Why KM Programs Fail

The Reinvention of Management
Why do great KM programs fail?
Steve Denning
www.stevedenning.com
http://blogs.forbes.com/stevedenningsteve@stevedenning.com
1

1996-2000
Knowledge management
By all indicators, an apparent success
“A world leader in KM”
2

2000-2008
Knowledge management
By all indicators, an apparent success
Put on a back burner
Not just the World Bank
BP
Ernst & Young
IBM
HP
Within a few years, it had been put on a back-burner
3

In 2008, I began exploring:
Why do managers act this way?
(These are highly intelligent, educated people!)
4

2008
It’s not just KM
Why did management systematically kill all the creative things in organizations?
knowledge management?
lean manufacturing?
innovation?
marketing?
leadership storytelling?
5

1978
A second clue …
Robert McNamara
President, Ford Motor Company, 1960
Secretary of Defence, 1961-1968
President, World Bank, 1968-1981
“the smartest man I ever met”
John F. Kennedy
6

Most management textbooks…
Most business schools …
Traditional management rests on seven shaky principles
7

7 planks of traditional management
1. “The purpose of a firm is outputs”
The firm produces “things”, i.e. goods or services
World Bank
= loans
Today, customers have choices.
Rapid change  firm makes wrong “things”
People want: outcomes, not outputs.
8

2. “Management’s main job: improve efficiency”
Focus on squeezing costs:Getting bigger cost reductions Economies of scale
Result is declining returns
Today: we need organic growth
Efficiency focus kills innovation
9

3. “The customer can be manipulated”
The World Bank will make more loans, whether countries want them or not.E.g. we prepare the loans for the countries
Michael Porter: “Parse and manufacture demand”
Today, the buyer is the boss
Instant information available to all.
Customers have choices.Customers communicate with each other
10

4. “Staff are human resources that can also be manipulated”
External incentives: carrot and sticks.
Today, most work is knowledge work:Disengaged workers don’t produce their best.
11

5. Communicate by directives
Tell people what to do
Knowledge workers don’t perform well when they are ordered around
12

6. “Traditional management practices are self-evident”
Management reflects timeless truths of the universe.
Evidence of management dysfunction is inadmissible.
Bad managers? Yes!Management itself is bad? Impossible!
13

7. “Managers don’t ask questions”
A. Zaleznik: Managers & Leaders: Are They Different?
1977 HBR
The source of the Dilbert manager
Managers focus attention on procedure, and not on substance.
Managers communicate to subordinates indirectly by signals, rather than clearly stating a position.
Managers play for time.
14

The assumptions are interlocking
Management principles are self-evident
Management function is to squeeze out costs
Managers don’task questions
Purpose of a firm is to produce outputs
Demand can be manufactured
Communicate through commands
“Human resources” can be manipulated
The mental model is impervious to challenge!
15

2008
Q. Why were allthe creative things in organizations systematically killed?
knowledge management?
lean manufacturing?
innovation?
marketing?
leadership storytelling?
A. Management did it!
16

2009: Conclusive proof of the failure of traditional management
The rate of return on assets has fallen by 75% since 1965
The life expectancy of Fortune 500 firms down to 15 years, and is heading towards 5 years.
Only 1 in 5 workers fully engaged
In 1980-2005, established firms created zero net new jobs.
1965
Today
Sources: Deloitte’s Center for the Edge: The Shift Index; Kauffman Foundation
17

2010
Many writers are concluding:
Management
has failed!
18

Although KM often makes temporary gains, eventually …
Management kills KM
KM isa low hangingfruit!
systematically
relentlessly
through business schools
through cost-cutting drives
despite claims to the contrary
COO
CFO
19

What we have learned
Our hope in 1996
Traditional management culture: Top-down, authority based
Traditional managementculture: Top-down, authority based
Knowledge Management: horizontal, collaborative knowledge-based culture
Knowledge Management: horizontal, collaborative knowledge-based culture
The reality of 15 years in KM
20

