A simple picture to link KM and continuous improvement

Knowledge Management is the discipline that drives continuous improvement. Here is a diagram that makes this clear

We are all familiar with the link between Knowledge and continuous improvement in our personal lives, as demonstrated by the familiar saying “Practice Makes Perfect”. The more we do something, the better we become. The more experience we have, the higher our performance.

This can also be true for Organisations, provided we apply KM. Organisations can also find that Practice Makes Perfect, and that the more experience they have the higher their performance.

The diagram here shows how – feel free to use with acknowledgement.

The two crucial elements are as follows.

1) There needs to be a learning loop in operation. Knowledge must be applied to activity and to problems, and must be reviewed and gained from activity, problems and experience. The challenges for an organisation are two-fold – firstly finding a way to gain knowledge from experience (through effective lessons capture for example), and secondly being able to find the knowledge from the past (practices like Peer Assist help here). This is one elements of Knowledge Management already. 

2) The second element is to embed new knowledge into processes, procedures and structures. This is represented by the blue wedge in the diagram marked KM. Without this embedding step, the new knowledge is lost over time as human memory fades, or as lessons become buried within lessons databases, and performance slips back down the hill. The embedding KM wedge makes sure that performance gains are maintained (through the use of Lessons Management Software for example).

This combination of the KM components of learning loop and embedding means that

  • the more experience an organisation has, the more it learns
  • the more it learns, the more it improves its knowledge base
  • the more it improves its knowledge base, the more it improves its processes, procedures and structures
  •  the more it improves its processes, procedures and structures, the more it improves performance.

View Original Source (nickmilton.com) Here.

How KM gives benchmarking a purpose

KM can add purpose to internal benchmarking, by using it to drive knowledge sharing

Image from wikimedia commons

Many commercial organisations track internal KPIs.  They publish league tables of the different departments, and differentiate the high performers, and the poor performers.

But Why? What’s the point? Surely not just to shame the poor performers, and make the high performers feel smug?

The answer is that by identifying the poor performers, you can also identify what each area of the business needs to focus on, and can give them a measure of how much they could (and need to) improve.

But they won’t make the improvement, if they don’t know how.

Benchmarking on its own is just a labelling exercise. It tells the departments where they need to improve, but it doesn’t help them learn how to improve.

This brings us to the second purpose of benchmark, which is to map out the knowledge transfer that needs to happen within the organisation.

Benchmarking shows where performance of a team or unit is weak compared to other teams or units, and therefore need to learn. It also shows which other teams or units are stronger performers, and so can be sources of knowledge. The strong performers can help the weaker performers, and benchmarking identifies which are which.

Managers can also use benchmarking to set targets and drive the learning –

“the factory in Poland uses 20% less energy than you do – I want you learn from them, and close the gap halfway by year end”.  

“Slough uses 80% of the packaging that you do – learn from them, and close the gap halfway by year end”.

In all of this, Knowledge Management is the enabler.

Target setting creates the driver for knowledge sharing, while measurement and benchmarking define the suppliers of and customers for knowledge. Knowledge Management closes the gap, enabling the production units to learn from Slovenia, from Slough, from Syracuse. The mechanism of learning may be by site learning visits, by Peer Assist, by creating Knowledge Assets or training courses, or through the operation of Communities of Practice. The poor performers will improve, and also the good performers learn a thing or two as well.

Link your internal benchmarking with a Knowledge Management campaign, and you can improve performance across the board.

View Original Source (nickmilton.com) Here.

How to get KM traction with senior managers

Struggling to get traction with senior managers for your Knowledge Management initiative? That’s partly because they don’t know how much the organisation’s knowledge is worth.

Ten years ago, my first ever post on this blog suggested that knowledge management is “managing as if knowledge matters”. Often many senior managers do not manage in this way, because they don’t know how much knowledge matters to their organisation. Or they sort of know, but haven’t worked through the numbers.

Knowledge is a company asset, like your staff, your money, your customers, your brand. It is one of your more valuable assets too, and yet it remains all too often, unmanaged. 

Your organisation has almost certainly implemented financial management, people management, customer relationship management, brand management, quality management because they know all these things matter. So surely it makes sound business sense to implement knowledge management too; to derive maximum business benefit from the invisible asset which is the operational knowledge held in the heads of your employees.

So why don’t they support you?

Because they don’t know how much their knowledge is worth – how much it matters.

And why don’t they know? Probably because you have not told them!

So how do you value that knowledge?

