MIS - Chapter 10 - Knowledge Management

448

�PA R T I V

Managerial and DecisionSupport Systems

10. Knowledge Management11. Data Management: Warehousing, Analyzing, Mining,

and Visualization12. Management Decision Support and Intelligent

Systems

C H A P T E R

10Knowledge Management

Siemens AG

10.1Introduction to Knowledge

Management

10.2Knowledge Management

Initiatives

10.3Approaches to Knowledge

Management

10.4Information Technology inKnowledge Management

10.5Knowledge ManagementSystems Implementation

10.6Roles of People in Knowledge

Management

10.7Ensuring Success of

KM Efforts

Minicases: (1) DaimlerChrysler /(2) Chevron

LEARNING OBJECTIVESAfter studying this chapter, you will be able to:

� Define knowledge and describe the differenttypes of knowledge.

� Describe the activities involved in knowledgemanagement.

� Describe different approaches to knowledgemanagement.

� Describe the issues associated withimplementing knowledge management inorganizations.

� Describe the technologies that can be utilized ina knowledge management system.

� Describe the activities of the chief knowledgeofficer and others involved in knowledgemanagement.

� Describe benefits as well as drawbacks toknowledge management initiatives.

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449

SIEMENS LEARNS WHAT IT KNOWS THROUGHKNOWLEDGE MANAGEMENT

➥ THE PROBLEM

Siemens AG, a $73 billion electronics and electrical-engineering conglomerate,produces everything from lightbulbs to X-Ray machines, from power generationequipment to high-speed trains. During its 156-year history, Siemens (siemens.com)developed into one of the world’s largest and most successful corporations.Siemens is well known for the technical brilliance of its engineers; however,much of their knowledge was locked and unavailable to other employees. Facingcompetitive pressure (see opening case, Chapter 1), Siemens is trying to maxi-mize the contributions of each business unit. One way to do it was to learn toleverage the knowledge and expertise of its 460,000 employees worldwide.

➥ THE SOLUTION

The roots of knowledge management (KM) at Siemens go back to 1996 whena number of people within the corporation with an interest in KM formed a“community of interest.” They researched the subject, learned what was beingdone by other companies, and looked for ways that knowledge managementcould benefit Siemens. Without any suggestion or encouragement from seniorexecutives, mid-level employees in Siemens business units began creating knowl-edge repositories, communities of practice, and informal techniques of sharingknowledge. By 1999, the senior management of Siemens AG confirmed the im-portance of knowledge management to the entire company by creating an orga-nizational unit that would be responsible for the worldwide deployment of KM.

At the heart of Siemens’ technical solution to knowledge management isa Web site called ShareNet, which combines elements of a database repository, achat room, and a search engine. Online entry forms allow employees to store in-formation they think might be useful to colleagues. Other Siemens employeesare able to search the repository or browse by topic, and then contact the au-thors for more information using one of the available communication channels.In addition, the system lets employees post an alert when they have an urgentquestion.

Although KM implementation at Siemens involved establishing a networkto collect, categorize, and share information using databases and intranets,Siemens realized that IT was only the tool that enabled knowledge management.Randall Sellers, Director of Knowledge Management for the Americas Region ofSiemens stated, “In my opinion, the technology or IT role is a small one. I thinkit’s 20 percent IT and 80 percent change management—dealing with culturalchange and human interfaces.”

The movement toward knowledge management by Siemens has presentedseveral challenges to the company, some of which are cultural. Siemens used athree-pronged effort to convince employees that it is important to participate inthe exchange of ideas and experiences and to share what they know. It has as-signed 100 internal KM “evangelists” throughout the globe who are responsiblefor training, answering questions, and monitoring the system. Siemens’ top man-agement has shown its full support for the knowledge management projects. Andthe company is providing incentives to overcome employees’ resistance to change.

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450 CHAPTER 10 KNOWLEDGE MANAGEMENT

In exchange for employees posting documents to the system and for using theknowledge, Siemens rewards its employees with “Shares,” much like frequent-flyer miles. Once collected and accumulated, these shares can be exchanged forthings like consumer electronics or discounted trips to other countries.

However, the real incentive of the system is much more basic. Commission-driven salespeople have already learned that knowledge and expertise of theircolleagues available through ShareNet can be indispensable in winning lucrativecontracts. Employees in marketing, service, R&D, and other departments are alsowilling to participate and contribute as long as they realize that the systemprovides them with useful information in a convenient way.

The ShareNet has undergone tremendous growth, which resulted in severalchallenges for Siemens. The company strives to maintain balance between globaland local knowledge initiatives as well as between knowledge management ef-forts that support the entire company or individual business units. Furthermore,Siemens works to prevent ShareNet from becoming so overloaded with infor-mation that it becomes useless. It employs a group of people who monitor thesystem and remove trivial and irrelevant content.

➥ THE RESULTS

The ShareNet has evolved into a state-of-the-art Web-based knowledge manage-ment system that stores and catalogues volumes of valuable knowledge, makes itavailable to every employee, and enhances global collaboration. Numerous com-panies, including Intel and Volkswagen, studied ShareNet before setting up theirown knowledge management systems. Furthermore, Teleos, an independentknowledge management research company, acknowledged Siemens as being oneof the Most Admired Knowledge Enterprises worldwide for five years in a row.

Siemens also has realized a variety of quantifiable benefits afforded by knowl-edge management. For example, in April 1999, the company developed a por-tion of ShareNet to support its Information & Communications Networks Groupat the cost of $7.8 million. Within 2 years, the tool had helped to generate $122million in additional sales.

Ultimately, knowledge management may be one of the major tools that willhelp Siemens prove that large diversified conglomerates can work and that be-ing big might even be an advantage in the Information Age.

Sources: Adapted from Vasilash (2002), The Economist (2001), and Williams (2001).

➥ LESSONS LEARNED FROM THIS CASE

This case illustrates the importance and value of identifying an organization’sknowledge and sharing it throughout the organization. In a major initiative,Siemens AG developed ShareNet and other knowledge management systems tothe valuable knowledge of the employees. Siemens transformed its culture as theknowledge management system was deployed, leading to significantly lower op-erating costs and more collaboration throughout the global enterprise.Organizations recognize the value of their intellectual assets, though they maybe hard to measure. Fierce global competition drives companies to better utilizetheir intellectual assets by transforming themselves into organizations that fosterthe development and sharing of knowledge.

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10.1 INTRODUCTION TO KNOWLEDGE MANAGEMENT 451

In this chapter we describe the characteristics and concepts of knowledgemanagement. In addition, we will explain how firms are using information tech-nology to implement knowledge management systems and how these systemsare transforming modern organizations.

With roots in expert systems, organizational learning, and innovation, the ideaof knowledge management is itself not new (e.g., see Cahill, 1996). Successfulmanagers have always used intellectual assets and recognized their value. Butthese efforts were not systematic, nor did they ensure that knowledge gainedwas shared and dispersed appropriately for maximum organizational benefit.Moreover, sources such as Forrester Research, IBM, and Merrill Lynch estimatethat 85 percent of a company’s knowledge assets are not housed in relationaldatabases, but are dispersed in e-mail, Word documents, spreadsheets, and pre-sentations on individual computers (Editors of Ziff Davis Smart Business, 2002).The application of information technology tools to facilitate the creation, storage,transfer, and application of previously uncodifiable organizational knowledge isa new and major initiative in organizations.

Knowledge management (KM) is a process that helps organizations iden-tify, select, organize, disseminate, and transfer important information and ex-pertise that are part of the organization’s memory and that typically residewithin the organization in an unstructured manner. This structuring of knowl-edge enables effective and efficient problem solving, dynamic learning, strategicplanning, and decision making. Knowledge management initiatives focus onidentifying knowledge, explicating it in such a way that it can be shared in aformal manner, and leveraging its value through reuse.

Through a supportive organizational climate and modern information tech-nology, an organization can bring its entire organizational memory and knowl-edge to bear upon any problem anywhere in the world and at any time. Fororganizational success, knowledge, as a form of capital, must be exchangeable amongpersons, and it must be able to grow. Knowledge about how problems are solvedcan be captured, so that knowledge management can promote organizationallearning, leading to further knowledge creation.

KNOWLEDGE. In the information technology context, knowledge is very dis-tinct from data and information (see Figure 10.1). Whereas data are a collectionof facts, measurements, and statistics, information is organized or processed datathat are timely (i.e., inferences from the data are drawn within the time frame

10.1 INTRODUCTION TO KNOWLEDGE MANAGEMENT

Concepts and Definitions

DATA KNOWLEDGE

INFORMATIONProcessed

Relevant andactionable

Relevant and actionable dataFIGURE 10.1 Data,Information, andKnowledge.

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of applicability) and accurate (i.e., with regard to the original data) (Holsapple,2003). Knowledge is information that is contextual, relevant, and actionable.

For example, a map giving detailed driving directions from one location toanother could be considered data. An up-to-the-minute traffic bulletin along thefreeway that indicates a traffic slowdown due to construction several milesahead could be considered information. Awareness of an alternative, back-roadsroute could be considered as knowledge. In this case, the map is considered databecause it does not contain current relevant information that affects the driv-ing time and conditions from one location to the other. However, having thecurrent conditions as information is only useful if the individual has knowledgethat will enable him to avert the construction zone. The implication is thatknowledge has strong experiential and reflective elements that distinguish itfrom information in a given context. Having knowledge implies that it can beexercised to solve a problem, whereas having information does not carry thesame connotation.

An ability to act is an integral part of being knowledgeable. For example, twopeople in the same context with the same information may not have the sameability to use the information to the same degree of success. Hence there is adifference in the human capability to add value. The differences in ability maybe due to different experiences, different training, different perspectives, and soon. While data, information, and knowledge may all be viewed as assets of anorganization, knowledge provides a higher level of meaning about data andinformation. It conveys meaning, and hence tends to be much more valuable,yet more ephemeral.

Knowledge has the following characteristics that differentiates it from anorganization’s other assets (Gray, 1999; Holsapple, 2003):

● Extraordinary leverage and increasing returns. Knowledge is not subject todiminishing returns. When it is used, it is not consumed. Its consumers canadd to it, thus increasing its value.

● Fragmentation, leakage, and the need to refresh. As knowledge grows, itbranches and fragments. Knowledge is dynamic; it is information in action.Thus, an organization must continually refresh its knowledge base to main-tain it as a source of competitive advantage.

● Uncertain value. It is difficult to estimate the impact of an investment inknowledge. There are too many intangible aspects.

● Uncertain value of sharing. Similarly, it is difficult to estimate the value ofsharing the knowledge, or even who will benefit most.

● Rooted in time. The utility and validity of knowledge may vary with time;hence, the immediacy, age, perishability, and volatility of knowledge areimportant attributes.

There is a vast amount of literature about what knowledge and knowingmeans in epistemology (study of the nature of knowledge), the social sciences,philosophy, and psychology (Polanyi, 1958, 1966). Though there is no singledefinition of what knowledge and knowledge management specifically mean,the business perspective on them is fairly pragmatic. Information as a resourceis not always valuable (i.e., information overload can distract from the impor-tant); knowledge is a resource when it is clear, relevant, and important to anindividual processing the knowledge (Holsapple, 2003). Knowledge implies an

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implicit understanding and experience that can discriminate between its use andmisuse. Over time, information accumulates and decays, while knowledgeevolves. The word knowledge tends to carry positive connotations (Schultze andLeidner, 2002). However, because knowledge is dynamic in nature, today’s knowl-edge may well become tomorrow’s ignorance if an individual or organizationfails to update knowledge as environmental conditions change. For more on thepotential drawbacks of managing and reusing knowledge, see Section 10.7.

Intellectual capital (or intellectual assets) is another term often used forknowledge, and it implies that there is a financial value to knowledge (Edvins-son, 2003). Though intellectual capital is difficult to measure, some industrieshave tried. For example, the value of the intellectual capital of the property-casualty insurance industry has been estimated to be between $270 billion to$330 billion (Mooney, 2000). The Organization for Economic Co-operation andDevelopment (OCED) has scored its 30 member nations according to their invest-ments in intellectual capital such as R&D, education, and patents. According toOCED, those countries with the most intellectual capital activities will be thewinners of future wealth (Edvinsson, 2003).

Knowledge evolves over time with experience, which puts connectionsamong new situations and events in context. Given the breadth of the typesand applications of knowledge, we adopt the simple and elegant definition thatknowledge is information in action (O’Dell et al., 1998).

TACIT AND EXPLICIT KNOWLEDGE. Polanyi (1958) first conceptualized and dis-tinguished between an organization’s tacit and explicit knowledge. Explicitknowledge deals with more objective, rational, and technical knowledge (data,policies, procedures, software, documents, etc.). Tacit knowledge is usually inthe domain of subjective, cognitive, and experiential learning; it is highlypersonal and difficult to formalize (Nonaka and Takeuchi, 1995).

Explicit knowledge is the policies, procedural guides, white papers, reports,designs, products, strategies, goals, mission, and core competencies of the enter-prise and the information technology infrastructure. It is the knowledge thathas been codified (documented) in a form that can be distributed to others ortransformed into a process or strategy without requiring interpersonal interac-tion. For example, a description of how to process a job application would bedocumented in a firm’s human resources policy manual. Explicit knowledge hasalso been called leaky knowledge because of the ease with which it can leavean individual, document, or the organization, after it has been documented(Alavi, 2000). Moreover, there is a simple relationship between the codificationof knowledge and the costs of its transfer: the more than knowledge is madeexplicit, the more economically it can be transferred (Teece, 2003).

