Working Knowledge How Organizations Manage What They Know

1. Working KnowledgeHow Organizations Manage What They Know Thomas H. Davenport Laurence Prusak Presented by Rimal Popat Madhusudhana Sadagopan

2. What is Data? • Data, Information, Knowledge—Not interchangeable • Data: discrete, objective facts about events • RM used to create information • Important to data dependent organizations (i.e. banks, IRS, etc.) • Meaningless because doesn’t describe the context • Myth: More data the better • False: (1) Too much data can be confusing & harder to identify • (2) No inherent meaning of data; No judgment/ interpretation

3. What is Information? • Information: “message in form of document or audible/visible communication” • Sender & Receiver; meant to have an impact on receiver’s judgment and behavior • How does info travel? • Hard Network– visible, definite infrastructure • i.e. wires, vans, post offices, addresses, inboxes • Soft Network – less formal, visible; ad hoc • i.e. “FYI”

4. Transformation of Data  Information 1. Contextualized 2. Categorized 3. Calculated 4. Corrected 5. Condensed Impact of Computers Medium is not the message Having more technology will not increase the state of information i.e. Having phone does not guarantee or even encourage brilliant conversations

5. What is Knowledge? • Intuitively, deeper and richer than data and information • Mixture of various elements • Both process and stock • Human element; Obtain knowledge from indivs or groups • Delivered through structured media (i.e. books) and human interaction (i.e. conversations) 1. Comparison (of situations) 2. Consequences (implications for decisions & actions) 3. Connections (how it relates to others) 4. Conversation (what other people think about this info)

6. Measurements

7. Why Knowledge is Awesome/Useful • Used to make wiser decisions about strategy, competitors, customers, etc. • Shortcomings: Hard to trace path b/w knowledge and action since people generally think about this internally • Knowledge moving up and down the value chain • Data  Info  Knowledge • Knowledge Info Data

8. Components of Knowledge • Experience • Latin root: to put to the test • Related word: experts—people with deep knowledge of a subject • (+) provides historical perspective to see and grasp new situations and events • Connection b/w what is happening now vs. what is happening in the past

9. Components of Knowledge • Ground Truth • Knowing what works and what doesn’t • Real-life knowledge • Rich truths of real situations experienced close up; on grounds vs. theory or generalization • Term derived from the Army Center for Army Lessons Learned (CALL) • “After Action Review” (AAR) • Exercise involving what was supposed to happen vs. what happened + why difference b/w two • What can be learned from it • Results  Doctrine • Used to restore value

10. Components of Knowledge • Ground Truth (cont’d) • Correlation between business strategies (practical) vs. business teachings (theory) • Complexity • Knowing more usually leads to better decisions vs. knowing less • Want both certainty and clarity • What doesn’t know can and—in most cases—will hurt you • Tomato Farmer example, pg. 10

11. Components of Knowledge • Judgment • Knowledge contains judgment • i.e. Living system • Growing and changing as it interacts with environment • When knowledge stops evolving, turns into opinion or dogma • Rules of Thumb & Intuition • Flexible guides to action that developed through trial and error • Shortcuts to solutions to new problems that resemble problems once solved by experienced workers • Thus, knowledge = speed • Scripts—patterns of internalized experience; relying on intuition (aka “compressed expertise”)

12. Components of Knowledge • Values & Beliefs • Organizations are not neutral; Instead, values and beliefs have powerful impact on an organization’s knowledge • Integral component to knowledge; serves as the “seeing” aspect of organization • “Knowledge, unlike information, is about beliefs and commitment.” -- Nonaka & Takeuchi

13. Knowledge as a Corporate Asset • Studies: Managers get 2/3 of info + knowledge from face-to-face interaction than from documents (1/3). Expertise is invaluable. • The Changing Global Economy • Companies and countries are fiercely competitive • Thus, will differentiate themselves on basis of knowledge • “In a global economy, knowledge may be a company’s greatest competitive advantage.” • i.e. Outsourcing

14. Knowledge as a Corporate Asset • Product & Service Convergence • Products mean more than just tangibles • Intangibles: product design, marketing presentation, understanding the consumer, personal creativity, innovation • Fortune 500 • Industrial + Service • I.E. Software companies – often sell ideas vs. products • IBM : Business Solutions

15. Knowledge as a Corporate Asset • Sustainable Competitive Advantage • Past: the importance of corporate secrets; government regulations • i.e. Coca-Cola formula, Zildjian cymbals • Present: the contrary • Difficult to keep secrets in knowledge-driven industry “Self canceling technological advantage” –Alan Webber • Same tech available to everyone  can’t be LT advantage to anyone • Knowledge = Sustainable Competitive Advantage • Increasing returns and continuing advantages

16. Knowledge as a Corporate Asset • Knowledge Assets vs. Material Assets • Knowledge increases over time • Ideas generate and multiply • Stay with the sender & enriches the receiver “Ideas are the instructions that let us combine limited physical resources in arrangements that are ever more valuable.” –Paul Romer, expert, knowledge economics • Material Assets decreases over time

