,

the more people you meet,

the more books you read,

and the more places you

visit, the greater is that

investment in all that you

are. Everything that you add

to your peace of mind, and

to your outlook upon life, is

added capital that no one

but yourself can dissipate.

- George Matthew Adams

K

31issuethree

The third model combines elements of the other two. A virtual

team is established with representation from each group that is a

stakeholder or contributor to the overall solution. While the members

of the team are not dedicated to knowledge management, their

accountability to the operational side of the business will allow the

team to reach more directly into the different parts of the organiza-

tion. This model is worth considering in more detail.

Knowledge management systems should be carefully interwoven

with other systems (e.g. HR, CRM, ERP, and financial systems) in the

organization to provide a total solution. With slower technologies it

was necessary to basically draw a hard line between a transaction ori-

ented systems that needed fast turnaround, and data stores that fed

the predecessor to knowledge management systems as we describe

them today. These data stores or data warehouses were essentially a

copy of the production data, mapped to various formats. This fre-

quently resulted in problems with the data being reported, either its

timeliness or because emergency changes to production systems were

not propagated through the duplicate data stores. The data ware-

housing experience demonstrates that when there are multiple

groups of systems competing for resources, the transaction oriented

ones appear to win.

Technology continues to enable knowledge management solu-

tions. Such solutions can benefit from incorporating web-facing fea-

tures, access to external systems (e.g. in an ASP model, some of the

critical data may be on external computers), and integration with

email services. Knowledge management solutions can also be turned

into ASP services. This is a particularly interesting possibility that will

become more popular with growing bandwidth availability.

Another risk area to consider is executive reporting, which gen-

erally falls into the regular or ad hoc categories. Poor quality reports,

regardless of the effort required to produce them, are the worst way to

demonstrate a cost/benefit proposition to an executive team.

Similarly, ad hoc reports are only as effective as the requests going in

to produce them. The mitigation strategy to consider involves defin-

ing a core set of reports which demonstrate the value of the overall

knowledge management application and which are delivered at fre-

quent intervals to those paying for the solution.

Knowledge management is a strategic initiative that offers the

opportunity to integrate information and processes within and out-

side an organization to promote overall competitiveness. A sound

approach for getting started is to pursue some quick payback

projects, while supporting the overall knowledge management vision

for the organization. ■

28% Capturing employee expertise

28% Knowledge audits

45% Information mapping

67% Groupware

73% Knowledge-sharing events

78% Intranet

Use of SpecificKM Processes

Source: Ipsos Reid

[ ]Knowledge management is a strategic initiative that offers the opportunity to integrate the

information and processes within and outside an organization to promote overall competitiveness.

Current Non-Users of KM

Reasons for Non-Use of Knowledge Management practices

Source: Ipsos Reid

No

need

Not

fam

iliar

wit

h it

Hav

e ot

her

prio

riti

es

Cos

t/la

ck o

f re

sour

ces

Cor

pora

te c

ultu

re is

sues

No

tim

e

Inve

stm

ent

requ

ired

too

larg

e

Wor

kloa

d

Oth

er

DK

/N

S

14%

11%10%

9% 9%8% 8%

1%

16%

25%

issuethree32

fiveonfive

KM provides the tools to make it easierto share information and collaborate as teams. These tools help to capture,index, organize, search and deliver theright information at the right time to the right person.

First, you should have a solid under-standing of your current assets (whatexists and where it is located). Under-standing your environment, you can thenresearch the tools and technologies thatare available to facilitate the delivery of information. The end result is a planthat you can implement which will produce measurable results.

Some barriers are an inability for theorganization to create a proper knowl-edge map; poor participation from keyplayers to creating a knowledge marketwhich includes sellers, buyers and bro-kers; and, a poor infrastructure thatmakes it difficult to share information.

Technology is an enabler. In, and of itself,it can't help and can lead to more prob-lems. If there is structure around the useof the Internet, then it can assist in deliv-ering information just in time.

The financial services industry has been aleader. With their use of call centres anddatabase marketing efforts, they havetruly taken KM to new levels providingcustomers with information that is per-sonalized, customized and quickly.