Tacit knowledge is the cumulative store of the experiences, mental maps,insights, acumen, expertise, know-how, trade secrets, skill sets, understanding,and learning that an organization has, as well as the organizational culture thathas embedded in it the past and present experiences of the organization’s peo-ple, processes, and values. Tacit knowledge, also referred to as embedded knowl-edge (Madhaven and Grover, 1998), is usually either localized within the brainof an individual or embedded in the group interactions within a department ora branch office. Tacit knowledge typically involves expertise or high skill levels.It is generally slow and costly to transfer and can be plagued by ambiguity(Teece, 2003).

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Sometimes tacit knowledge is easily documentable but has remained tacitsimply because the individual housing the knowledge does not recognize itspotential value to other individuals. Other times, tacit knowledge is unstruc-tured, without tangible form, and therefore difficult to codify. Polanyi (1966)suggests that it is difficult to put some tacit knowledge into words. For exam-ple, an explanation of how to ride a bicycle would be difficult to documentexplicitly, and thus is tacit. Tacit knowledge has been called sticky knowledgebecause it may be relatively difficult to pull it away from its source.

Successful transfer or sharing of tacit knowledge usually takes place throughassociations, internships, apprenticeship, conversations, other means of socialand interpersonal interactions, or even through simulations (e.g., see Robin,2000). Nonaka and Takeuchi (1995) claim that intangibles like insights, intu-itions, hunches, gut feelings, values, images, metaphors, and analogies are theoften-overlooked assets of organizations. Harvesting this intangible asset can becritical to a firm’s bottom line and its ability to meet its goals.

The goal of knowledge management is for an organization to be aware of indi-vidual and collective knowledge so that it may make the most effective use of theknowledge it has (Bennet and Bennet, 2003). Historically, MIS has focused on cap-turing, storing, managing, and reporting explicit knowledge. Organizations nowrecognize the need to integrate both explicit and tacit knowledge in formal infor-mation systems. Knowledge management systems (KMSs) refer to the use ofmodern information technologies (e.g. the Internet, intranets, extranets, Lotus-Notes, Software filters, Agents, Data Warehouses) to systematize, enhance, andexpedite intra- and inter-firm knowledge management (Alavi and Leidner, 1999).KMSs are intended to help an organization cope with turnover, rapid change, anddownsizing by making the expertise of the organization’s human capital widelyaccessible. They are being built in part from increased pressure to maintain a well-informed, productive workforce. Moreover, they are built to help large organiza-tions provide a consistent level of customer service, as illustrated in IT At Work 10.1.

A functioning knowledge management system follows six steps in a cycle (seeFigure 10.2). The reason the system is cyclical is that knowledge is dynamicallyrefined over time. The knowledge in a good KM system is never finishedbecause, over time, the environment changes, and the knowledge must beupdated to reflect the changes. The cycle works as follows:

1. Create knowledge. Knowledge is created as people determine new ways of do-ing things or develop know-how. Sometimes external knowledge is brought in.

2. Capture knowledge. New knowledge must be identified as valuable and berepresented in a reasonable way.

3. Refine knowledge. New knowledge must be placed in context so that it is ac-tionable. This is where human insights (tacit qualities) must be capturedalong with explicit facts.

4. Store knowledge. Useful knowledge must then be stored in a reasonable for-mat in a knowledge repository so that others in the organization can access it.

5. Manage knowledge. Like a library, the knowledge must be kept current. Itmust be reviewed to verify that it is relevant and accurate.

6. Disseminate knowledge. Knowledge must be made available in a useful for-mat to anyone in the organization who needs it, anywhere and anytime.

The Need forKnowledge

ManagementSystems

KnowledgeManagement

System Cycle

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As knowledge is disseminated, individuals develop, create, and identify newknowledge or update old knowledge, which they replenish into the system.Knowledge is a resource that is not consumed when used, though it can age.(For example, driving a car in 1900 was different from driving one now, butmany of the basic principles still apply.) Knowledge must be updated. Thus, theamount of knowledge grows over time.

their questions. Furthermore the software determines therelevance of possible answers by ranking them partly on ex-act text and phrase matching. In addition, the system canmatch synonyms and assign additional weight to certainthings. The system attempts to provide even more focusedsolutions by retrieving answers from the pool of knowledgethat is relevant to a particular user and his or her profile.

Understanding that knowledge must grow and evolve,Cingular encourages users to contribute their expertise tothe system. The software can automatically record a se-quence of steps that an agent took to find a correct solutionto a certain problem and give the agent an option toprovide additional feedback.

Cingular realized that ensuring validity and integrity ofthe knowledge stored and distributed by the knowledgemanagement system is one of the key factors of the sys-tem’s success. To that end, the company employs a knowl-edge management team that is responsible for monitoring,maintaining, and expanding the knowledge managementsystem. The team consists of about 25 full-time employeesbased in Cingular’s Atlanta headquarters. The KM teamworks closely with various departments of the companyand subject matter experts to ensure that the knowledgebase has the right answers in a user-friendly format at theright time. In addition, the team reviews contributionsto the knowledge base made by the agents and makesappropriate changes or additions to the knowledge base.

Cingular’s clients are often the ultimate beneficiaries ofthe company’s knowledge. That is why Cingular plans tobring its knowledge closer to its customers by extendingthe knowledge management system online and to retailstores. Customers will be able to access instructions on us-ing wireless services and features, handsets, and other de-vices that Cingular carries, as well as troubleshooting tips.

Source: Adapted from O’Herron (2003).

For Further Exploration: Explain the advantages and dis-advantages of a professional knowledge management teamadministering the content of organization’s knowledge base.

How do you make sure that each of your customerservice agents at 22 call centers nationwide can an-

swer virtually any question asked by one of your 22 millionclients? That was the challenge faced by Cingular Wireless(cingular.com), a major mobile communications providerbased in Atlanta, Georgia.

To accomplish this Herculean task, Cingular Wirelessturned to knowledge management. Cingular benchmarkedknowledge management solutions of technology-orientedcompanies, such as Dell and Microsoft. Steve Mullins, vicepresident of customer experience for Cingular Wireless andMonica Browning, Cingular’s director of knowledge man-agement, met with several knowledge management soft-ware vendors to learn how their tools operate. Following areview of knowledge management solutions used by othercompanies, Cingular chose eService Suite by ServiceWareof Edison, New Jersey.

To ensure successful implementation of the system, Cin-gular embarked on a campaign to obtain support of every-one involved, from senior executives to each call centeragent who would use the system. A pilot program was ini-tiated at technical support departments at three call centers.In addition, to help manage organizational changes that ac-company a shift to knowledge management, Cingular en-listed the help of leading consulting firms Cap Gemini,Ernst and Young, and Innovative Management Solutions.

A major issue in developing the knowledge manage-ment system involved capturing the knowledge and stor-ing it in the system. Cingular accomplished it by combiningthe efforts of its employees and an external authoringgroup from Innovative Management Solutions. Cingulardivided the process into phases, which allowed the com-pany to populate the knowledge base with technical sup-port information, common topics, information on rateplans, and so on. It took about four months before theknowledge base was ready for the first group of users.

The knowledge management system uses complex algo-rithms to process natural language queries and providecustomer service agents with lists of most likely answers to

IT At Work 10.1CINGULAR CALLS ON KNOWLEDGE

MKT

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When asked why the organization was building a worldwide knowledge man-agement system, the Chief Knowledge Officer (CKO) of a large multinationalconsulting firm replied, “We have 80,000 people scattered around the world thatneed information to do their jobs effectively. The information they needed wastoo difficult to find and, even if they did find it, often inaccurate. Our Intranetis meant to solve this problem.” (Leidner, 2003). A survey of European firmsby KPMG Peat Marwick in 1998 found that almost half of the companiesreported having suffered a significant setback from losing key staff (KPMG,1998). Similarly, a survey conducted in the same year by Cranfield Universityfound that the majority of responding firms believed that much of the knowl-edge they needed existed inside the organization, but that finding and leverag-ing it were ongoing challenges. It is precisely these types of difficulties that haveled to the systematic attempt to manage knowledge.

Most knowledge management initiatives have one of three aims: (1) tomake knowledge visible mainly through maps, yellow pages, and hypertext,(2) to develop a knowledge-intensive culture, or to (3) build a knowledge infra-structure (Davenport and Prusak, 1998). These aims are not mutually exclusive,and indeed, firms may attempt all three as part of a knowledge managementinitiative.

There are several activities or processes that surround the management ofknowledge. These include the creation of knowledge, the sharing of knowledge,and the seeking and use of knowledge. Various terms have been used to describethese processes. What is important is an understanding of how knowledge flowsthrough an organization, rather than any particular label assigned to a knowl-edge activity.

Knowledge creation is the generation of new insights, ideas, or routines. It mayalso be referred to as knowledge acquisition (Holsapple and Joshi, 2003). It ishelpful to distinguish between the creation of fundamentally new knowledgeversus the acquisition of existing knowledge (Ford, 2003). Nonaka (1994)describes knowledge creation as interplay between tacit and explicit knowledgeand as a growing spiral as knowledge moves among the individual, group, andorganizational levels.

10.2 KNOWLEDGE MANAGEMENT INITIATIVES

KnowledgeCreation

Knowledge

Refine

Capture

Create

Manage

Disseminate

StoreFIGURE 10.2 The knowl-edge management cycle.

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10.2 KNOWLEDGE MANAGEMENT INITIATIVES 457

There are four modes of knowledge creation: socialization, externalization,internalization, and combination. The socialization mode refers to the conversionof tacit knowledge to new tacit knowledge through social interactions and sharedexperience among organizational members (e.g., mentoring). The combinationmode refers to the creation of new explicit knowledge by merging, categorizing,reclassifying, and synthesizing existing explicit knowledge (e.g., statistical analy-ses of market data). The other two modes involve interactions and conversionbetween tacit and explicit knowledge. Externalization refers to converting tacitknowledge to new explicit knowledge (e.g., producing a written documentdescribing the procedures used in solving a particular client’s problem). Internali-zation refers to the creation of new tacit knowledge from explicit knowledge (e.g.,obtaining a novel insight through reading a document). These final two modesof knowledge creation deal less with the creation of new knowledge than withthe conversion of existing knowledge to a new mode.

Holsapple and Joshi (2003) suggest that there are two important dimensionsto the acquisition of knowledge: one is the identification of existing knowledgefrom external sources and the other, the selection of needed knowledge froman organization’s existing knowledge resources. These two activities requiredifferent skills, levels of effort, and costs.

Knowledge sharing is the willful explication of one’s ideas, insights, solutions,experiences (i.e., knowledge) to another individual either via an intermediary,such as a computer-based system, or directly. However, in many organizations,information and knowledge are not considered organizational resources to beshared, but individual competitive weapons to be kept private (Davenport et al.,1998). Organizational members may share personal knowledge with a certaintrepidation—the perceived threat that they are of less value if their knowledgeis part of the organizational public domain. Also, a primary constraint on indi-vidual’s knowledge sharing behaviors might simply be time. Moreover, sharingknowledge is a risky proposition since one does not know how that knowledgemight be reused (Ford, 2003).

Research in organizational learning and knowledge management suggests thatsome facilitating conditions include trust, interest, and shared language (Hanssen-Bauer and Snow, 1996), fostering access to knowledgeable members (Brown andDuguid, 2000), and a culture marked by autonomy, redundancy, requisite vari-ety, intention, and fluctuation (Nonaka, 1994). Several organizations have madeknowledge sharing a guiding principal for the organization (Liebowitz and Chen,2003). Johnson & Johnson has knowledge fairs designed to promote new rela-tionships among colleagues in order to facilitate knowledge transfer. The WorldBank includes such factors as openness to new ideas, continual learning, and shar-ing of knowledge as part of their annual performance evaluation of employees(Liebowitz and Chen, 2003).

Knowledge seeking, also referred to as knowledge sourcing (Gray and Meister, 2003),is the search for and use of internal organizational knowledge. While the lackof time or the lack of reward may hinder the sharing of knowledge, the samecan be said of knowledge seeking. Individuals may sometimes feel compelled tocome up with new ideas, rather than use tried-and-true knowledge, if they feelthat their own performance review is based on the originality or creativity oftheir ideas. Such was the case for marketing employees in a global consumergoods organization described in Alavi et al. (2003).

Knowledge Sharing

Knowledge Seeking

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Individuals may engage in knowledge creation, sharing, and seeking withor without the use of information technology tools. We next describe two com-mon approaches to knowledge management.

There are two fundamental approaches to knowledge management: the processand the practice approaches.

The process approach attempts to codify organizational knowledge throughformalized controls, processes, and technologies (Hansen et al., 1999). Organi-zations adopting the process approach may implement explicit policies gov-erning how knowledge is to be collected, stored, and disseminated throughoutthe organization. The process approach frequently involves the use of infor-mation technologies to enhance the quality and speed of knowledge creationand distribution in the organizations. These technologies may include intranets,data warehousing, knowledge repositories, decision support tools, and group-ware (Ruggles, 1998).

There are several different levels of the process approach (van der Spek etal., 2003). At the most rudimentary, knowledge may be codified in projectdescriptions, stories, or other forms of documentation, but limited filtering hasbeen done. At the next level, knowledge may be codified into structured con-cepts, frameworks, and theories. At the highest level, knowledge is embeddedinto work practices that give direction to employees (van der Spek et al., 2003).

The main criticisms of the process approach are that it fails to capture muchof the tacit knowledge embedded in firms and that it forces individuals intofixed patterns of thinking (DeLong & Fahey, 2000; Brown & Duguid, 2000; VonKrogh, 2000; Hargadon, 1998). The process approach is favored by firms that sellrelatively standardized products that fill common needs. Most of the valuableknowledge in these firms is fairly explicit because of the standardized nature ofthe products and services. For example, a kazoo manufacturer has minimalproduct changes or service needs over the years, and yet there is steady demandand a need to produce the item. In these cases, the knowledge is typically staticin nature.