  • Use Larry Prusak’s rule of thumb – 60% of the non-capital spend (see here for how he works that out)
  • Think how your organisation would perform if you had no knowledge, and all your staff were straight out of university or training.  The difference between that performance, and your current performance is the value that knowledge brings. There would be loss of production and loss of revenue until you had retrained or replaced the staff.
  • Carry out some rule-of thumb estimate of the current “cost of lost knowledge” – the value that could be gained by better knowledge management. What would it be worth if you could eliminate the spend on defects and problems which are a direct result of poor knowledge management, such as:
    • repeat mistakes (because nothing was learned from the first mistake)
    • wrong decisions, where people did not have the knowledge to make the correct decision (see the Longford refinery story for a really scary example of this
    • failed bids (because there was something you should have known when bidding, but didn’t)
    • duplicate work (because neither party knew the other was doing the work)
    • rework (because people didn’t know what they were supposed to be doing the first time)
    • the cost of non quality?

You will need to do some research to get these figures, but that’s all part of gaining the evidence you need to convince management.

Also look at, and put a value on, the potential loss of Knowledge as people retire.

If senior managers knew the value of your company knowledge, there is no way that they would leave it unmanaged.   For example, one oil-sector drilling organisation recently estimated the value of its knowledge of drilling to be worth half a billion dollars annually. Who would leave a half-billion dollar asset unowned and unmanaged?

So work out the value, and tell them. Show them how much Knowledge matters to the success of their organisation. Make them sit up and take notice.

View Original Source (nickmilton.com) Here.

How to keep your job as a knowledge manager

If you want to keep your job as a knowledge manager, then ensure you are directly supporting the front line staff. 

Being a Knowledge Manager is a precarious place to be, until KM is fully embedded. Any major organisation change such as a merger or a change in CEO may mean that your budget is suddenly removed and that you are out of a job.

The thought process behind post-merger cuts in KM, or “new broom” cuts from a new CEO, goes like this;

  • We promised cost savings  – what can we cut?
  • We cannot cut the front line operations 
  • We cannot eliminate anything that directly supports the front line, such as procurement, or finance, but we could probably slim them down; combine our procurement and finance departments and make them smaller.
  • We can safely get rid of anything that is 2 steps away from the front line; the teams that work on things that may eventually help the front line, but not directly. That’s KM,  Risk, R&D (in many companies) etc etc.
So KM is cut, because it is seen as only indirectly supporting the front line. It is seen as 2 steps away from where the money is made.
So how do you ensure your survival as a Knowledge Manager?
The answer is simple;
DIRECTLY SUPPORT THE FRONT LINE OF THE BUSINESS – THE PEOPLE WHO MAKE THE MONEY.
Work directly on business problems and on business issues, introducing the KM tools and techniques in order to solve those issues. Don’t be generic, be specific. Introduce KM one business issue at a time, rather than focusing on generic roll-out of technologies or processes (until the commitment is made, in which case you can be generic).

Find out what knowledge the front line needs, and get it to them.

If for example the front line sales staff need knowledge on how to sell the new product better, then get it to them. Interview the experts, interview the best sales people and find out how they do it, hold a knowledge exchange, build a set of guidelines on product selling, provide it to all sales staff, and when sales number rise, claim some of the credit.

Don’t sit around worrying about building a better taxonomy for example, because “if we have a better taxonomy, then people will file documents better, and if others come looking, they might find them and if they find the documents, they might be useful, and if the documents are useful, sales figures might rise”. That’s too many Ifs; too many steps away from what the business needs.

Provide valuable knowledge to front line staff to help them do their job better. Then when the merger happens, and the axeman comes to call, the business will say “don’t cut KM; we need them to win this contract, deliver this project, or develop this product”.

Stay only one step from the business. Stay relevant. Add Value. Keep your job.

(see my post on “putting a man on the moon” for more explanation)

View Original Source (nickmilton.com) Here.

One way to decide how much effort to put into KM in your project.

How much of your project spend should be on KM?

image from wikimedia commons

That’s an interesting question, and one way to answer it is to look at the value of the knowledge in proportion to the value of the project itself (please note this argument only really works for projects that deliver a value stream).

