Working Knowledge : How Organizations Manage What They Know

1. Working Knowledge : How Organizations Manage What They Know By Thomas H. Davenport And Laurence Prusak Elridge D'Mello Graduate Student in Computer Engineering

2. Ch 1: What do we talk about when we talk about knowledge? • Data • Information • Knowledge • Related, but not interchangeable!

3. Data • Set of discrete, objective facts about events. • Organizational context: structured records of transactions. • Needed by all organizations especially Banks, insurance companies, government agencies • More not always better • Can be difficult to make sense of in large volume • No inherent meaning in data • Why is data important? • It is the essential raw material for the creation of information

4. Information • “Data endowed with meaning and relevance” – Peter Drucker • Data that makes a difference • Data sent from sender to receiver intended to alter the receiver’s perception of something • Moves in hard and soft networks • Traditional networks – hard networks • A note, an FYI – soft network

5. How to add value to Data • Contextualized • Categorized • Calculated • Corrected • Condensed Information Data

6. Knowledge • Knowledge derives from minds at work. • Definition: • Fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices and norms.

7. How to Transform Information into Knowledge • Comparison: how does this info compare with other situations we’ve known? • Consequence: what implications does the information have for decisions and actions? • Connections: how does this bit of knowledge relate to others? • Conversation: what do other people think about this information? • These knowledge creating activities take place within and between humans

8. Quantitative Measure Qualitative Measure Data Cost Speed Capacity Timeliness Relevance Clarity Information Connectivity Transaction Informativeness Usefulness Knowledge What are the resultant decisions or actions? Difficult to trace the path between knowledge and action How do we know if it's any good?

9. Components of knowledge • Experience • Knowledge develops over time, through experience • Provides a historical perspective from which to view and understand new situations and events. • Firms hire experts – buy experience-based insights. • Ground Truth • Knowing what really works and what does not. • Army’s “After Action Review” (AAR) program.

10. Components of knowledge • Complexity • Knowledge is not a rigid structure that excludes what doesn’t fit it; it can deal with complexity in a complex way. • Knowledge is aware of what it doesn’t know. • Judgment • It judges and refines itself in response to new situations and information. • When knowledge stops evolving, it turns into opinion or dogma.

11. Components of knowledge • Rules of Thumb and Intuition • Those with knowledge don’t have to build an answer from scratch every time, thus offering speed. • Intuition is “compressed expertise” • Values and Beliefs • Values and beliefs are integral to knowledge • “Knowledge, unlike information, is about beliefs and commitment.” -- Nonaka & Takeuchi

12. Knowledge as a Corporate Asset • Effect of the Changing Global Economy • No room for inefficient production. • Organization that knows how to do new things well and quickly will thrive over the next decade. • Product and Service Convergence • Knowledge and related intangibles are increasingly becoming part of the “products” firms offer • The intangibles that add value to most products and services are knowledge-based.

13. Knowledge as a Corporate Asset • Sustainable Competitive Advantage • Today, it is very easy for competitors to figure out the “secrets” of a company’s products – use of reverse engineering, information flow, advanced technology. • But knowledge can provide a sustainable advantage. • Unlike material assets which decrease with use, knowledge assets increase with use.

14. Information Technology and Knowledge Exchange • Caveat: Having more information technology will not necessarily improve the state of information/knowledge. • E.g. TV was supposed to be device that bridged culture gaps and foster world understanding. • Networked computers can be used as knowledge enablers.

15. Case Study: British Petroleum (BP) • British Petroleum’s Virtual Teamwork Program • BP Exploration: 42 separate business assets • Goal: Agility of small company with resources of a large one • Implementation • Stressed corporate behavior vs. technology • Coaches and teams: Coaches helped team members link business objectives to system capabilities; challenged individuals • Emphasis: person-to-person interaction and understanding vs. system requirements

16. Case Study: British Petroleum (BP) • Results: • 4 of the 5 pilot groups had great success: • Measurable savings (time and money) • Participant enthusiasm • Volume of use • Case in point: Equipment failure on mobile drilling ship • Utilized communication media to consult a remotely located expert and fixed the problem in a few hours  huge financial savings of avoided downtime.

17. Ch1: Summary • Data – Information – Knowledge hierarchy • Knowledge – fluid; in people’s minds • Knowledge is the way to maintain a sustainable economic advantage Knowledge Information Data

18. Ch2: The Promise and Challenge of Knowledge Markets • Knowledge is exchanged, bought, bartered, found, generated, and applied to work. • Knowledge transactions occur because all the participants expect the transactions to provide “utility”. • Fact of life: people rarely give away valuable possessions (including knowledge) without expecting something in return. • Important fact to realize for any knowledge initiative: there are markets for knowledge.

19. Political Economy of Knowledge Markets • Meet the players: • Buyers • Knowledge seekers looking for insights, judgments and understanding. • Seeks answers imbued with emotional subtexts that are key to our sense making. • Sellers • People with an internal market reputations for having substantial knowledge about a process or subject. • Brokers • Gatekeepers, boundary spanners. • Examples: Managers, corporate librarians.