Even large firms that utilize tacit knowledge, such as Ernst & Young, haveinvested heavily to ensure that the process approach works efficiently. The 250people at Ernst & Young’s Center for Business Knowledge manage an electronicrepository and help consultants find and use information. Specialists writereports and analyses that many teams can use. And each of Ernst & Young’smore than 40 practice areas has a staff member who helps codify and store doc-uments. The resulting area databases are linked through a network (Hansen etal., 1999). Naturally, people-to-documents is not the only way consultants infirms like Ernst & Young and Accenture share knowledge; they talk with oneanother as well. But they do place a high degree of emphasis on the codificationstrategy (Hansen et al., 1999).

In contrast, the practice approach to knowledge management assumes that agreat deal of organizational knowledge is tacit in nature and that formal con-trols, processes, and technologies are not suitable for transmitting this type ofunderstanding. Rather than building formal systems to manage knowledge, the

10.3 APPROACHES TO KNOWLEDGE MANAGEMENT

The ProcessApproach

The PracticeApproach

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10.3 APPROACHES TO KNOWLEDGE MANAGEMENT 459

TABLE 10.1 Process and Practice Approaches to Knowledge Management

Process Approach Practice Approach

Explicit knowledge—codified in rules,tools, and processes (DeLong andFahey, 2000)

Formal controls, procedures, and standard operating procedures withheavy emphasis on informationtechnologies to support knowledgecreation, codification, and transferof knowledge (Ruggles, 1998).

Provides structure to harnessgenerated ideas and knowledge(Brown and Duguid, 2000).

Achieves scale in knowledge reuse(Hansen et al., 1999).

Fails to tap into tacit knowledge. May limit innovation and forcesparticipants into fixed patterns ofthinking.

Heavy investment in IT to connectpeople with reusable codified knowl-edge (Hansen et al., 1999).

Type of knowledgesupported

Means of transmission

Benefits

Disadvantages

Role of informationtechnology

Mostly tacit knowledge-unarticulatedknowledge not easily captured or codi-fied (Leonard and Sensiper, 1998)

Informal social groups that engage instory telling and improvisation(Wenger and Snyder, 2000).

Provides an environment to generateand transfer high value tacitknowledge (Brown and Duguid, 2000;Wenger & Snyder, 2000).

Provides spark for fresh ideas andresponsiveness to changing environment(Brown and Duguid, 2000).

Can result in inefficiency. Abundance ofideas with no structure to implementthem.

Moderate investment in IT to facilitateconversations and transfer of tacitknowledge (Hansen et al., 1999).

Source: Alavi et al. (2003), p. 3.

focus of this approach is to build the social environments or communities of prac-tice necessary to facilitate the sharing of tacit understanding (Brown and Duguid,2000; DeLong and Fahey, 2000; Gupta and Govindarajan, 2000; Wenger andSnyder, 2000; Hansen et al., 1999). Communities of practice are groups of indi-viduals with a common interest who work together informally (Smith and McK-een, 2003). Within such a community, individuals collaborate directly, teach eachother, and share experiences (Smith and McKeen, 2003).

The practice approach is typically adopted by companies that provide highlycustomized solutions to unique problems. The valuable knowledge for these firmsis tacit in nature, which is difficult to express, capture, and manage. In this case,the environment and the nature of the problems being encountered are extremelydynamic. For these firms, knowledge is shared mostly through person-to-personcontacts. Collaborative computing methods (for example, Lotus Notes/DominoServer or e-mail) help people communicate. Because tacit knowledge is difficultto extract, store, and manage, the explicit knowledge that points to how to findthe appropriate tacit knowledge (people contacts, consulting reports) is madeavailable to an appropriate set of individuals who might need it.

To make their practice approach work, firms like Bain invest heavily inbuilding networks of people and communications technology such as telephone,e-mail, and videoconferencing. Also they commonly have face-to-face meetings(Hansen et al., 1999).

Table 10.1 summarizes the process and practice approaches.

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Another tool that Texaco uses to connect its employeesis a software system called Knowledge Mail (from TacitKnowledge Systems). This software analyzes e-mail sentand received by employees to help them make goodcontacts with colleagues who work on the same issues.

John Old speaks of several important lessons that Tex-aco learned while managing knowledge. He points out thatpeople are more eager to share knowledge when they areunited by a clear, specific, and measurable business pur-pose. Knowledge sharing becomes even more successfulwhen they trust each other and see direct benefits that canbe derived from the knowledge exchange. In addition, it isimportant to give people enough time to reflect on whatthey know and what they need to learn.

Texaco’s approach to knowledge management has pro-vided many positive results. The knowledge managementefforts help Texaco’s employees successfully resolve nu-merous issues that range from adjusting oil well pumps todeciding whether or not to enter into new lines of business.

Source: Adapted from Warner (2001).

For Further Exploration: Texaco relies primarily on thepractice approach to knowledge management. Why wasthis approach effective for Texaco? Would this approach beoptimal for your college or place of work?

Texaco (texaco.com), a company that pumps over a mil-lion barrels of oil a day, has discovered a new source of

power—the collective knowledge and expertise of its18,000 employees in 150 countries around the world. Tex-aco believes that connecting people who have questionswith people who have answers gives it the power to workfaster and more efficiently.

At Texaco, managing knowledge is a critical businesschallenge. John Old, Texaco’s knowledge guru, approachesthis challenge with a strategy that leverages human con-nections. Old states that knowledge by its nature is contex-tual; thus, systems that simply allow people to record whatthey know are ineffective. He strongly believes that a suc-cessful knowledge management solution must recognizethe importance of human connections.

Texaco uses technology to help people build personalrelationships and share knowledge. One of the systems atwork at Texaco is PeopleNet, a search engine for employeeson the company’s intranet. Employees who have questionscan use PeopleNet to review profiles of their colleagueswho might have the right answers. Texaco discovered thathaving biographies and pictures of its employees onlinemakes it possible to establish credibility and trust betweenpeople who have not met each other. And it is trust thatmakes effective knowledge transfer possible.

IT At Work 10.2TEXACO DRILLS FOR KNOWLEDGE

POM

In reality, a knowledge management initiative can, and probably will,involve both process and practice approaches. The two are not mutually exclu-sive. Alavi et al. (2003) describe the case of an organization that began its KMeffort with a large repository but evolved the knowledge management initiativeinto a community-of-practice approach that existed side by side with the repos-itory. In fact, community members would pass information from the commu-nity forum to the organizational repository when they felt that the knowledgewas valuable outside their community. IT At Work 10.2 illustrates how Texacosuccessfully manages its knowledge using the practice approach.

Knowledge management is more a methodology applied to business practicesthan a technology or product. Nevertheless, information technology is crucialto the success of every knowledge management system. Information tech-nology enables KM by providing the enterprise architecture upon which it isbuilt.

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Knowledge management systems are developed using three sets of technologies:communication, collaboration, and storage and retrieval.

Communication technologies allow users to access needed knowledge, and tocommunicate with each other—especially with experts. E-mail, the Internet,corporate intranets, and other Web-based tools provide communication capabil-ities. Even fax machines and the telephone are used for communication,especially when the practice approach to knowledge management is adopted.

Collaboration technologies provide the means to perform group work. Groupscan work together on common documents at the same time (synchronous) orat different times (asynchronous); in the same place, or in different places. Thisis especially important for members of a community of practice working onknowledge contributions. Collaborative computing capabilities such as electronicbrainstorming enhance group work, especially for knowledge contribution.Additional forms of group work involve experts working with individuals try-ing to apply their knowledge. This requires collaboration at a fairly high level.Other collaborative computing systems allow an organization to create a virtualspace so that individuals can work online anywhere and at any time.

Storage and retrieval technologies originally meant using a database manage-ment system to store and manage knowledge. This worked reasonably well inthe early days for storing and managing most explicit knowledge, and evenexplicit knowledge about tacit knowledge. However, capturing, storing, andmanaging tacit knowledge usually requires a different set of tools. Electronicdocument management systems and specialized storage systems that are part ofcollaborative computing systems fill this void.

Several technologies have contributed to significant advances in knowledgemanagement tools. Artificial intelligence, intelligent agents, knowledge discov-ery in databases, and Extensible Markup Language (XML) are examples of tech-nologies that enable advanced functionality of modern knowledge managementsystems and form the base for future innovations in the KM field.

ARTIFICIAL INTELLIGENCE. In the definition of knowledge management, artifi-cial intelligence (Chapter 11) is rarely mentioned. However, practically speaking,AI methods and tools are embedded in a number of knowledge managementsystems, either by vendors or by system developers.

AI methods can assist in identifying expertise, eliciting knowledge automat-ically and semiautomatically, interfacing through natural language processing,and in intelligent search through intelligent agents. AI methods, notably expertsystems, neural networks, fuzzy logic, and intelligent agents, are used in knowl-edge management systems to perform various functions: They assist in andenhance searching knowledge (e.g., intelligent agents in Web searches), includ-ing scanning e-mail, documents, and databases and helping establish knowledgeprofiles of individuals and groups. They forecast future results using existingknowledge. AI methods help determine the relative importance of knowledge,when knowledge is both contributed to and accessed from the knowledge repos-itory, and help determine meaningful relationships in the knowledge. They iden-tify patterns in data (usually through neural networks), induce rules for expertsystems, and provide advice directly from knowledge by using neural networks

Componentsof KnowledgeManagement

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or expert systems. Finally, they provide a natural language or voice command–driven user interface for a knowledge management system.

INTELLIGENT AGENTS. Intelligent agents are software systems that learn howusers work and provide assistance in their daily tasks. For example, when thesesoftware programs aree told what the user wants to retrieve, passive agents canmonitor incoming information for matches with user interests and active agentscan seek out information relevant to user preferences (Gray and Tehrani, 2003).Intelligent agents of various kinds are discussed in Chapter 12.

There are a number of ways that intelligent agents can help in knowledgemanagement systems. Typically they are used to elicit and identify knowledge.Examples are:

● IBM (ibm.com) offers an intelligent data mining family, including IntelligentDecision Server (IDS), for finding and analyzing massive amounts of enter-prise data.

● Gentia (Planning Sciences International, gentia.com) uses intelligent agents tofacilitate data mining with Web access and data warehouse facilities.

● Convectis (HNC Software Inc.) uses neural networks to search text data andimages, to discern the meaning of documents for an intelligent agent. Thistool is used by InfoSeek, an Internet search engine, to speed up the creationof hierarchical directories of Web topics.

Combining intelligent agents with enterprise knowledge portals is a powerfultechnique that can deliver to a user exactly what he or she needs to perform hisor her tasks. The intelligent agent learns what the user prefers to see, and howhe or she organizes it. Then, the intelligent agent takes over to provide it at thedesktop like a good administrative assistant would (King and Jones, 1995).

KNOWLEDGE DISCOVERY IN DATABASES. Knowledge discovery in databases(KDD) is a process used to search for and extract useful information from vol-umes of documents and data. It includes tasks known as knowledge extraction,data archaeology, data exploration, data pattern processing, data dredging, andinformation harvesting. All of these activities are conducted automatically andallow quick discovery, even by nonprogrammers. Data are often buried deepwithin very large databases, data warehouses, text documents, or knowledgerepositories, all of which may contain data, information, and knowledge gatheredover many years. Data mining, the process of searching for previously unknowninformation or relationships in large databases, is ideal for eliciting knowledgefrom databases, documents, e-mail, and so on. (For more on data mining, seeChapter 12.)

AI methods are useful data mining tools that include automated knowledgeelicitation from other sources. Intelligent data mining discovers informationwithin databases and other repositories that queries and reports cannot effec-tively reveal. Data mining tools find patterns in data and may even (automati-cally) infer rules from them. Patterns and rules can be used to guide decisionmaking and forecast the effect of these decisions. KDD can also be used to iden-tify the meaning of data or text, using KM tools that scan documents and e-mailto build an expertise profile of a firm’s employees. Data mining can speed upanalysis by providing needed knowledge.

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Extending the role of data mining and knowledge discovery techniquesfor knowledge externalization, Bolloju et al. (2002) propose a framework forintegrating knowledge management into enterprise environments for next-generation decision support systems. Their framework, shown in Figure 10.3,includes model marts and model warehouses. Both of these act as reposi-tories of knowledge created by employing knowledge-discovery techniques onpast decision instances stored in data repositories. (Model marts are small ver-sions of model warehouses.) The model marts and model warehouses captureoperational and historical decision models. For example, a model mart can storedecision rules corresponding to problem-solving knowledge of different decisionmakers in a particular domain, such as loan approvals in a banking environ-ment. (As you will discover in Chapter 12, model marts and model warehousesare analogous for models to data marts and data warehouses for data.)

This integrated decision support–knowledge management framework accom-modates different types of knowledge transformations proposed by Nonaka andTakeuchi (1995). Systems built around this framework are expected to enhancethe quality of support provided to decision makers; to support knowledge man-agement functions such as acquisition, creation, exploitation, and accumulation;to facilitate discovery of trends and patterns in the accumulated knowledge; andto provide means for building up organizational memory.

EXTENSIBLE MARKUP LANGUAGE (XML). Extensible Markup Language (XML)enables standardized representations of data structures, so that data can beprocessed appropriately by heterogeneous systems without case-by-case pro-gramming. This method suits e-commerce applications and supply chain man-agement systems that operate across enterprise boundaries. XML not only canautomate processes and reduce paperwork, but also can unite business partnersand supply chains for better collaboration and knowledge transfer. XML-basedmessages can be taken from back-end repositories and fed out through theportal interface and back again. A portal that uses XML allows the company to

Externalization

Internalization

So

cial

izat

ion

Co

mb

inatio

n

DataMarts

TacitModels

Internal and ExternalData Sources

DataWare-house

Databases

ModelMarts

ExplicitModels

Internal and ExternalKnowledge Sources

Problem SpecificKnowledge Base

OrganizationalKnowledge Base

Functional Knowledge Base

Modelbases

Modelwarehouse

FIGURE 10.3 Framework for integrating decision support and knowledge management systems.(Source: Bolloju et al., 2001.)