Take for example a large construction and engineering project – the first of its kind in a new location. The project will create two things –

  1. An income stream for the owner
  2. Knowledge, which can be used to reduce cost for future projects
Let’s assume some facts for our imaginary project. Let’s assume it’s a big one but not quite a megaproject.
  1. Budget of $500 million
  2. Timescale 2.5 years
  3. Net Present Value (NPV) $1 billion
  4. Work-hour estimate 10 million
  5. 2 similar projects planned
  6. Conservative estimate of the value of the knowledge – $50 million (5% cost saving on 2 follow-on projects of the same size and scope through effective KM and lesson learning)
So if the value of the knowledge is $50 million and the value of the project is $1 billion, then logically you would expect the investment in KM to be in the same ration to the spend on the project – ie 5%. You would expect a total KM spend of $25 million (3% of $500m) producing lessons, guidance and other knowledge for the improvement of the two follow-on projects. 
Now a lot of the work on the main project would  be done by contractors, and you would need to make sure that they also were spending their share on KM.  Its also possible that you could discount the cost or materials, and instead look at time and labour costs.  The project management team itself might be, say 20 people, working 10,000 days over the life of the project. By the same logic, you would want 500 days (or 1 person full time) spent by the project management team on knowledge management. 
In most projects, the team would spend nowhere near this. They might have a one-day lessons learned meeting halfway through the project (1 day for 20 people is 20 workdays) and another one-day meeting at the end (another 20 workdays). That is a massive under-investment of time and resource, given the value of the knowledge. Instead they should spend 5% of their time on KM, or 2 hours a week.
For your organisation,you can do the math. Work out the value of the knowledge vs the value of the projects, and see what investment in KM would  be appropriate. 
It might surprise you – it surely will surprise your management, because in our (Knoco) experience, the vast majority of projects under-resource KM, compared to the value it delivers.

View Original Source (nickmilton.com) Here.

Quantified KM value story 124

Another example of quantified value delivered from KM – number 124 in a continuing series

image from wikimedia commons
This story comes from the same article from HBR I referenced yesterday, entitled “What managers need to know about social tools“.  It shows some of the value in seeking and sharing knowledge in a networked world. Here’s the story.

“At the insurance company we studied, one employee, Sheila, was asked by her manager to put a hold on her current project and perform an urgent analysis for a new vertical market. She told her manager that the analysis would most likely take two weeks, pushing her current project past the deadline and over budget. The manager was willing to pay that price.

“As Sheila began to dig into the problem, she remembered a series of exchanges on the internal social tool among colleagues in another department about a project they were working on in that same vertical market. With this metaknowledge, she sent them a note asking if they could suggest where to start. They replied that they had completed a market analysis and asked if she would like to see it. Sheila said that when she received the report, “I couldn’t believe it. It was exactly what my boss asked me to do. This just saved me two weeks, and it saved my project over a million dollars. I had no idea they were working on this. Neither did my boss.”

View Original Source (nickmilton.com) Here.

The principle of local value in KM

KM will be adopted if people can see local value – value to them – in using it

Former Value City Department Store in Boardman, OhioHow can we help people see that Knowledge Management is a “good thing”?

People need to see not only that Knowledge Management delivers value to the organisation, but also that it delivers value to them as individuals. So talk to them, and find out

  • What are their local business challenges?
  • What are their local “hot issues”?
  • What knowledge would help them with these issues and challenges?
  • How could Knowledge Management give them access to this knowledge?

Then find some stories or case studies, where other people in similar situations have been able to use Knowledge Management not only to deliver business results, but also to make their own lives easer.

Go by the “Principle of Local Value”.

People will adopt a new idea, provided they see it as having tangible value in the local setting. Help them see the local value.

View Original Source (nickmilton.com) Here.

Estimating the "Cost of not Knowing" as a proxy for the value of KM.

When estimating the potential value of Knowledge Management, perhaps we can start by looking at the cost of not knowing.

It’s not always easy to put a value on knowledge, or on knowledge management.

However it is easier to put a cost to the lack of knowledge, through asking the question

“How much would you have saved, if you had known what you know now, in advance”?

The answer to this question represents the “cost of no knowledge”

We recently asked this question of a project manager, at the end of his project, once he had identified the problem areas with the benefit of hindsight. His reply was as follows;

  • Savings of $30 m by avoiding sanction delays –  “The 8 months hiatus may have cost $30 million, that is just off the top of my head, no science” 
  • Savings of $.5m in better involvement of the operations staff  “The documentation issue may have cost the project about $0.5 million”. 
  • $.5m in commissioning + $2-3m lost revenue  – “The cost to the project would be an extension of the PM team, say $0.5 million, plus 4/6 weeks lost revenue, equivalent to $0.5 million/week.”. 

The total cost of no knowledge was therefore $33 to 34 million  – about 5% of the project costs.

It would be wrong to suggest that Knowledge management could eliminate the “cost of no knowledge”, but it can certainly reduce it. If the figures above are representative, even if KM reduces this cost by 20% (thus reducing overall project costs by 1%), that is still a huge amount of money.