17. Knowledge as a Corporate Asset • Corporate Size and Knowledge Management • How big is too big for the manager to know his resources? • Studies show 200-300 is optimal • Thus, Chrysler “Engineering Books of Knowledge” resource • For reference  hence, efficiency • Computer Networks & Knowledge Exchange • Technology helps facilitateknowledge but is not knowledge itself

18. Theory into Practice: BP • British Petrol’s Virtual Teamwork Program • 1993 | BP Exploration: 42 separate business assets • Each should have its own ability for DM • Goal: Agility of small company w/ resources of a large one • Planning • Create federations • VTP (Virtual Teamwork Program)– to develop effective ways for members of teams to collaborate across different locations • Goal: NT of people; not store information—telephone, basically • Emphasis—richness of communication • Emulating face-to-face communication

19. Theory into Practice: BP • Implementation • Allowing other groups aside from IT to construct structure • Stressed corporate behavior vs. technology • Coaches and teams • Chain Management Teams  Knowledge Management Teams • Emphasis: person-to-person interaction and understanding vs. system requirements • Coaches helped team members link business objectives to system capabilities; challenged individuals

20. Theory into Practice: BP • Results • Good News • Groups of 4 or 5  SUCCESS!!! • Enthusiasm, savings in time + money, volume of use • Instance when part failed –outstanding use of on-site resource • Savings: $150, 000 p/day 

21. Brief Summary Chapter 1

22. Promise & Challenge of Knowledge Markets, Ch. 2 • Key Points of Chapter • A market exists for knowledge • Knowledge moves throughout an organization • Knowledge Market • Buyers and sellers who reach price for goods exchanged • Brokers: pairs buyers and sellers together • Knowledge most sought after remedy to uncertainty • Still exists form of payment/compensation

23. Political Economy of Knowledge Markets • Social, economic, and political climate needed to evaluate knowledge markets • Some cultural norms may inhibit the knowledge market • i.e. HP VP in Australia –discourages calling attn to individual • The Knowledge Management Market Dream Team • Buyers • Sellers • Brokers

24. The Players • Buyers • Looking for solutions to a problem • Insights | Judgments | Understanding • Answers to sense-making questions • Will make them more successful at work • Important • 15 – 20 percent of managerial time spent specifically in knowledge search and responding to requests for knowledge

25. The Players • Sellers • Other end; giving end • Sell either in “bundles” or piece by piece • Exchange for salary • Must be skilled in their field • Able to articulate knowledge • Should all sellers sell? • Some “hoard” the information • Knowledge is Power

26. The Players • Brokers • Aka Gatekeepers, Boundary Spanners • Intermediaries (people-to-people; people-to-text) • Role • Finding out what people do, how, etc. • Understand the big picture, therefore linking people • Importance • 10 percent of managers • Example • Librarians

27. The Price System • How do they get paid? • $ $ $ • i.e. Lawyers, Consultants, etc • Other means • i.e. Internally • Three Factors of Payment • Reciprocity • Repute • Altruism + TRUST

28. Payment Factors • Reciprocity • I’ll help you now if you’ll help me in the future • Time, energy, knowledge—finite resources • Use sparingly and keep self-interest in mind • Repute • Having the “street cred” • Getting acknowledged as intelligent and reliable • Yield tangible benefits (i.e. job security, promotion, etc) • Increasingly important in today’s industry where ethics are compromised; loyalty hard to find

29. Payment Factor • Altruism • People who enjoy helping for sake of helping • i.e. Mentoring • Generative stage • Often hard to give credit to older mentors, as hard to determine what he/she knows • Real and can be encouraged • Chrysler “Engineering Books of Knowledge” • Type of mentoring tool • Contributing to program = altruism

30. The “T” Word • Trust • Purpose • Glue to hold knowledge components together • Means to be established (mandatory) • 1. Visible • Members should physically see trust in the workplace • 2. Ubiquitous • All around; otherwise, not optimal efficiency • 3. Start at the top • Monkey see, monkey do

31. Knowledge Market Signals • Market Signals • Where is knowledge located in an organization? • How can I get a piece of it? • Informal & Formal • Position & Education • Commonsense organizational approach (+/-) • Education/Credential (+/-) • Informal Networks • Ask one person who asks another (+/-) • Communities of Practice • Complimentary knowledge  formal organization

32. Knowledge Market Inefficiencies • Efficient market generates the most good at the least cost • i.e. Market for car • Various sources of information (Consumer Info, Classifieds, etc) • Knowledge Market • Not always efficient • Harder to find the right seller, let alone quality • None • 3 Factors to Cause Inefficient Knowledge Markets • Incompleteness of Info • Asymmetry of Knowledge • Localness of Knowledge

33. Factors for Inefficient Knowledge Markets • Incompleteness of Info • Absence of resources (i.e. Yellow Pages, etc). • Uncertainty of price • Asymmetry of Knowledge • Access to knowledge at different levels • (-) Prevents knowledge from getting where it is needed • “knowledge famine” • Localness of Knowledge • Mechanisms for getting access to distant knowledge • “Satisficing” • Human tendency to settle for info that’s good enough for their purposes