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communicate better with its customers, linking them in a virtual demand chain,where changes in customer requirements are immediately reflected in produc-tion plans. Due to its potential to tremendously simplify systems integration,XML may become the universal language that all portal vendors embrace (seeRuber, 2001). (For more technical detail on XML, see Technology Guide 2.)

Vendors are quickly moving to integrate the advantages offered by XMLstandards. For example, Interwoven’s content management software, Teamsite,now fully supports XML, enabling organizations to provide content available inany format across the enterprise. Sequoia Software’s XML Portal Server (XPS)and Hummingbird’s Enterprise Portal Suite also support the XML standard fordata exchange.

The KMS challenge is to identify and integrate the three essential components—communication technologies, collaboration technologies, and storage and retrievaltechnologies—to meet the knowledge management needs of an organization. Theearliest knowledge management systems were developed with networked tech-nology (intranets), collaborative computing tools (groupware), and databases (forthe knowledge repository). They were constructed from a variety of off-the-shelfIT components (e.g., see Ruggles, 1998). Many organizations, especially largemanagement consulting firms like Accenture and J.D. Edwards, developed theirknowledge architecture with a set of tools that provided the three technologytypes. Collaborative computing suites such as Lotus Notes/Domino Server providemany KMS capabilities. Other systems were developed by integrating a set of toolsfrom a single or multiple vendors. For example, J.D. Edwards used a set of looselyintegrated Microsoft tools and products to implement its Knowledge Garden KMS,as did KPMG. In the early 2000s, KMS technology has evolved to integrate thethree components into a single package. These include enterprise knowledgeportals and knowledge management suites.

Technology tools that support knowledge management are called knowware.Most knowledge management software packages include one or more of thefollowing seven tools: collaborative computing tools, knowledge servers, enter-prise knowledge portals, electronic document management systems, knowledgeharvesting tools, search engines, and knowledge management suites. Manypackages provide several tools because several are necessary in an effectiveknowledge management system. For example, most electronic document man-agement systems also include collaborative computing capabilities.

Knowledge management systems can be purchased in whole or in part fromone of numerous software development companies and enterprise informationsystems vendors, they can be acquired through major consulting firms, or canbe outsourced to the application service providers (ASPs). All three alternativeswill be discussed in the later part of this chapter.

SOFTWARE DEVELOPMENT COMPANIES AND ENTERPRISE INFORMATION SYS-TEMS VENDORS. Software development companies and enterprise informationsystems vendors offer numerous knowledge management packages: from indi-vidual tools to comprehensive knowledge management suites. The variety of

10.5 KNOWLEDGE MANAGEMENT SYSTEMS IMPLEMENTATION

KnowledgeManagementProducts and

Vendors

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knowware that is readily available on the market allows companies to find thetools that will meet their unique knowledge management needs. Following is areview of some software packages and their vendors in each of the sevenknowware categories cited earlier.

Collaborative Computing Tools. Collaboration tools, or groupware, were thefirst used to enhance tacit knowledge transfer within an organization. One ofthe earliest collaborative computing systems, GroupSystems, provides many ofthe tools that support group work, including electronic brainstorming and ideacategorization. Lotus Notes/Domino Server provides an enterprisewide collabo-rative environment. Other collaboration tools include MeetingPlace (Latitude),QuickPlace (Lotus Development Corp.), eRoom Documentum (Documentum),and PlaceWare (PlaceWare Inc.). For a discussion, details and examples ofcollaborative computing, see Chapter 4.

Knowledge Servers. A knowledge server contains the main knowledgemanagement software, including the knowledge repository, and provides accessto other knowledge, information, and data. Examples of knowledge serversinclude the Hummingbird Knowledge Server, the Intraspect Software Knowl-edge Server, the Hyperwave Information Server, the Sequoia Software XML Por-tal Server, and Autonomy’s Intelligent Data Operating Layer (IDOL) Server.Autonomy’s IDOL Server connects people to content, content to content, andpeople to people through modules that enable organizations to integrate vari-ous personalization, collaboration and retrieval features. The server provides aknowledge repository, a central location for searching and accessing infor-mation from many sources, such as the Internet, corporate intranets, databases,and file systems, thereby enabling the efficient distribution of time-sensitiveinformation. The server seamlessly extends and integrates with the company’se-business suite, allowing rapid deployment applications that span the enterpriseand leverage AI-assisted technology to harvest knowledge assets.

Enterprise Knowledge Portals. Enterprise knowledge portals(EKPs) are thedoorways into many knowledge management systems. They have evolved fromthe concepts underlying executive information systems, group support systems,Web-browsers, and database management systems. According to an IDC report,individuals may spend as much as 30 percent of their time looking for infor-mation (Ziff Davis, 2002). An enterprise knowledge portal presents a singleaccess point for a vast body of explicit information, such as project plans, func-tional requirements, technical specifications, white papers, training materials,and customer feedback survey data (Kesner, 2003).

Enterprise knowledge portals are a means of organizing the many sourcesof unstructured information in an organization. Most combine data integration,reporting mechanisms, and collaboration, while document and knowledge man-agement is handled by a server. The portal aggregates each user’s total infor-mation needs: data and documents, e-mail, Web links and queries, dynamicfeeds from the network, and shared calendars and task lists. The personal infor-mation portal has evolved into an enterprise knowledge portal (Silver, 2000).

One highly successful portal is Cisco’s Employee Connection. The portal pro-vides anytime, anywhere access to the company’s intranet; it has been creditedwith helping save the company $551 million, thanks primarily to improved self-service (Anderson, 2002). The intent of the system is to connect as many systemsand applications as possible so that the user has a single entree into all of Cisco’sinformation systems (Anderson, 2002).

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When enterprise information portals first entered the market, they didnot contain knowledge management features. Now, most do. Leading portalvendors include Autonomy, Brio, Corechange, Dataware, Vignette, Intraspect,Hummingbird, InXight, IBM/Lotus, Knowmadic, OpenText, Plumtree, Verity,and Viador. Database vendors such as Microsoft, Oracle, and Sybase are alsoselling knowledge portals. Portals can range in cost from less than $500,000 to$8 million (Steinberg, 2002).

The Knowledge Center (from KnowledgeTrack) offers integrated business-to-business (B2B) functions and can scale from dot-coms to large enterprises.Knowledge Center can be built into the enterprise architecture instead of sim-ply sitting on top, the way most intranet portals do. The Knowledge Center inte-grates with external data sources including ERP, online analytical processing(OLAP) (see Chapter 11), and CRM systems (see Chapter 7). Knowledge Centersupports communities of practice and enables them for large project manage-ment, allowing information to be shared among all of the extended enterprisevalue chains.

Hyperwave’s Hyperwave Information Portal (HIP) aggregates informationfrom disparate sources and features dynamic link management, which verifiesthe quality of the link and hides links to unauthorized content. HIP managesconnections between information sources and makes structured and unstruc-tured corporate information searchable via a standard browser. See IT At Work10.3 about how the Canadian law firm Smith Lyons developed a successfulenterprise knowledge portal. For more on such portals, see Collins (2001),Liautaud and Hammond (2000), and InfoWorld (2000).

Electronic Document Management. Electronic document management (EDM)systems focus on the document in electronic form as the collaborative focus ofwork. EDM systems allow users to access needed documents, generally via aWeb-browser over a corporate intranet. EDM systems enable organizations tobetter manage documents and workflow for smoother operations. They alsoallow collaboration on document creation and revision.

Many knowledge management systems use an EDM system as the knowl-edge repository (see Minicase 2). There is a natural fit in terms of the purposeand benefits of the two. For example, Pfizer uses a large-scale document man-agement system to handle the equivalent of truckloads of paper documents ofdrug approval applications passed between Pfizer and the FDA, its regulatingagency. This EDM system dramatically cut the time required for FDA submis-sion and review, making Pfizer more competitive in getting new and effectivedrugs to market (Blodgett, 2000).

Systems like DocuShare (Xerox Corporation) and Lotus Notes (Lotus Develop-ment Corporation) allow direct collaboration on a common document. Some otherEDM systems include Documentum (Documentum Inc.), ViewStar (eiStream), FYI(Identitech), FileNet Content Manager (FileNet Corporation), Livelink (OpenText Corporation), PaperPort (ScanSoft Inc.), and CaseCentral.com (DocumentRepository Inc.).

Knowledge Harvesting Tools. Tools for capturing knowledge unobtrusivelyare helpful since they allow a knowledge contributor to be minimally (or notat all) involved in the knowledge-harvesting efforts. Embedding this type of toolin a KMS is an ideal approach to knowledge capture.

For example, Tacit Knowledge Systems’ KnowledgeMail is an expertise-location software package that analyzes users’ outgoing e-mail to parse subject

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SVC


expertise. It maintains a directory of expertise and offers ways to contact experts,while maintaining privacy controls for those experts. Autonomy’s Active-Knowledge performs a similar analysis on e-mail and other standard documenttypes. Intraspect Software’s Intraspect platform monitors an organization’s groupmemory, captures the context of its use, such as who used it, when, for what,how it was combined with other information, and what people said about it,and then makes the information available for sharing and reuse.

Search Engines. Search engines perform one of the essential functions ofknowledge management—locating and retrieving necessary documents fromvast collections accumulated in corporate repositories. Companies like Google,Verity, and Inktomi are offering a wide selection of search engines that are capa-ble of indexing and cataloging files in various formats as well as retrieving andprioritizing relevant documents in response to user queries.

liked about Hyperwave’s portal environment was that assoon as we installed it, we had a framework to beginknowledge mapping—tagging and indexing documents bysubject and key words and phrases—and for building thedatabase structures in our repositories,” says Van Dyk. Thefirm had definite ideas on how to structure templates andspecific pieces of information that are unique to a legalpractice. These issues included myriad legal forms and doc-uments generated by the proprietary software applicationsused for different practice areas.

Once the portal was set up, Smith Lyons’ developers be-gan to customize the views for each desktop PC by creatingwizards that connect users to their own secure informationareas and to intranet pages containing company activity in-formation. In development, too, is an extranet on whichlawyers will be able to post status reports to clients anddeliver confidential documents and contracts.

“That flexibility in building our DM portal allows ourlawyers and specialists to be incredibly specific in theirsearches,” says Van Dyk. Lawyers also can share their accu-mulated knowledge more easily with colleagues in the samepractice areas, by referencing legal citations, court decisions,and winning strategies that have worked in the past.

Source: Adapted from Ruber (2000).

For Further Exploration: How is the practice of law differ-ent from the operations of other businesses? How can en-terprise knowledge portals benefit the entire legal system(courts, and so on)?

Richard Van Dyk, CIO of Smith Lyons, a Toronto-basedinternational law firm, knew exactly what kind of sys-

tem he was looking for to manage the firm’s documentsand knowledge. He had spent a year defining his require-ments and had composed a complex flowchart on hiswhiteboard. Smith Lyons (smithlyons.com) wanted to takethousands of pieces of information, give people differentviews into that information, and have a high level of linkmanagement. Van Dyk considered document managementtools to be too inflexible for the way lawyers practice law.“We needed a flexible environment that we could massageand manipulate and that would allow people to continueworking as they have,” says Van Dyk.

“Lawyers are basically document generators,” he says.“Due to time constraints, they spend more time collectingdocuments than organizing them.” Because the firm’s 550attorneys and support specialists each had a distinct work-ing methodology, often reflecting the requirements of aspecific area of practice, Van Dyk knew they would resenthaving a rigid system they could not easily personalize.

The profusion of document management, knowledgemanagement, and portal systems makes finding the rightproduct difficult. Each has its strengths and weaknesses.Organizations coming from a document-centric perspec-tive, like Smith Lyons, need to organize and manage con-tent at the back end while developing highly customizedindividual user interfaces at the front end.

The solution that best met Van Dyk’s criteria was theHyperwave Information Portal from Hyperwave Informa-tion Management of Westford, Massachusetts. “What I

IT At Work 10.3PORTAL OPENS THE DOOR TO LEGAL KNOWLEDGE

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Knowledge Management Suites. Knowledge management suites are com-plete knowledge management solutions out-of-the-box. They integrate thecommunications, collaboration, and storage technologies into a single conven-ient package. A knowledge management suite must still access internal data-bases and other external knowledge sources, so some integration is required tomake the software truly functional. Knowledge management suites are power-ful approaches to developing a KMS because they offer one user interface, onedata repository, and one vendor.

IBM/Lotus offers an extensive range of knowledge management products:the Domino platform, QuickPlace and Sametime, Discovery Server and Learn-ing Space, as well as the WebSphere portal. See IT At Work 10.4 to learn howCommerce Bank implemented a knowledge management system based on theIBM/Lotus platform.

Several vendors also provide fairly comprehensive sets of tools for KM ini-tiatives, which include Dataware Knowledge Management Suite, KnowledgeXby KnowledgeX, Inc., and many others. Autonomy Knowledge ManagementSuite offers document categorization and workflow integration. Microsoft pro-vides central components of knowledge management solutions, and is workingon developing an encompassing KM framework. Some enterprise informationsystems vendors, such as SAP, PeopleSoft, and Oracle are developing knowledge-management-related technologies as a platform for business applications. SiebelSystems is repositioning itself as a business-to-employee knowledge manage-ment platform.