Break for discussion
21
Do you recognize the world of management I have just described?
KM isa low hangingfruit!
Yes?
No?
Not sure?
COO
21
CFO

Implication for KM & organizational survival:
We have to generate a culture of continuous innovation
22

Five big shifts…and 70+ practices
New goal for the organization
New role for managers
New coordination mechanisms
Shift from value to values
New way to communicate
23

1
1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders
Deliver more value to customers sooner
Shareholder Capitalism Tweak the supply chain Make money for shareholders
The Age of Customer Capitalism
We are entering
Customer Capitalism
Delighting customersThe customer becomes the bossMaking money is result, not goal
Roger Martin, HBR Jan 2010
24

1
Deliver more value to customers sooner
Inside-out perspective Tweak the supply chain
We are entering
Outside-in perspective
Understand the customer
Solve the customer’s problems
25

1
Not just satisfy them: Delight them!
We are entering
Everyone in the organization is focused on generating a continuous stream of added value sooner
26

1
1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders
The convenience of “the system”
Public sector equivalents of “delighting clients”
Education: “students first”Health: “patients first”
27

1
1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders
This changes the game completely
Outcomes
Outputs
Complex
People
Simple
Things
28

2
2. NEW MANAGER ROLE: from controller to enabler
Control can’t delight customers
You can’t control knowledge work
Work is done in networks ofself-organizing teams
Teams are empowered to decide.
Teams report to clients, not managers
Managers: set goals, remove impediments
29

3
3. COORDINATION OF WORK: Dynamic linking
Boss driven
Hierarchical bureaucracy
Big plan
Start
Finish
Shortcycles
Specify the goal, not how the work is done
Work in short cycles: reduce risk & increase agility.
Client driven
Deliver value to clients each cycle (not reports).
30

4
4. FROM VALUE TO VALUES: radical transparency
Bureaucracy
Make the numbers, come what may!
Radical transparencyFacing the brutal reality
Get to root causes
31
Alan Mullaly CEO, Ford

4
4. FROM VALUE TO VALUES: continuous improvement
Bureaucracy = get the product out
The status quo is never good enough
Enable continuous improvement
Systematically identify impediments
Fix problems immediately
Identify and remove root causes
32

5
5. INTERACTIVE COMMUNICATON: conversation
Command and control
Adult to adult conversations
Storytelling
Open-ended questions
Springboard stories
User stories
33

Two different mental models of management
34

The shifts are self-reinforcing & interdependent
Focus all work on delighting customers
From command to conversations
From controller to enabler
From bureaucracy to dynamic linking
Radical transparency
35
WHAT’S NEW: doing all at once

Where did these shifts begin?
In 1980s, the approach began spreading among auto manufacturers (“Lean”)
In mid-1990s, the approach began spreading to software development (“Agile”)
You can see current exemplars in firms like Apple, AmazonandZappos
36

The transition is inevitable
Two- to four-times gains in productivity
Economics will drive the change!
37

The transition is inevitable
Traditional management0% to -50%
Radical management+1,000%
Ten year share price
38

The opportunity for KM
Educate yourselves

Master the 5 principles and 70+ practices of radical management
Spread the word
Disseminate the Shift Index
Disseminate the books that show how
Become leaders of the new movement: inspire!
39

The opportunity for KM
Lead the revolution!
Embody the change yourself
Make your KM world a model
Learn to tell authentically true stories
Capture people’s imagination
Join with those who share the vision
Encourage and support them in their work
40

Hang out with fellow revolutionaries:
2 day workshop May 12-13, 2011
Washington DC
“Revolutionizing the world of work”
“Join us to help reinvent the Fortune 500, government, & the health and education sectors”
41

http://blog.jackvinson.com	63
http://knowledgelens.msloc.northwestern.edu	5
http://translate.googleusercontent.com	4
http://ctr-organizational-change.msloc.northwestern.edu	3
http://us-w1.rockmelt.com	1
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Why KM Programs Fail

by SIKM on Mar 11, 2011

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