Quantified KM Value stories numbers 121 to 123 – ROI of knowledge retention

From this published article comes three examples of quantified value from KM.

Image from wikimedia commons

The article is entitled “Assessing the Business Value of Knowledge Retention Projects: Results of Four Case Studies”, and much of it comes from the work of Larry Todd Wilson, who operates a Knowledge Harvesting service.

Larry always tries to determine the ROI of the work he does, and he and his co-authors share the following 3 case stories:

The business result of harvesting (a senior forestry manager) expert’s knowledge was a single source for understanding how to manage delinquent accounts and how to respond to bad debt events, e.g., bankruptcy, collections, etc. The final deliverable was an interactive tool that was developed to capture and disseminate the key decisions relating to the management and response to delinquent/bad debt events. The estimated cost of developing the project was approximately $33,000, with a recognized benefit of $150,000. The immediate benefits to the company included not only improved productivity gains due to bad debt management practices being deployed, but also the ability to move forward without replacing the senior manager. The total estimated benefit over a three-year timeframe is approximately $450,000, with a net present value of approximately $334,000. Therefore, the return on investment of this project was approximately 10:1.

The deliverable captured the expertise from the technical (call-centre) expert and developed an interactive tool around the key decisions relating to the call center, eGain. The estimated cost of developing the project was approximately $12,000 with a recognized benefit of $41,000. The total estimated benefit over a three-year timeframe is approximately $124,000, with a net present value of approximately $89,000. Therefore, the return on investment of this project was reported as approximately 6:1. The efficiency gains from this project would include transferring 60% of the work from a high-cost employee to a lower-cost employee. 

The deliverable captured the expertise from the Senior Systems Analyst and developed an interactive tool around the key decisions relating to troubleshooting the (IT portfolio management) tool. The estimated cost of developing the project was approximately $13,000 with a recognized benefit of $69,000. The total estimated benefit over a three-year timeframe is approximately $207,000, with a net present value of approximately $156,000. Therefore, the return on investment of this project was reported at a greater than expected ratio of 10:1. Since the expert quickly adapted to the harvesting process, it took less time for the harvester to capture his valuable information; hence, reducing the time and cost required for the harvesting process.

View Original Source (nickmilton.com) Here.

Quanitified KM value story #120 – Petroleum Development Oman

Our list of KM Value stories reaches number 120, with this story from Petroleum Development Oman (PDO). See the complete list.

Image from wikimedia commons
The story was presented last week at the UK KM Summit by Hank Malik, who gave an excellent presentation on how standard project-based Knowledge Management has been developed and deployed at PDO.  The elements of KM Hank described included 
  • Lesson Learning, 
  • Best practices, 
  • Knowledge Assets, 
  • Content Management, 
  • Knowledge Retention and 
  • Communities of Practice; 
in fact all the core elements of project-based KM, plus a complete Governance layer and a Processes toolbox.
Hank described a whole set of acheivements from the KM program, including the following quantified benefits delivered to date:
  • 5,554 Lessons Learned captured to date across over 50 projects,
  • Over $740 M savings,  and $80M realised for in-country value.

Well done to Hank and the KM team at PDO!

View Original Source (nickmilton.com) Here.

How Fluor raise the profile of KM – "Knowvember"

Fluor, the construction company, use the month of Knowvember” as an opportunity to publicise KM internally.

Fluor are an international engineering and construction company, who have been applying a Knowledge management approach, based primarily on Communities of Practice, for nearly 20 years. And with a long-running program such as this, it is easy for people to start to forget about KM, or take it for granted. Fluor have a powerful approach for keeping KM live in the corporate consciousness, described in a 2011 blog from Jeff Hester entitled “Successful KM storytelling“.

Welcome to Knowvember.

Knowvember is an annual collection and celebration of KM success stories. It is a time when the Fluor offices sprout posters describing KM successes, chosen from submissions over the previous year. 
Each story has been collected – either informally and formally – from the various communities of practice and describes an example where knowledge was sought and shared, and where value was delivered to the organisation or to a client as a result. The stories come with pictures and quotes.

Then every year during the month of Knowvember the KM team reviews the stories shared over the past 12 months, and select a list of finalists. These are presented to a panel of C-level executives that select the winning stories. Jeff describes how “in 2010 we collected roughly 300 stories, culled this down to 20 finalists, from which the executives selected six winners. If your success story is selected as a winner, you get to select a local charitable organization to which a $500 donation is made in your name.”

Although these stories are collected and publicised through the year, the annual one-month focus brings KM to the fore. As Jeff says

“During the final judging for the annual contest, the exposure these stories and the people involved get at a very high level of the organization serves two purposes: 

  • it provides recognition to folks who are often from far flung offices, and 
  • it reminds our executives of some very concrete ways KM strengthens and improves our company. 

And we’ve found that these stories provide the most tangible measure of the value of knowledge management — much more than the number of clicks and downloads”.

Try a similar communication campaign at your organisation, focused on value stories. I could help keep alive and fresh the perception of KM as a value-delivery tool.