CONSULTING FIRMS. All of the major consulting firms (Accenture, Ernst &Young, and so on) have massive internal knowledge management initia-tives. Usually these become products after they succeed internally and provideassistance in establishing knowledge management systems and measuring theireffectiveness. Consulting firms also provide some direct, out-of-the-box propri-etary systems for vertical markets. Most of the major consulting firms definetheir knowledge management offerings as a service. For more on consulting firmactivities and products, see McDonald and Shand (2000).

KNOWLEDGE MANAGEMENT APPLICATION SERVICE PROVIDERS. Applicationservice providers (ASPs) have evolved as a form of KMS outsourcing on theWeb. There are many ASPs for e-commerce on the market.

For example, Communispace is a high-level ASP collaboration system thatfocuses on connecting people to people (not just people to documents) to achievespecific objectives, regardless of geographic, time, and organizational barriers. Asa hosted ASP solution, it is easy to rapidly deploy within organizations. Unlikeconventional KM systems that organize data and documents, or chat rooms wherepeople simply swap information, Communispace contains a rich assortment ofinteractions, activities, and tools that connect people to the colleagues who canbest help them make decisions, solve problems, and learn quickly. Communispaceis designed to build trust online. It attempts to make a community self-consciousabout taking responsibility for its actions and knowledge. Its Climate componenthelps participants to measure and understand how people are feeling about thecommunity. The Virtual Café gives dispersed employees a way to meet and learnabout each other through pictures and profiles.


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Introduced in 2000, Wow Answer Guide provides acentral repository of knowledge about all bank transac-tions, helps employees learn a process and respond to cus-tomer inquiries, and stores information electronically. Inaddition, the system allows employees to register for thebank’s continuing education courses.

The complete Wow Answer Guide contains more than400 applications, and Commerce plans to add even more,such as a customer relationship management system. Theflexibility of the platform simplifies application develop-ment process and allows adding new features and expand-ing functionality with minimal investments of time and ef-fort. By drawing on the power of the Domino platform,Commerce Bank created workflow-based applications thatstreamline internal knowledge sharing and that route dataand information to the appropriate employees within theorganization. This dramatically reduces the completiontime for approval-intensive transactions, improves thebank’s capacity, and minimizes labor costs.

“[Wow Answer Guide] is especially good for the green as-sociate, or the veteran, who is still learning how to process anew product,” says Allison. ”We don’t want our associateson a scavenger hunt to get the correct information.”

Commerce Bank realized that knowledge managementwould be beneficial not only to the bank’s employees, butalso to the bank’s clients. “We wanted to put information inour customers’ hands so they could conduct [online] trans-actions with confidence,” said Allison. In the summer of2000, Commerce Bank deployed a new version of Wow An-swer Guide that empowered the bank’s online customers.

Knowledge management at Commerce Bank proved tobe an effective investment. According to Allison, the appli-cation has saved the bank $20,000 per week, or approxi-mately $1 million a year. In fact, the bank achieved a re-turn on investment within a month of launching WowAnswer Guide.

Source: Adapted from Amato-McCoy (2003).

For Further Exploration: How do knowledge require-ments of bank employees differ from those of bankcustomers? How would these differences influence thefunctionality of knowledge management systems designedto serve these two groups of users?

Commerce Bank (commerceonline.com) is a $15.4 billionfinancial institution that is quickly growing to become

a dominant player in the financial services market ofPhiladelphia and southern New Jersey. During 30 years ofits existence, it has developed a network of 214 branchesand made ambitious plans for continuous growth. Com-merce Bank names itself “America’s Most ConvenientBank.” It lives up to that name by maintaining a strongbanking network and by empowering each branch to makebusiness decisions in an effort to better meet the needs ofits customers.

While undergoing explosive growth, Commerce Bankencouraged its associates to learn all about the customersand the right ways to service them. However, the companyrealized that its most important asset, knowledge, waslocked away in the file cabinets and in the heads of its as-sociates. In order to support this initiative, CommerceBank needed to tap into that knowledge and find a way totrain employees consistently and conveniently across theentire branch network.

The first step for new employees is Commerce Univer-sity, a boot camp where they are instilled with the funda-mentals of customer service. But the program covers onlya few of the range of issues that an associate might en-counter.

The need for knowledge management at CommerceBank was apparent. Jack Allison, VP of Systems Develop-ment, saids, “We had folks in administration that couldspend 70 percent of their time answering calls and clarify-ing answers for branches. At times, we could wait weeksor months for the right answer to certain questions.Knowing that training may not give answers for everyscenario, we needed to give associates a tool that couldhelp them find any answer to any topic at any time.”

Commerce Bank envisioned a solution—a workflow-based knowledge management system that could provideinstant answers to questions for the bank’s employees andonline customers. To make this vision a reality, Commercechose to develop a system based on IBM’s Lotus Notes,which the bank had been using since 1995. Using IBM’sDomino server, the Lotus Notes client, and an applicationdevelopment toolkit, Commerce Bank created a full-fledged knowledge management system, called WowAnswer Guide.

IT At Work 10.4FINDING THE RIGHT ANSWERS WITHKNOWLEDGE MANAGEMENT

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A recent trend among application service providers is to offer a completeknowledge management solution, including a KM suite and the consulting toset it up.

Since a knowledge management system is an enterprise system, it must be inte-grated with other enterprise and other information systems in an organization.Obviously, when it is designed and developed, it cannot be perceived as anadd-on application. It must be truly integrated into other systems. Through thestructure of the organizational culture (changed if necessary), a knowledgemanagement system and its activities can be directly integrated into a firm’s busi-ness processes. For example, a group involved in customer support can captureits knowledge to provide help on customers’ difficult problems. In this case, help-desk software would be one type of package to integrate into a KMS, especiallyinto the knowledge repository.

Since a KMS can be developed on a knowledge platform consisting of com-munication, collaboration, and storage technologies, and most firms alreadyhave many such tools and technologies in place, it is often possible to developa KMS in the organization’s existing tools (e.g., Lotus Notes/Domino Server).Or, an enterprise knowledge portal can provide universal access and an inter-face into all of an individual’s relevant corporate information and knowledge.In this case, the KMS effort would provide the linkage for everyone into theentire enterprise information system.

In the remainder of this section, we look at how KM systems can be inte-grated with other types of business information systems.

INTEGRATION WITH DECISION SUPPORT SYSTEMS (DSS). Knowledge manage-ment systems typically do not involve running models to solve problems,which is an activity typically done in decision support systems. However, sincea knowledge management system provides help in solving problems by apply-ing knowledge, part of the solution may involve running models. A KMS couldintegrate into an appropriate set of models and data and activate them, whena specific problem may call for it.

INTEGRATION WITH ARTIFICIAL INTELLIGENCE. Knowledge management has anatural relationship with artificial intelligence (AI) methods and software,though knowledge management, strictly speaking, is not an artificial intelligencemethod. There are a number of ways in which knowledge management andartificial intelligence can integrate. For example, if the knowledge stored in aKMS is to be represented and used as a sequence of if-then-else rules, then anexpert system becomes part of the KMS (see Rasmus, 2000). An expert systemcould also assist a user in identifying how to apply a chunk of knowledge inthe KMS.

Much work is being done in the field of artificial intelligence relating toknowledge engineering, tacit-to-explicit knowledge transfer, knowledgeidentification, understanding, and dissemination, and so on. Companies areattempting to realign these technologies and resultant products with knowledgemanagement. The AI technologies most often integrated with knowledge man-agement are intelligent agents, expert systems, neural networks, and fuzzy logic.Several specific methods and tools were described earlier.

Integration ofKM Systems with

Other BusinessInformation

Systems

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10.6 ROLES OF PEOPLE IN KNOWLEDGE MANAGEMENT 471

INTEGRATION WITH DATABASES AND INFORMATION SYSTEMS. Since a KMSutilizes a knowledge repository, sometimes constructed out of a database systemor an electronic document management system, it can automatically integrateto this part of the firm’s information system. As data and information updatesare made, the KMS can utilize them. Knowledge management systems alsoattempt to glean knowledge from documents and databases (knowledge dis-covery in databases) through artificial intelligence methods, as was describedearlier.

INTEGRATION WITH CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS. Cus-tomer relationship management (CRM) systems help users in dealing withcustomers. One aspect is the help-desk notion described earlier. But CRM goesmuch deeper. It can develop usable profiles of customers, and predict their needs,so that an organization can increase sales and better serve its clients. A KMS cancertainly provide tacit knowledge to people who use CRM directly in workingwith customers.

INTEGRATION WITH SUPPLY CHAIN MANAGEMENT SYSTEMS. The supply chainis often considered to be the logistics end of the business. If products do notmove through the organization and go out the door, the firm will fail. So it isimportant to optimize the supply chain and manage it properly. As discussed inChapter 8, supply chain management (SCM) systems attempts to do so. SCMcan benefit through integration with KMS because there are many issues andproblems in the supply chain that require the company to combine both tacitand explicit knowledge. Accessing such knowledge will directly improve supplychain performance.

INTEGRATION WITH CORPORATE INTRANETS AND EXTRANETS. Communicationand collaboration tools and technologies are necessary for KMS to function. KMSis not simply integrated with the technology of intranets and extranets, but istypically developed on them as the communications platform. Extranets arespecifically designed to enhance the collaboration of a firm with its suppliers andsometimes with customers. If a firm can integrate its KMS into its intranets andextranets, not only will knowledge flow more freely, both from a contributorand to a user (either directly or through a knowledge repository), the firm canalso capture knowledge directly with little user involvement, and can deliver itwhen the system “thinks” that a user needs knowledge.

10.6 ROLES OF PEOPLE IN KNOWLEDGE MANAGEMENT

Managing a knowledge management system requires great effort. Like any otherinformation technology, getting it started, implemented, and deployed requiresa champion’s effort. Many issues of management, people, and culture must beconsidered to make a knowledge management system a success. In this section,we address those issues.

Managing the knowledge repository typically requires a full-time staff, similarto a reference-library staff. This staff examines, structures, filters, catalogues, andstores knowledge so that it is meaningful and can be accessed by the people who

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need it. The staff assists individuals in searching for knowledge, and performs“environmental scanning”: If they identify specific knowledge that an employeeor client might need, they send it directly to them, thus adding value to theorganization. (This is standard procedure for Accenture knowledge managementpersonnel.) Finally, the knowledge repository staff may create communities ofpractice (see Minicase 1) to gather individuals with common knowledge areas toidentify, filter, extract, and contribute knowledge to a knowledge repository.

Most of the issues concerning the success, implementation, and effective useof a knowledge management system are people issues. And since a knowledgemanagement system is an enterprisewide effort, many people need to be involvedin it (Robb, 2003). They include the chief knowledge officer (CKO), the CEO, theother officers and managers of the organization, members and leaders of com-munities of practice, KMS developers, and KMS staff. Each person or group hasan important role in either the development, management, or use of a KMS. Byfar, the CKO has the most visible role in a KMS effort, but the system cannotsucceed unless the roles of all the players are established and understood. Ensur-ing that a KM team is properly constituted is therefore an essential factor in thesuccess of any KM initiative (Robb, 2003).

Knowledge management projects that involve establishing a knowledge envi-ronment conducive to the transfer, creation, or use of knowledge attempt tobuild cultural receptivity. These attempts are centered on changing the behaviorof the firm to embrace the use of knowledge management. Behavioral-centricprojects require a high degree of support and participation from the senior man-agement of the organization to facilitate their implementation. Most firms devel-oping knowledge management systems have created a knowledge managementofficer, a chief knowledge officer (CKO), at the senior level. The objectivesof the CKO’s role are to maximize the firm’s knowledge assets, design andimplement knowledge management strategies, effectively exchange knowledgeassets internally and externally, and promote system use.

A chief knowledge officer must do the following (adapted from Duffy, 1998):

● Set strategic priorities for knowledge management.

● Establish a knowledge repository of best practices.

● Gain a commitment from senior executives to support a learning environment.

● Teach information seekers how to ask better and smarter questions.

● Establish a process for managing intellectual assets.

● Obtain customer satisfaction information in near real time.

● Globalize knowledge management.

The CKO is responsible for defining the area of knowledge within the firmthat will be the focal point, based on the mission and objectives of the firm(Davis, 1998). The CKO is responsible for standardizing the enterprisewidevocabulary and for controlling the knowledge directory. This is critical in areasthat must share knowledge across departments, to ensure uniformity. CKOsmust get a handle on the company’s repositories of research, resources, andexpertise, including where they are stored and who manages and accesses them.(That is, the CKO must perform a knowledge audit.) Then the CKO must encour-age “pollination” (sharing of knowledge) among disparate workgroups withcomplementary resources.

The ChiefKnowledge Officer

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The CKO is responsible for creating an infrastructure and cultural environ-ment for knowledge sharing. He or she must assign or identify the knowledgechampions within the business units. The CKO’s job is to manage the contenttheir group produces (e.g., the Chrysler Tech Clubs in Minicase 1), continuallyadd to the knowledge base, and encourage their colleagues to do the same. Suc-cessful CKOs should have the full and enthusiastic support of their managersand of top management. Ultimately, the CKO is responsible for the entireknowledge management project while it is under development, and then formanagement of the system and the knowledge once it is deployed.

Briefly, vis a vis knowledge management, the CEO is responsible for champi-oning the KM effort. He or she must ensure that a competent and capable CKOis found and that the CKO can obtain all the resources (including access to peo-ple with knowledge sources) needed to make the project a success. The CEOmust also gain organization-wide support for the contribution to and use of theKMS. The CEO must also prepare the organization for the cultural changes thatare expected to occur when the KMS is implemented. Support for the KMS andthe CKO is the critical responsibility of the CEO.