1

The need for a solid knowledge

management strategy to build a

successful business is becoming an

accepted truth. Here are five views

on how to tap its huge potential.

Clara Angotti Vice president, sales & marketing Sage Information Consultants Inc.

B.J. BardDirector of consulting services,Sierra Systems

At the start of the information age, thefocus was on sharing and on pushinginformation out to others. Now that weare in a subsequent phase of the infor-mation age where there is plethora ofdata and information, there is a need togive people the tools to pull the informa-tion that they need.

Building on the concept of learning,implementing a knowledge managementstrategy would not only allow an organiza-tion to repeat the success of a past prod-uct or project but to build on it and possi-bly carve out or create something new.

Technology is really not a barrier, asknowledge management is more aboutintent and process, and less about tech-nology. As a result, the main barriers toimplementing a successful knowledgemanagement strategy are organizationalcommitment and individual (employee)buy-in.

The Internet, if well managed, is anenabler to knowledge management as it broadens networks or communitiesbeyond organizational in areas of com-mon or related professional responsibili-ties or activities. However, the Internet,when not managed well, can create chaosor noise.

Best practices in knowledge managementare not restricted to a given industry oreven size of organization. But organiza-tions that recognize how learning andbreakthrough thinking are fostered andhow this integrates with business systemsand business processes are usually more successful.

2

3

4

5

The need to share information is a huge issue in every organization. How does knowledge management help?

In what ways can a knowledge management strategy deliver value to a company?

What do you see as the main barriers to implementing a successful knowledgemanagement strategy?

Does the Internet help with the dissemination and sharing of knowledge or simply perpetuate the problem of information overload?

Which company or industry do you most admire for its approach to knowledge management and why?

33issuethree

KM-enabled sharing is more than justpassing information, it's adding value to it and making it relevant for the enterprise. Information becomes trueknowledge because it is relevant to past experience, actionable and keyed to a role or person.

With a good KM strategy and supportingtools in place, on the whole, clerk-styletasks are reduced and more responsive,thoughtful work is increased. Less lowvalue work, more high value results.

What's necessary is recognition of theneed and an effort to put a solution inplace. This can be as simple as having astandard practice for allocating docu-ments and e-mails into public folders oras powerful as implementing a completeenterprise KM solution.

The pace of information flow has out-paced a human being’s capacity toabsorb. This only underscores the needfor smart and straightforward Web-basedKM tools and solutions to provide peoplewith what is relevant to their jobs.

Microsoft Canada’s CanadaWeb, devel-oped by Navantis, is a great example ofhow an organization can commit to KMprinciples and technologies. The result isnew hires are trained quicker, existingknowledge workers are better informed,processes are terrifically streamlined andteams collaborate more strategically.

KM is a complicated affair more thanpeople think. The word does not solve theproblem. Real KM is the management ofintelligence. It requires a proper arrange-ment of access and input interfaces anda value-added sorting of data. We are notreally there yet.

KM can help a company enormously onlyif it is properly managed. The value is notonly that there is a chance of actuallydiscover new things but it also gives adeeper sense of cohesion and a new kindof mental freedom to the participants.

The first and worst is the tendency tohoard the info. We are on the cusp of thetrade-off between co-operation and com-petition. There is also the turf protectionsyndrome. It is also a good idea to devel-op the strategy bottom-up rather thantop-down. Attitude is key.

The next generation of tools beyondsearch-engines will be collaborative tools. We haven't even begun to makegood use of the hypertextual quality of the Internet. We are still using it as a glorified database.

I like Autonomy.com because it deals with information in a semi-automatedway, Thinkwire, Smart Money's Map of theMarket, Plumb design's Thinkmap or The Brain, and also, Napster.

Derrick de KerkhoveDirector, McLuhan ProgramUniversity of Toronto

Jason MartinCo-founder,Navantis Inc.

KM can enable the sharing of tacitknowledge through collaborative tech-nologies like e-mail, instant messaging,and electronic conferencing beyond phys-ical and geographical boundaries and tofar greater numbers of people.