View Original Source (nickmilton.com) Here.

Selecting KM pilots to address non-Quality

Among many interesting discussions at the KAConnect 2018 conference was one on selecting KM pilots focused on reducing the cost of non-quality. 

Participants at KA connect 2018

The conversation was, as many KM conversations are, about Value.

The annual KAConnect conference is for the Architecture and Engineering community, and many of the architects were struggling to find value measures that KM could help with, especially as many of them are billed on a day-rate basis, and so have no direct incentives to be more efficient. Helping them to deliver their work faster would save the client money, but would not impact the profits of the firm.

One insightful suggestion was to address the cost of non-quality, which we discussed on this blog last week. Non-quality, in architectural terms, results in write-offs (doing extra work at the firms expense to correct errors), rework and change requests. A Knowledge Management pilot project aimed at reducing write-offs and rework would deliver real value to the organisation, and act as a proof-of-concept for KM.

This pilot would need to look analyse the causes of write-offs and rework, identify how many of these causes were knowledge-related, identify the critical knowledge which would reduce write-offs and rework, and then put in place an approach to ensure this knowledge was available to the teams at the point of need. The approach need not be complex – a “minimum viable” solution may be enough – but provided it was targeted at the critical knowledge, and focused on reducing the cost of non-quality, it could be an excellent showcase for the value of KM. 

View Original Source (nickmilton.com) Here.

KM and the cost of non-Quality

Part of the role of KM, particularly in manufacturing and production, is to reduce the cost of non-quality

  Product recallWhen I started my Knowledge Management journey in 1992, my job post was entitled “Quality Advisor”. I was accountable for the quality of the geoscientific work in the BP Norway office. Because oil wells are drilled (at huge investment) on the basis of geoscientific predictions, the cost of poor quality predictions can be immense.

It became quickly clear, in discussions with my manager, than the key to high quality work lay in knowledge; in preserving and transferring the knowledge of the local geology, in building the technical knowledge of the individuals, in importing knowledge from other teams, other offices and parts of the world, and in reviewing and learning from the results of predictions – both successful and unsuccessful.

In other words, we decided to use Knowledge Management to address the cost of non-quality, and my job morphed into Knowledge Manager.

Cost of non-Quality

The Cost of non-Quality is talked about most in terms of product development. Non-quality costs can include

  • Rework
  • Warranty costs
  • Service costs
  • and, at its worst, Product Recall costs and the associated loss of reputation and sales.

Knowledge management can help address many of these issues, ensuring that a full set of knowledge is acquired at the start of the project (knowledge of the clients real needs, knowledge of the limitations of the technology  knowledge from other projects, R&D projects to fill the gaps), and that knowledge is addressed throughout the development project (AARs, or more detailed approaches such as the Toyota A3 process, to ensure all hiccups are fully addressed), and that product design knowledge (not just the planned design, nor even the as-built design, but the rationale and thinking behind the design) is captured and preserved to accelerate service work.

I heard a client last week assert that perhaps half of the non-quality costs could be addressed by good Knowledge Management – KM thus becoming part of the Cost of Quality. So if you already know your Non-Quality costs, then this gives us another way to start to estimate the value of a KM program. And if you don;t already know your non-quality costs, then perhaps you should!

View Original Source (nickmilton.com) Here.

The "KM ROI" question – problem or opportunity?

Your manager comes to you and says “I like the idea of Knowledge Management, but you have to give me an ROI figure”. Is this a problem, or an opportunity?

At first sight this is a problematic request, as the ROI for KM is notoriously difficult to predict. If your manager wants you to sell KM on a firm ROI prediction, you have some difficult thinking to do (we can help).

However there are five things that make this question into a real opportunity for your KM program.

1) Top Management are talking to you. You have access to them, and they are listening to you. A conversation with senior management has opened up. As a KM sales person, you need to make the most of this, and you need to determine the selling point for KM.  ROI will not be the selling point – most firms buy KM on emotion and not logic – but management will still need a convincing ROI to justify the purchase.

2) You have the opportunity to show them some success stories which demonstrate a very high ROI. KM can deliver fantastic ROI – our October 2012 Newsletter gives many examples of KM ROI and how it can be measured, and this blog has published a regular series of quantified success stories, with 117 examples to date. There is plenty of evidence you can show them from industrial organisations where KM has paid back its investment ten-fold or a hundred-fold, and plenty of success stories you can use as social proof.

3) You have the opportunity to make a deal with them.Ask them for permission and support to pilot knowledge management in one part of the organisation, and to measure the return. You promise them ROI from the pilot, and if this ROI is big enough, you ask them for their continued support in return.

4) You have the opportunity to offer to use KM to solve some of their real problems. Don’t forget, KM works extremely well when applied at senior level – its not just for the frontline staff. Senior managers are knowledge workers too. If you can solve their problems through KM, they will become your greatest advocates.

 5) A big ROI gives you permission to ask for a big budget. Once your management realise how valuable KM can be, then they are more likely to make a sizeable investment. This could be the chance you were looking for to build a proper KM program with a good chance of success.