The various other officers in the organization generally must make resourcesavailable to the CKO so that he or she can get the job done. The chief financialofficer (CFO) must ensure that the financial resources are available. The chiefoperating officer (COO) must ensure that people begin to embed knowledge man-agement practices into their daily work processes. There is a special relationshipbetween the CKO and chief information officer (CIO). Usually the CIO is respon-sible for the IT vision of the organization and for the IT architecture, includingdatabases and other potential knowledge sources. The CIO must cooperate withthe CKO in making these resources available. KMSs are expensive propositions,and it is wise to use existing systems if they are available and capable.

Managers must also support the KM effort and provide access to sources ofknowledge. In many KMSs, managers are an integral part of the communitiesof practice.

The success of many KM systems has been attributed to the active involve-ment of the people who contribute to and benefit from using the knowledge.Consequently, communities of practice have appeared within organizationsthat are serious about their knowledge management efforts. As discussed ear-lier, a community of practice (COP) is a group of people in an organiza-tion with a common professional interest. Ideally, all the KMS users shouldeach be in at least one COP. Creating and nurturing COPs properly is one keyto KMS success.

In a sense, a community of practice “owns” the knowledge that it con-tributes, because it manages the knowledge on its way into the system, and asowner, must approve modifications to it. The community is responsible for theaccuracy and timeliness of the knowledge it contributes and for identifying itspotential use.

A number of researchers have investigated how successful COPs form andfunction. One study, by Storck and Hill (2000), investigated one of the earliestcommunities of practice, at Xerox. When established at Xerox, the COP was anew organizational form. The word community captured the sense of responsible,independent action that characterized the group, which continued to function

CEO, Officers, and Managers ofthe Organization

Communities of Practice

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within the standard boundaries of the large organization. Management sponsoredthe community, but did not mandate it. Community members were volunteers.For more on communities of practice, see Barth (2000a), Cothrel and Williams(1999a, 1999b), Eisenhart (2000), and Smith and McKeen (2003).

KMS developers are the team members who actually develop the system. Theywork for the CKO. Some are organizational experts who develop strategies topromote and manage the organizational culture shift. Others are involved insystem software and hardware selection, programming, testing, deploying, andmaintaining the system. Still others initially are involved in training users.Eventually the training function moves to the KMS staff.

Enterprisewide KM systems require a full-time staff to catalogue and managethe knowledge. This staff is either located at the firm’s headquarters or dispersedthroughout the organization in the knowledge centers. Most large consultingfirms have more than one knowledge center.

Earlier we described the function of the staff to be similar to that of refer-ence librarians. They actually do much more. Some members are functional-area experts who are now cataloguing and approving knowledge contributions,and pushing the knowledge out to clients and employees who they believe canuse the knowledge. These functional experts may also work in a liaison rolewith the functional areas of the communities of practice. Others work with usersto train them on the system or help them with their searches. Still others workon improving the system’s performance by identifying better methods withwhich to manage knowledge. For example, Ernst & Young has 250 people man-aging the knowledge repository and assisting people in finding knowledge at itsCenter for Business Knowledge. Some staff members disseminate knowledge,while others are liaisons with the forty practice areas. They codify and storedocuments in their areas of expertise (see Hansen et al., 1999).

KMS Developers

KMS Staff

KnowledgeManagement

Valuation

10.7 ENSURING SUCCESS OF KM EFFORTS

Organizations can gain several benefits from implementing a knowledge man-agement strategy. Tactically, they can accomplish some or all of the following:reduce loss of intellectual capital due to people leaving the company; reducecosts by decreasing the number of times the company must repeatedly solve thesame problem, and by achieving economies of scale in obtaining informationfrom external providers; reduce redundancy of knowledge-based activities;increase productivity by making knowledge available more quickly and easily;and increase employee satisfaction by enabling greater personal developmentand empowerment. The best reason of all may be a strategic need to gain acompetitive advantage in the marketplace (Knapp, 1998).

In general, companies take either an asset-based approach to knowledge man-agement valuation or one that links knowledge to its applications and businessbenefits (Skyrme and Amidon, 1998). The former approach starts with the iden-tification of intellectual assets and then focuses management’s attentionon increasing their value. The second uses variants of a balanced scorecard, wherefinancial measures are balanced against customer, process, and innovation

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measures. Among the best-developed financial measurement methods in use arethe balanced-scorecard approach, Skandia’s Navigator, Stern Stewart’s economicvalue added (EVA), M’Pherson’s inclusive valuation methodology, the return onmanagement ratio, and Levin’s knowledge capital measure. See Skyrme andAmidon (1998) for details on how these measures work in practice.

Another method of measuring the value of knowledge is to estimate its priceif it was offered for sale. Most firms are reluctant to sell knowledge, unless theyare expressly in the business of doing so. Generally a firm’s knowledge is an assetthat has competitive value, and if it leaves the organization, the firm loses its com-petitive advantage. However, it is possible to price the knowledge and the accessto the knowledge in order to make it worth a firm’s while to sell it. For exam-ple, American Airlines’ Decision Technologies Corp. grew from a small internalanalysis team in the 1970s. Initially the team was created to solve problems andprovide decision support to American Airlines only. As it grew, it became an inde-pendent corporation within AMR Corp., and it began to provide consulting andsystems to other airlines, including American’s competitors. AMR evidently haddecided that the revenue it could obtain by selling some knowledge overrode anycompetitive advantage it would lose by doing so. The major consulting firms arein the business of selling expertise. Their knowledge management efforts, whichoften began as internal systems, evolved into quite valuable systems that theirclients use on a regular basis.

Success indicators with respect to knowledge management are similar tothose for assessing the effectiveness of other business-change projects. Theyinclude growth in the resources attached to the project, growth in the volumeof knowledge content and usage, the likelihood that the project will survivewithout the support of a particular individual or individuals, and some evidenceof financial return either for the knowledge management activity itself or forthe entire organization (Davenport et al., 1998).

There are in general two types of measures that can be used to assess theeffectiveness of a KM initiative: results-oriented and activity-oriented (O’Dell etal., 2003). The results-oriented measures are financial in nature and mightinclude such things as increase in goods sold. The activities-based measures con-sider how frequently users are accessing knowledge or contributing to knowl-edge (O’Dell et al., 2003).

FINANCIAL METRICS. Even though traditional accounting measures are incom-plete for measuring KM, they are often used as a quick justification for a knowl-edge management initiative. Returns on investment (ROIs) are reported to rangefrom 20:1 for chemical firms to 4:1 for transportation firms, with an average of12:1, based on the knowledge management projects assisted on by one consult-ing firm (Abramson, 1998). In order to measure the impact of knowledge man-agement, experts recommend focusing KM projects on specific business problemsthat can be easily quantified. When the problems are solved, the value and ben-efits of the system become apparent and often can be measured (MacSweeney,2002).

At Royal Dutch/Shell group, the return on investment was explicitly doc-umented: The company had invested $6 million in a Knowledge ManagementSystem in 1999 and within two years obtained $235 million in reduced costsand new revenues (King, 2001). Hewlett-Packard offers another exampleof documented financial returns. Within six months of launching its @HP

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companywide portal in October 2000, Hewlett-Packard realized a $50 millionreturn on its initial investment of $20 million. This was largely due to a reduc-tion in volume of calls to internal call centers and to the new paperlessprocesses (Roberts-Witt, 2002).

The financial benefit might be perceptual, rather than absolute, but it neednot be documented in order for the KM system to be considered a success.

NONFINANCIAL METRICS. Traditional ways of financial measurement may fallshort when measuring the value of a KMS, because they do not consider intellec-tual capital an asset. Therefore there is a need to develop procedures for valuingthe intangible assets of an organization, as well as to incorporate models of intel-lectual capital that in some way quantify innovation and the development andimplementation of core competencies.

When evaluating intangibles, there are a number of new ways to view cap-ital. In the past, only customer goodwill was valued as an asset. Now the fol-lowing are also included (adapted from Allee, 1999):

● External relationship capital: how an organization links with its partners,suppliers, customers, regulators, and so on

● Structural capital: systems and work processes that leverage competitive-ness, such as information systems, and so on

● Human capital: the individual capabilities, knowledge, skills, and so on, thatpeople have

● Social capital: the quality and value of relationships with the larger society

● Environmental capital: the value of relationships with the environment

For example, a knowledge management initiative undertaken by PartnersHealthCare System, Inc. has not resulted in quantifiable financial benefits, buthas greatly increased the social capital of the company. The knowledge man-agement system for physicians implemented by Partners reduced the number ofserious medication errors by 55 percent at some of Boston’s most prestigiousteaching hospitals. Calculating return on investment for such a system turns outto be an extremely difficult proposition, which is why only a small fraction ofhospitals use similar systems. While the company is unable to determine howthe system affects its bottom line, it is willing to justify the costs based on thesystem’s benefits to the society (Melymuka, 2002).

No system is infallible. There are many cases of knowledge management fail-ing. Estimates of KM failure rates range from 50 percent to 70 percent, wherea failure is interpreted to mean that all of the major objectives were not metby the effort (Ambrosio, 2000).

Some reasons for failure include having too much information that is not eas-ily searchable (Steinberg, 2002) and having inadequate or incomplete informa-tion in the system so that identifying the real expertise in an organization becomesfoggy (Desouza, 2003). Failure may also result from an inability to capture andcategorize knowledge as well as from the over management of the KM processsuch that creativity and communities of practice are stifled (Desouza, 2003). Otherissues include lack of commitment (this occurred at a large Washington, D.C.,constituent lobbying organization), not providing incentive for people to use thesystem (as occurred at Pillsbury Co.; see Barth, 2000b, and Silver, 2000), and an

Causes of KM Failure

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over-emphasis on technology at the expense of larger knowledge and peopleissues (Hislop, 2002).

IT At Work 10.5 illustrates how Frito-Lay narrowly avoided failure of its KMS.

To increase the probability of success of knowledge management projects, com-panies must assess whether there is a strategic need for knowledge managementin the first place. The next step is to determine whether the current process ofdealing with organizational knowledge is adequate and whether the organiza-tion’s culture is ready for procedural changes. Only when these issues areresolved, should the company consider technology infrastructure and decide ifa new system is needed. When the right technological solution is chosen, it

are not on the front line, their view of what is valuable isdifferent from those running 100 miles an hour in thefield.”

Frito-Lay learned valuable lessons from that mistake andchose to redesign the system. However, at this stage, it notonly needed to add the missing features, but also had to winback the sales force and convince them that the redesignedsystem would indeed streamline their work by facilitatingknowledge exchange. The team of developers spent the fol-lowing four months working with salespeople to transformthe prototype into a system they would embrace.

The redesigned portal has been a big success. Better col-laboration has helped to significantly reduce turnover, whileimproved access to knowledge-base resources has enabledsalespeople to present themselves as consultants with im-portant knowledge to share. Today, the knowledge manage-ment portal is used for daily communication, call reporting,weekly cross-country meetings, training, document sharing,and access to data and industry news. The pilot team ex-ceeded its sales plan for 2000 and grew its business at a ratealmost twice that of Frito-Lay’s other customer teams. TheKMS concept is now being tailored to three other Frito-Laysales teams and departments, and other divisions of PepsiCohave expressed interest in it as well.

Source: Adapted from Melymuka (2001).

For Further Exploration: Why did Frito-Lay find it dif-ficult to correct the mistake identified in a late stage of thedevelopment cycle? If you were responsible for the devel-opment of a knowledge management system, what specificactions would you take to ensure that it satisfies the needsof end users?

In late 1990s, Frito-Lay Inc., a Plano, Texas-based snackfoods division of PepsiCo Inc., realized that its sales teams

had difficulties collaborating and finding pertinent informa-tion. These difficulties led to frustration, declining perform-ance, and rising turnover rates. To alleviate these problemsand boost performance, Frito-Lay (fritolay.com) envisioned aWeb-based portal that would combine tools for knowledgemanagement and collaboration. The company engaged Dal-las-based consulting firm, Navigator Systems Inc., to developthe portal.

Frito-Lay selected a pilot sales team to describe thekinds of knowledge they needed. The requests rangedfrom simple information, such as why Frito-Lay merchan-dises Lays and Ruffles products in one part of a store andDoritos in another, to more complex questions on whatmotivates shoppers as they move through a store. To col-lect the required knowledge, developers searched Frito-Lay’s databases in departments such as marketing, sales,and operations. They also referenced external sourcessuch as trade publications and industry organizations, andidentified in-house subject matter experts.

In October 1999, a working prototype of the system waspresented to the pilot sales team. Only then did Frito-Laydiscover that in the quest for speed, a classic and cripplingmistake had been made: The development team had failedto obtain sufficient input from the sales team and did notinvolve users in the design process. The prototype had thepotential to be marginally useful to any sales team, but itwas not specific enough to offer fundamental benefits forthe pilot team. Therefore, the pilot team was reluctant toaccept the system. “Conceptually, it was a great idea,” saidFrito-Lay sales team leader Joe Ackerman. “But when folks

IT At Work 10.5ESCAPING A KNOWLEDGE MANAGEMENT FAILURE

Factors Leading to KM Success

MKT

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becomes necessary to properly introduce the system to the entire organizationand to gain participation of every employee (Kaplan, 2002).

A case study of Nortel Network’s KM initiative indicated that there were threemajor issues that influenced the success of KM: (1) having effective managerialinfluence in terms of coordination, control and measurement, project manage-ment, and leadership; (2) having key resources such as financial resources andcross-functional expertise, and (3) taking advantage of technological opportunities.Together, these enabled a well-defined process, the understanding of people issues,and the successful incorporation of technology (Massay et al., 2002). Other factorsthat may lead to knowledge management project success are shown in Table 10.2.