34. Knowledge Market Pathologies • Deep Flaws: distortions that inhibit the flow of knowledge • Knowledge Monopolies • Hoarding info • Artificial scarcity • Hard to get  expensive • Downsizing  scarcity ; losing expertise in desig. area • Trade Barriers • Knowledge hoarding + not-invented-here mentality • Also, simple lack of technology

35. Developing Effective Knowledge Markets • Using Information Technology wisely • i.e. Electronic Yellow Pages • Building Marketplaces • Physical and virtual to buy/sell knowledge • i.e. Online forums | Note: People must have time to do this • Creating & Defining Knowledge Market Value • Appreciate and promote knowledge circulation • Promotions, vacations, etc

36. Benefits of Knowledge Markets • Internal • Productivity increases • Buyers, Sellers, Brokers interact • Peripheral / Non-Market Benefits • Higher workforce morale • Less employee cynicism • Greater Corporate Coherence • Richer Knowledge Stock • Stronger Meritocracy of Ideas

37. Knowledge Generation, Ch. 3 • Organizations generate and use knowledge • Why ? • Without knowledge, an organization could not organize itself • What is ‘Knowledge Generation’ ? • The specific activities and initiatives firms undertake to increase their stock of corporate knowledge

38. Modes of knowledge generation • Acquisition • Dedicated resources • Fusion • Adaptation • Knowledge networking

39. Acquisition • Well stolen is half done • Buy it  buy an organization or hire individuals • A company that acquires another firm for its knowledge is buying • People • Structured knowledge in documents • Formal measures to guide knowledge purchases have so far been imperfect and incomplete • Knowledge is hard to quantify

40. Acquisition • Rental • Firm’s financial support of university or institutional research in exchange for the right to first commercial use of promising results • Certain amount of control in exchange for reduced financial and organizational burdens • Firms that hire for a day or a week might be expected to squeeze as much knowledge as possible from the knowledge provider

41. Acquisition • Problems • Knowledge is hard to quantify • Difficult to determine where the knowledge resides • Organic connection of knowledge to a particular people and a particular environment • Reluctance  to view purchaser and acquisition as conqueror and conquered • Smooth meshing of existing and newly acquired knowledge

42. Dedicated Resources • A customary way to generate knowledge in an organization is to establish units or groups specifically for that purpose • Research and development departments • Separating R&D from other parts of the firm • Freedom to explore without the constraints imposed by a preoccupation with profits and deadlines • Problems • Financial returns take time to materialize • May be difficult to measure when they do come • May create pressure to cut costs

43. Fusion • Purposely introduces complexity and even conflict to create new synergy • Combining people with different skills , ideas, and values can generate create solutions • Creative chaos • Differences among individuals prevents the group from falling into routine solutions to problems • New ideas, “spillover” effects • A significant commitment of time and effort is required to give group members to share knowledge and work together

44. Fusion • Problems • Creative abrasion should generate “light rather than heat” • Creative chaos  Total chaos • 5 principles • Awareness • Identify key knowledge workers • Emphasize the latent creative potential • Direct it toward a common goal • Introduce measures and milestone of success

45. Adaptation • Adapt or die • Lulled by past success, companies sometimes fail to see that change is happening or acknowledge that it can affect them • Reasons to adapt • Spur of a crisis • Period of great stress • Ability to Adapt • Existing internal resources • Open to change or “absorptive capacity” • Employees who are willing to and able to learn new things • Creating a sense of artificial crisis might help to head off the real one

46. Adaptation • Problems • History matters – ability to change is developed over time • Neither firms nor the people in them are chameleons, able to adapt to any changes • A firm may make significant changes, but it cannot transform itself into a different animal

47. Networks • Communities of knowers, brought together by common interests.. • E-mail, in person, on the telephone • In the absence of formal knowledge policies and processes, networks act as critical conduits for much innovative thinking

48. Common factors • Adequate time and space • Time is the scarcest of all resources, the one impossible to replicate • Knowledge generation is an important activity for business success • Knowledge generation is a process that can be nurtured • Knowledge generation is difficult to measure • A firm that fails to generate knowledge will cease to exist

49. Knowledge Codification, Ch. 4 • Aim: to put organizational knowledge into a form that makes it accessible to those who need it • Users categorize knowledge, describe it, map and model it, simulate it, and embed it in rules. • New technology plays an important role in knowledge codification

50. Principles of Knowledge Codification • How to codify knowledge without losing its distinctive properties and turning it into less vibrant information or data • Must decide what business goals the codified knowledge will serve (Relevance is far more important than completeness) • Must be able to identify appropriate knowledge existing in various forms • Must evaluate knowledge for usefulness and appropriateness for codification –is it rich, tacit, intuitive knowledge of an expert of explicit knowledge • Must identify an appropriate medium for codification and distribution