So look on this request as an opportunity to engage, and broker a deal, at the highest level.  Your aim should be to gain support for a business pilot, through which you can demonstrate ROI, and if that ROI is convincing enough, to gain further support for full KM roll-out.

The ROI conversation could be the best opportunity you are given to progress KM. 

View Original Source (nickmilton.com) Here.

Why your knowledge gets $14 richer every day.

The knowledge you gain each working day is worth about $14, according to an anslysis of salary increases.

People often say “you can’t value knowledge”

In a strict sense, that is probably true, but there is a proxy for the value of knowledge, and that is how much a knowledge worker earns. As Larry Prusak said

“When I was at my last job, at the age of 50 they paid me 10 times more than a 30-year old with the same qualifications. What was the residual difference? Knowledge and experience”.

The chart to the right is drawn from the ASME Engineering Income and Salary Survey 2012 and shows how average engineering salaries increase with years of experience. Each year of experience seems to equate roughly to an added $2750 in salary per year, or $14 per working day. This “value of experience” is a proxy for the value of knowledge, because experience is where knowledge comes from.

Here are some other numbers

  • This site suggests that the market value of actuarial knowledge is $7960 per year of experience.
  • This site suggests that the market value of office worker knowledge is $4467 per year of experience.
  • This site suggests that the market value of Information Architecture knowledge is about $6000 per year of experience.

There are other sites out there that can give you other figures, but the phenomenon of the salary increase is all-pervasive – as you gain more knowledge and experience, you are worth more.

You can value that knowledge through the sorts of statistics shown here. A good knowledge worker might gain knowledge worth about $3000 in salary per year, or about $14 per working day.

Worth going to work for, wasn’t it!

View Original Source (nickmilton.com) Here.

Good, cheap, fast – choose all three

There is a well known saying; “Good, Fast, Cheap – pick any two.” It’s wrong.

The idea behind this saying is that there is a certain amount of work to be done to deliver a task, service or product, and that work is bounded by the limits of cost, time and quality.

If you try to improve any two of these factors, the third will be impacted. If you want something fast and cheap, for example, it won’t be any good. If you want it good and fact, it wont come cheap.

It’s like seeing work as an incompressible cube – if you press on two axies, the third will expand.

This is only true if the work really is incompressible. There is in fact a way to make things faster, better and cheaper, and that is the removal of waste.

If there is waste in the body of work, then removal of the waste will alllow all three axes to contract.

This is the principle behind Lean approaches to manufacturing, supply chain and product design, and is also an area that Knowledge Management can help with. Through effective KM, we can reduce waste from activity, and compress the “work cube”.

Good, cheap fast – if you use KM to reduce waste from work, you can pick all three.

View Original Source (nickmilton.com) Here.

Quantified KM value story number 119 – finding knowledge at Accenture

One of the ways in which KM adds value is through helping poeple do work faster and better.  Here is a story of howAccenture estimated that value.

Accenture make documented knowledge available to their staff through a portal known as KX. IN order to estimate the value delivered through KM they decided to focus on one component of Knowledge Management –the use of KX – and to focus on one single benefit – the savings in time delivered through the use of knowledge gained through the KX portal.

They estimated these savings through a survey, which asked the following question

“Please estimate the amount of your time that you saved during the last two weeks as a result of this knowledge.

“During the last 2 weeks, this information saved me AT LEAST:”
“During the last 2 weeks, this information saved me AT MOST:”

The results from this survey were used to calculate average time savings, and thus average cost savings.  They found that for annual KX costs to the sample population of $170,000 they were delivering savings of $2,400,000.

This equates to a 2500 percent Return on Investment

View Original Source (nickmilton.com) Here.

Quantified value story number 118 – saving patient cost in healthcare

Here is a reference to a great story about the value of simple KM in healthcare

The story is taken from a California State University blog on KM, and references an earlier Times Magazine story, available to subscribers. The Time magazine is ostensibly about doctors’ pay, but also describes how sharing and institutionalizing good practices (although they don’t call them that) can significantly reduce costs, improve outcomes for patients…and keep doctors happy.

The blog quotes the following example of a very simple KM practice, which shows how much difference even a best-practice checklist can make (and also how unpopular this was, until it began to deliver benefit).

The first thing he (the head of surgery at Geisinger) and his team did was take 20 general steps all surgeons follow throughout a bypass episode and try to sharpen them in a way that would remove as much chance and variability as possible, going so far as to spell out the specific drugs and dosages doctors would use. The result was an expanded 40-step list that some surgeons balked at initially, deriding what they called “cookbook medicine.” 

Once doctors began following the expanded checklist, however, they grew to like it. After the first 200 operations — a total of 8,000 steps — there had been just four steps not followed precisely, for a 99.95% compliance rate. A total of 320 bypasses have now been performed under the new rules. 

“There are fewer complications. Patients are going home sooner. There’s less post-op bleeding and less intubation in the operating room,” says Casale. What’s more, the reduced complication rate has cut the per-patient cost by about $2,000.

View Original Source (nickmilton.com) Here.

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