Effective knowledge sharing and learning requires cultural change withinthe organization, new management practices, senior management commitment,and technological support. We recognize that organizational culture must shiftto a culture of sharing. This should be handled through strong leadership at thetop, and by providing knowledge management tools that truly make people’sjobs better. As far as encouraging system use and knowledge sharing goes, peo-ple must be properly motivated to contribute knowledge. The mechanism fordoing so should be part of their jobs, and their salaries should reflect this. Peo-ple must also be motivated to utilize the knowledge that is in the KMS. Again,this should be part of their jobs and their reward structures.

As more companies develop their knowledge management capabilities, someof the ground rules are becoming apparent. Success depends on a clear strate-gic logic for knowledge sharing, the choice of appropriate infrastructure (tech-nical or non-technical), and an implementation approach that addresses the typ-ical barriers: motivation to share knowledge, resources to capture and synthesizeorganizational learning, and ability to navigate the knowledge network to findthe right people and data.

TABLE 10.2 Major Factors that Lead to KM Project Success

● A link to a firm’s economic value, to demonstrate financial viability and maintain executive sponsorship.● A technical and organizational infrastructure on which to build.● A standard, flexible knowledge structure to match the way the organization performs work and uses knowl-

edge. Usually, the organizational culture must change to effectively create a knowledge-sharing environment.● A knowledge-friendly culture leading directly to user support.● A clear purpose and language, to encourage users to buy into the system. Sometimes simple, useful knowledge

applications need to be implemented first.● A change in motivational practices, to create a culture of sharing.● Multiple channels for knowledge transfer—because individuals have different ways of working and expressing

themselves. The multiple channels should reinforce one another. Knowledge transfer should be easily accom-plished and be as unobtrusive as possible.

● A level of process orientation to make a knowledge management effort worthwhile. In other words, new, im-proved work methods can be developed.

● Nontrivial motivational methods, such as rewards and recognition, to encourage users to contribute and useknowledge.

● Senior management support. This is critical to initiate the project, to provide resources, to help identify impor-tant knowledge on which the success of the organization relies, and to market the project.

Source: Adapted from Davenport et al., 1998.

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While there are many positive outcomes of managing knowledge, as discussedin examples throughout this chapter, it would be short-sighted to not considerthe potential negative outcomes associated with reusing knowledge. As anexample, Henfridsson and Söderholm (2000) analyzed the situation that facedMrs. Fields cookies, as described in A Closer Look 10.1.

The case of Mrs. Fields illustrates that while organizations might achieve sig-nificant short-term gains through knowledge management systems, they must notneglect to allow for the creative process of new knowledge creation, lest theyeventually find themselves applying yesterday’s solutions to tomorrow’s problems.

For millennia we have known about the effective use of knowledge and howto store and reuse it. Intelligent organizations recognize that knowledge is anintellectual asset, perhaps the only one that grows over time, and when har-nessed effectively can sustain competition and innovation. Organizations can useinformation technology to perform true knowledge management. Leveraging anentire organization’s intellectual resources can have tremendous financialimpact.

With knowledge management, the definition is clear, the concepts areclear, the methodology is clear, the challenges are clear and surmountable, thebenefits are clear and can be substantial, and the tools and technology—though incomplete and somewhat expensive—are viable. Key issues are exec-utive sponsorship and measuring success. Technological issues are minimalcompared to these. Knowledge management is not just another expensivemanagement fad. Knowledge management is a new paradigm for how organ-izations work.

Mrs. Fields Cookies, a national chain of cookie stores,grew remarkably fast and successfully during the

early 1980s. A key aspect of the company’s strategy wasto provide expertise directly from the headquarters toevery store. As the number of stores increased, the onlyfeasible way to achieve such direct control was throughthe use of information systems that were designed tomimic the decision making of Mrs. Fields herself. Decision-making systems were placed in each store. The systemwould take input (such as the temperature, the day of theweek, the date, and so forth), would process the data, andwould provide, as output, information to each store man-ager about how many cookies of each type to bake eachhour. In essence, the software provided each store man-ager with explicit directions for planning each day’s pro-duction, sales, and labor scheduling, along with inventory

control and ordering. Because of the well functioningcomputer systems, which in principle were systemsdesigned to make Mrs. Fields tacit knowledge available toall stores, the company was able to successfully functionwith few managerial levels.

However, as the market began to change and consumersbecame more health conscious, Mrs. Fields was very slowto respond. In a sense, by embedding so much knowledgeinto systems that were incapable of adaptation, the organ-ization tied itself to a certain way of doing things and failedto engage in knowledge creation. That is, it failed to pickup the signals in the environment, which might have sug-gested a change in strategy or product focus. By the early1990s, the company had fallen into bankruptcy.

Source: Adapted from Henfridsson and Söderholm (2000).

A CLOSER LOOK10.1 ADAPTABILITY—A MISSING INGREDIENT

PotentialDrawbacks to

KnowledgeManagement

Systems

Closing Remarks

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➥ MANAGERIAL ISSUES

1. Organizational culture change. This issue is how can we change organiza-tional culture so that people are willing both to contribute knowledge to anduse knowledge from a KMS? There must be strong executive leadership,clearly expressed goals, user involvement in the system, and deployment ofan easy-to-use system that provides real value to employees. A viable rewardstructure for contributing and using knowledge must also be developed.

2. How to store tacit knowledge. This is extremely difficult. Most KMSs (basedon the network storage model) store explicit knowledge about the tacitknowledge that people possess. When the knowledgeable people leave anorganization, they take their knowledge with them. Since knowledge re-quires active use by the recipient, it is important for the person generatingknowledge to articulate it in a way that another, appropriately educatedperson can understand it.

3. How to measure the tangible and intangible benefits of KMS. There are anumber of ways to measure the value of intellectual assets and of providingthem to the organization, as discussed in Section 10.7.

4. Determining the roles of the various personnel in a KM effort. This issue isdescribed in Section 10.6.

5. The lasting importance of knowledge management. Knowledge managementis extremely important. It is not another management fad. If it is correctlydone, it can have massive impact by leveraging know-how throughout theorganization. If it is not done, or is not correctly done, the company will notbe able to effectively compete against another major player in the industrythat does KM correctly.

6. Implementation in the face of quickly changing technology. This is an im-portant issue to address regarding the development of many IT systems.Technology has to be carefully examined, and experiments done, to de-termine what makes sense. By starting now, an organization can get pastthe managerial and behavioral issues, which have greater impact on theeventual success (or not) of a KMS. As better and cheaper technology isdeveloped, the KMS can be migrated over to it, just as legacy systems havemigrated to the PC.

ON THE WEB SITE… Additional resources, including quizzes; online files ofadditional text, tables, figures, and cases; and frequently updated Web links tocurrent articles and information can be found on the book’s Web site.(wiley.com/college/turban).

KEY TERMSChief knowledge officer

(CKO) •••

Community of practice (COP) •••

Data mining •••

Explicit knowledge •••

Intellectual capital (intellectualassets) •••

Knowledge •••

Knowledge discovery in databases(KDD) •••

Knowledge management(KM) •••

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QUESTIONS FOR REVIEW 481

CHAPTER HIGHLIGHTS (Numbers Refer to Learning Objectives)

� Knowledge is different from information and data.Knowledge is information that is contextual, relevant,and actionable. It is dynamic in nature.

� Tacit (unstructured, sticky) knowledge is usually in thedomain of subjective, cognitive, and experiential learn-ing. Explicit (structured, leaky) knowledge deals withmore objective, rational, and technical knowledge, andis highly personal and hard to formalize.

� Knowledge management is a process that helps organ-izations identify, select, organize, disseminate, andtransfer important information and expertise that typ-ically reside within the organization in an unstruc-tured manner.

� Knowledge management requires a major transforma-tion in organizational culture to create a desire toshare (give and receive) knowledge, plus a commit-ment to KM at all levels of a firm.

� The knowledge management model involves the fol-lowing cyclical steps: create, capture, refine, store,manage, and disseminate knowledge.

� Standard knowledge management initiatives involvethe creation of knowledge bases, active process man-agement, knowledge centers, and collaborative tech-nologies.

� Knowledge management is an effective way for an or-ganization to leverage its intellectual assets.

� The two strategies used for knowledge management ini-tiatives are process approach and the practice approach.

� Communities of practice (COPs) provide pressure tobreak down the cultural barriers that hinder knowl-edge management efforts.

� A knowledge management system is generally devel-oped using three sets of technologies: communication,collaboration, and storage.

� A variety of technologies can make up a knowledgemanagement system: the Internet, intranets, data ware-housing, decision-support tools, groupware, and so on.Intranets are the primary means of displaying anddistributing knowledge in organizations.

� The chief knowledge office (CKO) is primarily respon-sible for changing the behavior of the firm to embracethe use of knowledge management and then manag-ing the development operation of a knowledge man-agement system.

� Knowledge management typically involves the coop-eration of managers, developers, KM staff, and users.

� Knowledge management systems can be purchased inwhole or in part from one of numerous software de-velopment companies and enterprise information sys-tems vendors, they can be acquired through majorconsulting firms, or can be outsourced to the applica-tion service providers (ASPs).

� Knowledge portals can be used to provide a centrallocation from which various KM applications aresearched.

� It is difficult to measure the success of a KMS. Tradi-tional methods of financial measurement fall short, asthey do not consider intellectual capital an asset. Non-financial metrics are typically used to measure thesuccess of a KM, yet some firms have been able todetermine financial payoffs.

Knowledge management system(KMS) •••

Knowledge repository •••

Knowware •••

Leaky knowledge •••

Model marts •••

Model warehouses •••

Practice approach •••

Process approach •••

Sticky knowledge •••

Tacit knowledge •••

QUESTIONS FOR REVIEW1. Discuss what is meant by an intellectual asset.

2. Define knowledge and knowledge management.

3. Define explicit knowledge. Why is it also called leaky?

4. Define tacit knowledge. Why is it also called sticky?

5. How can tacit knowledge be transferred or shared?

6. List some ways in which organizational culture canimpact on a knowledge management effort.

7. What is the primary goal of knowledge management?

8. Describe the process approach to knowledge manage-ment.

9. Describe the practice approach to knowledge manage-ment.

10. Describe the roles and responsibilities of the people in-volved in a knowledge management system, especiallythe CKO.

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QUESTIONS FOR DISCUSSION1. Why is the term knowledge so hard to define?

2. Describe and relate the different characteristics ofknowledge.

3. Explain why it is important to capture and manageknowledge.

4. Compare and contrast tacit knowledge and explicitknowledge.

5. Explain why organizational culture must sometimeschange before knowledge management is introduced.

6. How does knowledge management attain its primaryobjective?

7. How can employees be motivated to contribute to anduse knowledge management systems?

8. What is the role of a knowledge repository in knowl-edge management?

9. Explain the importance of communication and collab-oration technologies to the processes of knowledgemanagement.

10. Explain why firms adopt knowledge management ini-tiatives.

11. Explain the role of the CKO in developing a knowl-edge management system. What major responsibilitiesdoes he or she have?

12. Discuss some knowledge management success factors.

13. Why is it hard to evaluate the impacts of knowledgemanagement?

14. Explain how the Internet and its related technologies(Web browsers, intranets, and so on) enable knowl-edge management.

15. Explain the roles of a community of practice.

16. Describe an enterprise knowledge portal and explainits significance.

EXERCISES1. Make a list of all the knowledge management methods

you use during your day (work and personal). Whichare the most effective? Which are the least effective?What kinds of work or activities does each knowledgemanagement method enable?

2. Investigate the literature for information on the positionof CKO. Find out what percentage of firms with KM ini-tiatives have CKOs and what their responsibilities are.

3. Investigate the literature for new measures of success(metrics) for knowledge management and intellectualcapital. Write a report on your findings.

4. Describe how each of the key elements of a knowledgemanagement infrastructure can contribute to its success.

5. Based on your own experience or on the vendor’s infor-mation, list the major capabilities of a particular knowl-edge management product, and explain how it can beused in practice.

6. Describe how to ride a bicycle, drive a car, or make apeanut butter and jelly sandwich. Now, have someoneelse try to do it based solely on your explanation. Howcan you best convert this knowledge from tacit to explicit(or can’t you)?

7. Consider why knowledge-management systems wouldbe so important toa modern organization that firmswould initiate such systems.

GROUP ASSIGNMENTS1. Compare and contrast the capabilities and features of

electronic document management with those of collabo-rative computing and those of knowledge managementsystems. Each team represents one type of system. Pre-sent the ways in which these capabilities and featurescan create improvements for an organization.

2. Search the Internet for knowledge management prod-ucts and systems and create categories for them. Assignone vendor to each team. Describe the categories youcreated and justify them.

3. If you are working on a decision-making project in in-dustry for this course (or if not, use one from another

11. What is a community of practice?

12. List the steps in the cyclical model of knowledge man-agement. Why is it a cycle?

13. List the major knowledge management success factors.

14. Describe the role of IT in knowledge management.

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INTERNET EXERCISES 483

INTERNET EXERCISES1. How does knowledge management sup-

port decision making? Identify productsor systems on the Web that help organi-zations accomplish knowledge manage-ment. Start with brint.com, decision–support.net, and knowledgemanagement.

ittoolbox.com. Try one out and report your findings to theclass.

2. Try the KPMG Knowledge Management FrameworkAssessment Exercise at kmsurvey.londonweb.net and as-sess how well your organization (company or univer-sity) is doing with knowledge management. Are theresults accurate? Why or why not?

3. Search the Internet to identify sites dealing with knowl-edge management. Start with google.com, kmworld.com,and km-forum.org. How many did you find? Categorizethe sites based on whether they are academic, consult-

ing firms, vendors, and so on. Sample one of each anddescribe the main focus of the site.

