Saturday, 28 February 2009

The Value of Knowledge Management (3)

Why is it important to understand the business value of Knowledge Management?

The answer is a simple one - if you understand the value, you understand how much you can justify investing.

An illustration of this comes from the Drilling function of an oil company, where a drilling team were planning a campaign on a new field. They studied historical data from learning curves on nearby fields, and worked out that if they could eliminate the learning curve on their new campaign through knowledge management and access to prior knowledge, this would be worth $100 million in savings (which was just about equal to the cost challenge that senior management were setting).

They put together an excellent and comprehensive program of learning activities, and employed three learning engineers to capture and re-use lessons from operations. Almost inevitably, they began to face cost challenge. How could they justify these extra staff, they were asked, when the whole program was facing cost pressure? As the team leader reported

"We were criticized for team size. "Why do you need so many people"? It would have been very easy for our manager to say "you are going to have to conform to the rest of the world out there" but he didn't, and because he didn't, he forced us to think about what our needs were, and he allowed us to tailor and fit the organization to meet those needs"

He was able to justify the investment in learning engineers, because he understood the scale of the prize. He understood the value of learning and knowledge management. He knew that an investment of 3 extra people was justified if it would deliver a prize of $100 million.

So our advice to clients usually is to form a reliable and justified estimate, as early as you can in your Knowledge Management activity, of the scale of the prize. The prize will come through better decisions, improved process, accelerated or eliminated learning curves, and continually improved performance*. And if you understand the scale of that prize, you know how much you can invest to deliver it, and you are better placed to meet challenges to that investment.

* sometimes people imagine the prize from knowledge management to be an increase in personal productivity by speeding up employees' access to knowledge. This is not where the prize lies. The prize lies in giving people access to better knowledge, to make better decisions, and embedding this better knowledge in improved processes; not with giving people faster access to the same old knowledge.

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