In 1990s industrialized economies has shifted from natural resources to intellectual assets, companies started to think about the knowledge underlying their business and how that knowledge is used.
- For example, Ernst & Young at performance reviews, consultants are evaluated along five dimensions, one of which is their “contribution to and utilization of the knowledge asset of the firm”.At Bain, the partners are evaluated each year on a variety of dimensions, including how much direct help they have given colleagues. The degree of high quality person to person dialogue a partner has had with others can account for as much as one quarter of his or her annual compensation.Ernst & Young is one of the world's leading professional services organizations, helps companies across the globe to identify and capitalize on business opportunities.http://www.ey.com/CH/en/homeBain & Company is a global management consulting firm. Our business is making companies more valuable.http://www.bain.com/
KNOWLEDGE MANAGAMENTby Morten T. Hansen, Nitin Nohria, Thomas TierneyAhmed AhmedStefanie SchieferPasha BinyatovUchenna EgbeteMeera SegarNadeen AlkaydiNiccolo ColatrellaUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
What is the knowledge?• Knowledge is the fact or condition of knowingsomething with familiarity gained throughexperience or association• In 1990sUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013NaturalResourcesIntellectualAssetsIndustrialized economy
What is the knowledge management?Strategies and processes designed to identify, capture,structure, value, leverage, and share an organizationsintellectual assets to enhance its performance andcompetitiveness.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013Knowledge management based on two criticalactivities:• capture and documentation of individualexplicit and tacit knowledge• And its dissemination within the organization.
What is the explicit and tacit knowledge?UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013ExplicitknowledgeTacitknowledge• Explicit knowledge - is rational knowledge that can beexpressed as data which includes theoretical approaches,problem solving, manuals and databases• Tacit knowledge – is experience based knowledge that cannot be expressed as data which includes cognitive skills suchas beliefs, images, intuition and mental models as well astechnical skills such as craft and know- how.
Why is Knowledge Managementimportant?UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Knowledge management in consultingbusinessUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013ConsultingBusinessCodificationStrategyPersonalizationStrategy• Codification strategy – in some companies knowledge iscarefully codified and stored in databases to make itaccessible by anyone in the company• Personalization strategy– in other companiesknowledge is closely tied to the person who developed itthis kind of knowledge shared through person to personcontacts
Codification vs. PersonalizationUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013Codification Personalizationprovide high-quality,reliable, fast information-systemsCompetitive Strategy provide creative, analyticaladvice Reusing codifiedknowledge Channeling individualexpertiseonce investing inknowledge asset; reuse itmany timesLarge teams with high ratioEconomic Model Customized solutions toindividual problemsSmall teams with low ratioFocus: generating largeoverall revenuesFocus: maintaining highprofit marginsElectronic document tocodifyKnowledge Mgnt. Strategy Networks to link people People to documents Person to person
Codification vs. PersonalizationUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013Codification PersonalizationInvest heavily in IT Information Technology Invest moderate in IT Goal: to connect peoplewith reusable codifiedknowledge Goal: to facilitateconversationsTrain people in groups Human Resources Train people in one-to-onemeetingsHire people who are wellsuited to reuse ofknowledgeHire MBAs who likeproblem solvingFocus: reward people forusing/contributing todocument databasesFocus: reward people fordirectly sharing knowledgewith others
ExamplesCodification vs. PersonalizationUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013• Consultancies– Economics of reuse vs. experts economics– Exchange of knowledge between co-workers
ExamplesCodification vs. PersonalizationUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013• Health Care and High Tech– Saves cost of doing business– Simplified service– Makes innovation easier– Knowledge is transferred betweenco-workers
Codification Vs. Personalization• Pick the best strategy.• Use knowledgeeffectively.• Do Not Straddle.• Do not Choose one overthe other.• A firm cannot beequally perfect in both.• Very costly• Not fully effective• Need to excel on onemore than the other.– Mix of Codification &Personalization.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Problems with document-drivensystemsMajor U.S company• Relying on a consultingcompany because of comfort.Bain consulting Company• Relying on documents only do not get full informationneeded.CSC Index and Straddling• Fully established bothstrategies.• Two kinds of staff:– Initial IT focus– Corporate Strategy focus• Both groups had differentinterests Clash!• Firm overtaken by rivals.• Lack of competitiveness.• Revenues went down.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Getting The Incentives Right• People need incentives toparticipates in the knowledgesharing process.• The two knowledge managementstrategies call for differentincentive systems.• In the codification model,managers need to develop asystem that encourages peopleto write down what they knowand to get those documents intothe electronic repository.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Getting The Incentives Right• The level and quality of employees’ contributionsto the document database should be part of theirannual performance reviews.• In the companies that are following thepersonalization approach, managers need toreward people for sharing knowledge directly withother people.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Incentives & TechnologyCodification• Encourage employees todocument knowledge.– Part of annual performancereviews.– E.g. Ernst & Young strategy.• Heavy investment in ITPersonalization• Reward for sharingknowledge.– E.g. Bain strategy.• Low investment in ITUniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Do Managers Need To IsolateKnowledge Management?• Some CEOs have put knowledge management at thetop of their agendas.• Others have not given it the same attention as theyhave given cost cutting, restructuring, or internationalexpansion.• Companies that isolate knowledge management risklosing its benefits, which are highest when it iscoordinated with HR, IT, and competitive strategy.• That coordination requires the leadership of thegeneral manager.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Don’t Isolate Knowledge Management• When CEOs and general managers actively choose aknowledge management approach both the companyand its customers benefit.• When top people fail to make such a choice bothsuffer.• Customers may end up paying for a customizedsolution when a standard solution would have workedperfectly well.• Within the organization, employees will be confusedabout priorities.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Don’t Isolate Knowledge Management• The issue will quickly become politicized, andpeople will battle for resources without seeingthe whole picture.• Only strong leadership can provide thedirection a company needs to choose,implement, and overcome resistance to a newknowledge management strategy.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
Choosing the right strategy• Competitive strategy should drive the knowledgemanagement strategy.• What values do customers expect from thecompany?• How does the knowledge that resides in thecompany add value to the customer?• Clear answers are needed to make a knowledgemanagement strategy.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013
• Do company’s offer Standardized or customizedproducts?• Knowledge management is based on the reuse companies that createstandardized products.• Customized products are unique and vary dramatically, KM brings limitedvalue.• Do you have a mature or an innovative product?• Matured products normally benefit form the KM.• Do people rely on explicit or tacit knowledge tosolve problems?• Tacit knowledge is hand to be codified whereas explicit can be easilystored.UniversitàdellaSvizzeraitaliana,InternationalBusiness,2013Choosing the right strategy