4. Identify five real-world knowledge management suc-cess stories by searching vendor Web sites (use at leastthree different vendors). Describe them. How didknowledge-management systems and methods con-tribute to their success? What features do they share?What different features do individual successes have?

5. Search the Internet for vendors of knowledge manage-ment suites, enterprise knowledge portals, and out-of-the-box knowledge management solutions. Identify themajor features of each product (use three from each),and compare and contrast their capabilities.

6. J. D. Edwards ( jdedwards.com) developed a knowledgemanagement intranet initiative called the KnowledgeGarden. Access both the J. D. Edwards and MicrosoftWeb sites and investigate its current capabilities.

class or from work), examine some typical decisions inthe related project. How would you extract the knowl-edge you need? Can you use that knowledge in prac-tice? Why or why not?

4. Read the article by A. Genusa titled “Rx for Learning,”available at cio.com (February 1, 2001), which describes

Tufts University Medical School’s experience withknowledge management. Determine how these con-cepts and such a system could be implemented and usedat your college or university. Explain how each aspectwould work, or if not, explain why not.

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In 1980 Chrysler Corporation came back from near bank-ruptcy with innovative designs and a view of a sharedculture in design, development, and manufacturing. Thecompany began new ways of looking at its business, itssuppliers, and its workers. After the acquisition of Ameri-can Motors Corporation (AMC) in 1987, executives devel-oped and deployed advanced, dedicated platform designand production methods, which showed enormous poten-tial. Jack Thompson, the technology center developmentdirector, worked closely with Chairman Lee Iacocca on thedevelopment of a new, modern engineering and design fa-cility. Thompson designed the center around knowledge-sharing and productivity principles: open air, natural light,and escalators (people don’t talk on elevators).

In 1994 the tech center opened, providing a home for atransformed engineering culture. Two years later, the cor-porate headquarters was moved next to the tech center soexecutives could be nearby. By 2000, over 11,000 peoplewere working at the Auburn Hills, Michigan, center. InNovember 1998, Daimler-Benz became the majority ownerof Chrysler Corporation, renaming the company Daimler-Chrysler (daimlerchrysler.com). Chrysler’s fast, efficient, andinnovative nature, as a result of the extremely successfulplatform approach to design and engineering, led to thebuy-in—the largest merger in manufacturing history.

Platform production at DaimlerChrysler has teams ofengineers focused on a single type of car platform (smallcar, minivan, and so on), working on new models as a sys-tem from concept to production. Cars are designed by asingle team considering customer needs and preferences,as opposed to the standard practice of organizing the newdesigns by organizational functions (silos). Platform teamsof employees work and learn together focused on the prod-uct, with a payoff in market responsiveness, reduced cost,and increased quality. The Chrysler LH, the first model de-veloped with the platform approach, took 39 months toproduce; typically the time to market exceeds 50 months.

While the benefits were clear, Chrysler executives no-ticed that unexplained errors were popping up in the new

platforms (like leaving a moisture barrier out of car doors).There was an organizational memory problem: Mentoring andpeer support became limited. Informal and formal profes-sional collaboration had stopped. The same mistakes werebeing made, corrected, and repeated. People were notlearning about new developments in their core areas. Thetypical collaboration found among groups doing similarwork was sharply reduced, and so problems and solutionswere not being documented or shared.

Collaboration and communication needed to be re-established within groups with common training, interests,and responsibilities (design, engineering, body, engine,manufacturing, and so on). The goal was to reestablishthese links while becoming more competitive with evenfaster product-cycle times. Chrysler needed to institution-alize knowledge sharing and collaboration. In 1996Chrysler Corporation made knowledge management a vitalcondition for design and engineering, leading to dramaticimprovements in productivity.

First, engineers mapped out where the knowledge waswithin the organization (a knowledge audit). There weremany categories, or “buckets of knowledge,” ranging fromproduct databases to CAD/CAM systems to manufacturing,procurement, and supply vehicle test data. Within eachcategory, details were identified and codified. Sharingknowledge meant integrating these knowledge buckets,while resolving cultural issues that impeded sharing acrossplatform boundaries. Chrysler created informal cross-platform Tech Clubs, functionally organized communities ofpractice to reunite designers and engineers with peers fromother platform groups. Each community would then codifyits knowledge and provide mentoring and apprenticingopportunities for learning.

The Engineering Book of Knowledge (EBOK) is Chrysler’sintranet supporting a knowledge repository of process bestpractices and technical know-how to be shared and main-tained. It was initially developed by two engineeringmanagers but continues through encouraged employeeparticipation in grassroots (i.e., supported at the lower

Minicase 1DaimlerChrysler EBOKs with Knowledge Management

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MINICASE 1 485

levels of the organization) Tech Clubs. EBOK is written inGrapeVine (GrapeVine Technologies), running as a LotusNotes application, and is accessed with the Netscapebrowser and NewsEdge.

Knowledge is explored and entered into the EBOKthrough an iterative team approach: the Tech Clubs. Bestpractices are identified, refined, confirmed, and finally en-tered into the EBOK in a secure interactive electronic repos-itory. When an author proposes a best practice, users in theTech Club responsible for that area of knowledge react bycommenting on the knowledge through a discussion list.One manager, the Book Owner, is ultimately responsible forapproving new entries and changes to the book. The BookOwner joins the conversation. The author can respond tothe comments by either building a better case or goingalong with the discussion. Ultimately the Tech Club decides,and the Book Owner enters the new knowledge. The BookOwner is the individual who is ultimately responsible forthe accuracy of the book, and therefore approves entries to,modifications to, and deletions from the book.

The EBOK is DaimlerChrysler’s official design reviewprocess. The EBOK even contains best practices informa-tion about DaimlerChrysler’s competitors. DaimlerChryslerhas determined that EBOK is both a best practices tool (theprocess approach) and a collaboration tool (the practice ap-proach). DaimlerChrysler officials recognize that becausethe environment changes and new methods are being con-tinually developed, the EBOK will never be fully complete.The EBOK is a living book. The EBOK leverages technologyknowledge.

The EBOK is central to DaimlerChrysler’s new way ofworking. The plan is to have more than 5,000 users withaccess to 3,800 chapters, of which just over half were com-pleted by early 1999. Through the EBOK, DaimlerChryslerreconciled its platform problems and developed a technicalmemory while tracking competitive information, qualityinformation, and outside standards. Even though there isno central budget for books of knowledge and associatedprocesses, DaimlerChrysler is deploying knowledge inother departments such as manufacturing, finance, andsales and marketing.

The EBOK is only one of several initiatives that promoteand facilitate knowledge sharing at DaimlerChrysler. In

early 1999, soon after the merger, the company began aninformation-sharing project called ProBench. The objectiveof ProBench was to help Chrysler and Mercedes determinehow to best use each other’s manufacturing expertise. Ex-tensive collaboration enabled Chrysler to benefit from theengineering strengths of Mercedes, while Mercedes wasable to learn from Chrysler’s know-how in launching newvehicle models. One of the biggest accomplishments ofProBench was Chrysler’s decision to use a Mercedes’ supe-rior rear-wheel-drive automatic transmission on future ve-hicles. “We are able to save [$600 million in] investmentmoney, get variable costs down, and gain many other ad-vantages by not inventing the wheel twice,” says DieterZetsche, DaimlerChrysler’s Chief Executive Officer. Zetscheconcludes: “[Collaboration] has been a real value to us, andit is a very positive result of the merger.”

Sources: Adapted from Karlenzig (1999), Maynard (2001), anddaimlerchrysler.com.

Questions for Minicase 1

1. Platform design at DaimlerChrysler led directly to a re-duction in the time to market and in costs for new vehi-cles. Explain how it caused new problems.

2. What is meant by a community of practice? How didDaimlerChrysler leverage the knowledge within such acommunity?

3. Describe the Engineering Book of Knowledge (EBOK).Explain how it is updated by adding new knowledge ofpractice.

4. It has been said that “the proper role for all knowledgemanagement tools is to leverage technology in serviceto human thinking.” Explain this statement.

5. How successful was the knowledge management initia-tive at DaimlerChrysler?

6. Consider how a book of knowledge could impact an-other organization, ideally one with which you areaffiliated (e.g., your university, job, part-time job, fam-ily business). Describe the potential impacts, and list thebenefits. Would there be any organizational cultureissues to deal with? Why or why not?

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Chevron (chevron.com) wanted to explore, develop, adapt,and adopt knowledge management methods to leverage itsexpertise throughout the enterprise to maintain a compet-itive position in the marketplace. The improvementsgained from identifying, sharing, and managing intellec-tual assets can impact positively on drilling, office work,safety, and refineries. Improvements were generated byfocusing on process, culture, best practices, and technology,including Internet technology.

Chevron uses knowledge management in drilling, refin-ery maintenance and safety management, capital projectmanagement, and other areas. The electronic document-management system impacts on several different areas atChevron.

Drilling

Chevron adopted an organizational learning system (OLS)that improves drilling performance by sharing informationglobally. The system uses a simple software tool to capturelessons from the first wells in a new area, and then usesthat knowledge to drill the rest of the wells faster andcheaper. Well costs have dropped by 12 to 20 percent andcycle time has been reduced as much as 40 percent insome cases (offshore drilling vessels can cost up to$250,000 a day). Oil & Gas Consultants International

developed the OLS for Amoco. Chevron found it througha best-practices survey.

Refineries

The company uses knowledge management IS to maintainsix refineries. Sam Preckett, reliability-focused mainte-nance-system manager, is developing a process to improveinformation and knowledge sharing. Preckett and othersrealized that they were not effectively using the data andinformation already stored in Chevron’s enterprise infor-mation systems. Preckett has been developing an informalbest-practices methodology for maintenance by “trying tolearn how we do things.” Getting knowledge to users isonly part of the system; another part captures the tacitknowledge and experiences of workers. Chevron is tryingto motivate workers to participate. Preckett said that atChevron creative thinking is promoted from the executivelevel, which “allows him to do interesting things” toachieve efficiency gains through knowledge sharing.

Electronic Document Management

Another specific need under the knowledge managementumbrella was addressed by the DocMan system, initiated inDecember 1994 to improve the timeliness of document

Minicase 2Chevron’s Knowledge Management Initiatives Cook with Gas

You’ve noticed that Barbara and Jeremy spend quite a bitof time interviewing potential employees, and some quickWeb research reveals that average turnover of restaurantemployees for the past few years has been running over100 percent. This news is alarming to you, as you think ofall of the new information systems and technologies that

could help The Wireless Café run more efficiently. Howwill the staff ever develop system expertise if they stay lessthan a year?

1. What kinds of knowledge is The Wireless Café losingwith such a high turnover? Consider both tacit and ex-

Virtual Company AssignmentKnowledge Management at The Wireless Café

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VIRTUAL COMPANY ASSIGNMENT 487

access, management, and integration, and sharing of infor-mation among individual divisions to meet regulatory com-pliances. A long-standing application, DocMan works forthe Warren Petroleum Limited Partnership Mont Belvieucomplex in Texas (of which Chevron is a joint owner).

To handle cultural resistance to change, managementemphasized the benefits of the DocMan system: faster ac-cess to documents, elimination of wasted effort searchingfor documents, and assets protection. DocMan delivered a95 percent return on investment over its 5-year project life.The investment payout period was 1.1 years based on anannual savings of $480,000.

Capital Project Management

Through knowledge management, Chevron implementeda new standard methodology for capital project manage-ment. In one case, 60 companies shared data and practices,and so it was possible to compare performance to deter-mine which companies were best and why.

These remarkable achievements did not take placeovernight, but were a part of a continuous process thatstarted in 1985 with a focus on Total Quality Manage-ment training and benchmarking. By 2000, knowledgemanagement was established as a corporate value, virtualcollaboration among groups was practiced worldwide,and knowledge management became an important partof performance appraisals.

What have been the overall results? Improved manage-ment of knowledge was instrumental in reducing operat-

ing costs from $9.4 billion to $7.4 billion from 1992 to 1998and in reducing energy costs by $200 million a year. Dur-ing the 1990s, efforts like this were essential in reducingcosts, achieving productivity gains of over 50 percent (inbarrels of output per employee), and improving employeesafety performance more than 50 percent. Chevron nowcalls itself a learning organization (an organization capableof learning from its past experiences sure that’s a goodidea). Some gains from knowledge management atChevron are qualitative: Employees’ work is more inter-esting and challenging when it involves finding and apply-ing new knowledge. Jobs are potentially more fulfillingand more personally rewarding.

Sources: Adapted from Velker (1999), CIO.com (1999), and Silver-man et al. 2000).

Questions for Minicase 2

1. What is meant by a learning organization?

2. Describe the gains that Chevron experienced throughits knowledge management programs.

3. To what different areas did Chevron apply knowledgemanagement, and how successful were they?

4. Why is it important to document cost savings of knowl-edge management systems?

5. If dramatic payoffs can be achieved through knowledgemanagement (as with the DocMan system), why don’tmore companies do so?

plicit knowledge accumulated by employees in the dif-ferent positions. How important is this knowledge to thewell-being and long-term success of The Wireless Café?What can Barbara and Jeremy do about capturing it?

2. Using The Wireless Café’s Web site, match the jobs withinformation systems that The Wireless Café mightadopt. Try to rank the level of training or expertise youthink an employee needs to have before using the sys-tem on the job and determine whether online trainingwould be beneficial.

3. Discuss the problems of retaining organizational knowl-edge in an industry with high turnover. Is a knowledgemanagement effort cost-effective for The Wireless Café?What are some guidelines to help management decideon the level of knowledge capture and managementthey should practice?

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MIS - Chapter 10 - Knowledge Management