Talk to your project managers about the cost of not knowing – that could give you a good proxy figure for the value of KM.

View Original Source (nickmilton.com) Here.

Cost of lost knowledge could be $47 million per year

Large businesses can lose $47 million each year due to poor KM, claims a recent report

That is the claim of the Panopto Workplace Knowledge and Productivity Report, a recent report based on a survey of 1000 US workers

Here are some highlights from the report

  • US business loses $47 million in productivity each year as a direct result of inefficient knowledge sharing. This is the median result – large businesses can lose much more, and the website provides a calcaulator to calculate your own risk;
  • U.S. knowledge workers waste 5.3 hours every week either waiting for vital information from their colleagues or working to recreate existing institutional knowledge. 
  • 42 percent of institutional knowledge is acquired specifically for the employee’s current role and is not shared by any of their coworkers. 
  • When that employee leaves their job or is otherwise unavailable, their coworkers are unable to do 42 percent of that job.  
  • 60 percent of respondents found it difficult, very difficult, or nearly impossible to obtain information vital to their job from their colleagues. 
  • Delays due to unshared knowledge have a major impact on project schedules. 66 percent of all such delays will last up to one week, and 12 percent will last a month or more. 
  •  81 percent of employees report feeling frustrated when they can’t get the information they need to do their job. 
  • 85 percent of employees agree that preserving and sharing unique knowledge in the workplace is critical to increasing productivity. 
  •  81 percent of employees state that knowledge gained from hands-on experience is the hardest to replace once it’s lost. 
  •  In companies with higher turnover rates, employees were 65 percent more likely to state that that it could be “very difficult” or “nearly impossible” to “get the information needed to do my job well.” 
  •  While the average new hire receives 2.5 months of formal training, it can take up to 6 months for an employee to actually ramp up in a new role. 
  • These employees often struggle for up to 3.5 months learning the details of their job on their own, seeking out information, and inadvertently replicating work.
All of the value figures here represent efficiency losses through poor KM.
There is another set of value figures, which represent the cost of poor decisions made by people with obsolete or inaccurate knowledge; the cost of rework and the cost of mistakes that arise from those bad decisions (what we call the cost of lost knowledge). This second value figure is far harder to estimate, but is potentially much larger than the inefficiency figures mentioned above.
However when you are creating your investment case for KM, the numbers in this Panopto report may give you some useful benchmarks. 

View Original Source (nickmilton.com) Here.

How knowledge and performance are linked

There is a very close link between knowledge and performance, which is at the heart of any KM framework.

Knowledge results in performance. The more knowledge we have, the better we can perform. The more we learn from performance, the more knowledge we have. This puts us in a reinforcement cycle – a continuous improvement loop – continuously improving knowledge, continuously improving performance.

We are all well aware of this link as it applies to us as individuals. The more we learn about something, the better we get, whether this is learning to speak Mandarin, or learning to ride a bicycle. The knowledge builds up in our heads and in our legs and fingertips, and forms an asset we can draw on.

It’s much harder to make this link for a team, or for an organization. How do we make sure the organization learns from performance and from experience? How do we collect or store that knowledge for future access, especially when the learning takes place in many teams, many sites or many countries? How do we access the store of knowledge when it is needed, given that much of it may still be in peoples’ heads?

This link, between knowledge and performance, is fundamental to the concept of knowledge management.  Knowledge management, at its simplest, is ensuring this loop is closed, and applied in a systematic and managed way, so that the organisation can continuously learn and continually improve performance.  The  knowledge manager should

  1. Know what sort of organisational performance needs to be improved or sustained (and in some organisations this may not be easy – the performance requirements of public sector organisations, for example, may not always be easy to define);
  2. Know what knowledge is critical to that performance;
  3. Develop a system whereby that knowledge is managed, developed and made available;
  4. Develop a culture where people will seek for that knowledge, and re-use and apply it;
  5. Develop work habits and skills that ensure performance is analysed, and that new knowledge is gained from that performance (using processes such as lesson learning or After Action reviews);
  6. Set up a workflow to ensure that the body of knowledge is updated with this new knowledge; and
  7. Be able to measure both the flow of knowledge through this loop, and also the impact this has on performance.

That’s KM at its simplest; a closed cycle of continuous learning and continuous performance improvement.

The complexities come in getting this loop up and running, in a sustainable way, in the crazy complex pressurised world of organisational activity.

But that’s what they pay us Knowledge Managers for, right?  Dealing with those complexities. Designing the framework that closes the loop. Delivering the value.

Ensuring that knowledge drives performance, and that performance results in new knowledge.

View Original Source (nickmilton.com) Here.