One of the key methods to deliver value to a company is to leverage what is already there. What I mean is that theanswer or solution to a problem often lieswithin the organization. The challenge is knowing where to find it or who tospeak with.

Implementing the technology is usuallythe most straightforward aspect ofdeploying a KM system but if the processand culture is not there to support it, thesystem will not provide the return that isavailable. Calculating the value of knowl-edge or return on investment can also bea barrier in some organizations.

I have often heard the expression infor-mation overload but have never heardanyone complain of knowledge overload.We will be successful to the extent thatwe can extract knowledge from the infor-mation and provide that knowledge topeople in a digestible format.

I admire Nortel Networks because of the way they value intellectual propertyand leverage the intelligence within theorganization to remain competitive.

Peter RakoczyDirector, consultingMicrosoft Canada

by Yogi Schulz

issuethree34

column

T heorists describe knowledge management in terms

of building and retaining crucial organizational

expertise and understanding.

The CIO can address knowledge management by

ensuring that valuable knowledge of the past is available

to the business of today and by nurturing the formation

of new knowledge that is the foundation of future success.

An organization maintains

its competitive edge and controls

its costs by harnessing its accu-

mulated knowledge such as

research reports, engineering

documents and customer infor-

mation. Many organizations are

replete with such valuable, rele-

vant knowledge. Unfortunately,

they also experience difficulty

making this knowledge easily

available when researchers, exec-

utives or front line staff need to

see it or manipulate it.

For instance, in the oil and

gas industry millions of dollars

are spent each year on under-

ground reservoir characteriza-

tion studies. Shortly after com-

pletion, these studies gather

dust, migrate to an off-site stor-

age box or are lost. When a reservoir is reviewed a few

years later, the work begins from scratch because no one

can locate the previous study.

An organization strengthens its competitive edge by

creating the knowledge that will form the basis for appeal-

ing products and services in the future. Collaboration has

become essential to product development and problem

resolution. It’s become increasingly difficult for one per-

son or one discipline to comprehend all the dimensions

of an opportunity or problem. A multi-disciplinary

approach to collaboration based on technology delivers

innovation. Consider the examples of the wildly success-

ful PT Cruiser or the reintroduced VW beetle. These prod-

ucts are successes because of the collaboration of not just

engineers but also designers, marketers and sociologists.

The CIO can enable improvements in corporate per-

formance through knowledge management with some

surprisingly low-risk initiatives.

In many organizations, knowledge is stored in un-

indexed and/or unknown filing cabinets and in long-for-

gotten storage rooms. Improved document management

systems, with strong scanning, indexing and annotating

capabilities will help to make the knowledge of the past

easily accessible to the employees of today.

Knowledge of customer buying patterns, equipment

configurations, payment history, likes and whims are cru-

cial components of customer retention and superior cus-

tomer service. This knowledge usually disappears in direct

relation to employee turnover. The high interest in cus-

tomer relationship management systems reflects the

importance of managing this knowledge.

The CIO can also help the organization use this

knowledge through the introduction of higher capacity

storage facilities. And what receives less attention but is

arguably even more important is the use of hierarchical

storage management and strong cataloguing functionali-

ty. These technologies contain storage costs while ensur-

ing data can in fact be found when needed.

Some of the interest in knowledge management is dri-

ven by the pace and volume of knowledge generation

which accelerates as the number of researchers, engineers

and academicians continues to expand. In particular, the

biotechnology and pharmaceutical industries generate

huge volumes of new data associated with new knowledge.

One measure of the increase in data volumes can be

seen in the change of media used to transfer data. Just a

few years ago, documents were still being distributed on

floppy disks, then came CDs that store 500 times as much

data. The DVD constitutes another 10-fold increase and is

just beginning to take hold. ■

Gems in the Hype and FogYogi Schulz is president of Corvelle Consulting Inc., Calgary. YogiSchulz@corvelle.com

Each new development

starts from something else.

It does not come out of a

blue sky. You make use of

that which has already

entered the mind ... That

is the real reason for

accumulating knowledge.

- Robert P. Crawford