20. Factors that affect the Price System • Reciprocity • Most important factor • Seller will spend time and effort needed to share knowledge effectively if he expects the buyers to be willing sellers when he is in the market for their knowledge, a.k.a. “The favor bank.” • Related to the next most important factor – Repute.

21. Factors that affect the Price System • Repute • Intangible, but produces tangible results • Importance of repute is increasing • Workers at all levels feel considerable pressure to heighten their individual repute for their demonstrated knowledge, skills, and competencies. • Altruism • The seller is just a “nice guy/gal”

22. The Trump card – Trust! • An essential condition of a functioning knowledge market. • Established in the following ways: • Must be visible • Must be ubiquitous • Must start at the top • A firm’s knowledge market must be founded on mutual trust.

23. Knowledge Market Signals • Indicate both where knowledge actually resides and how to gain access to it. • Position and Education • Not a consistent signal • Informal Networks • Possibly the best knowledge market signals flow during chats at the water cooler, cafeteria, etc. • Disadvantage: undocumented; not readily available to all who need them • Communities of Practice • Employee initiated common interest groups.

24. Knowledge Market Inefficiencies – Responsible Factors • Incompleteness of Information • Lack of maps and yellow pages to guide the buyers to the sellers. • Asymmetry of Knowledge • Some asymmetry is needed, strong asymmetry prevents knowledge from getting to where it is needed. • Localness of Knowledge • People usually get knowledge from their organizational neighbors

25. Knowledge Market Pathologies • Monopolies • Knowledge will come at a high price • Not be there to benefit the company • Artificial Scarcity • Monopoly is one form • Downsizing can cause a scarcity as well • Trade Barriers • Refusal to accept new knowledge • Status difference between seller and buyer • Lack of good knowledge transfer infrastructure

26. Developing Effective Knowledge Markets • Using Information Technology Wisely • Tech developments can change market dynamics dramatically. • Pitfalls and Limitations of using IT • Trying to force fluid knowledge into rigid data structures • Focusing too much on the system and not enough on the content

27. Developing Effective Knowledge Markets • Building Marketplaces • Create virtual spaces dedicated to knowledge exchange • Members of an organization must be given time to shop for knowledge • “Talk rooms”, knowledge fairs, live and electronic forums • Creating and Defining knowledge Market Value • Recognize, promote, reward employees for sharing knowledge

28. Peripheral Benefits of Knowledge Markets • Higher Workforce Morale • Employees see that their expertise is valued • Greater Corporate Coherence • Shared awareness of corporate goals and strategies • Richer Knowledge Stock • Continuously refined and validated • Stronger Meritocracy of Ideas • Test official beliefs and expose flaw

29. Ch2: Summary • Knowledge markets exist • Important factors – reciprocity, repute. • Trust is the key! • Organizations should value knowledge • Reward knowledge sharers • Promote culture of sharing

30. Ch3: Knowledge Generation • Modes of Knowledge Generation • Acquisition • Dedicated resources • Fusion • Adaptation • Networking

31. Modes of Knowledge Generation • Acquisition • Knowledge does not have to be newly created • “Well stolen is half done” – Spanish proverb • Most effective way – buy it! • Increasingly, firms acquire other companies for their knowledge • Knowledge acquisitions can be problematic – must be handled with care • Various agencies trying to create metrics to quantify value of knowledge

32. Modes of Knowledge Generation • Rental • Knowledge can be leased or rented • Funded research, consultants • Likely to include some knowledge transfer • Make sure to take steps to retain it too!

33. Modes of Knowledge Generation • Dedicated Resources • Establish units or groups specifically for that purpose • Research and Development (R&D) groups • Fusion • Bringing together people with different perspectives to work on a project • Group members must find some common ground – need to understand one another

34. Modes of Knowledge Generation • Adaptation • External (and internal) changes cause businesses to adapt. E.g. new competitors products, new tech., etc. • The business world has become aware that success can lead to unwillingness to adapt • Ability to adapt based on: • have existing resources and ability to change • being open to change • It is important to adapt new knowledge before a crisis occurs

35. Modes of Knowledge Generation • Networks (communities of knowers) • People brought together by common interests (informally)  often generates new knowledge within firms • Consulting and service firms have organized their previously informal networks into formal networks, with budgets, coordinators, librarians, etc

36. Common Factors to the Modes of Knowledge Generation • All these efforts need adequate time and space devoted to knowledge creation or acquisition • Critical that managers recognize • Knowledge generation is both an important activity for success • It must be nurtured • The firm that fails to generate new knowledge will probably cease to exist!!

37. Ch3: Summary • Various modes of knowledge generation • Acquire (buy/rent), Dedicate resources, Fusion, Adapt, Network • Organizations need to be flexible • Process takes time • Must be done carefully

38. Ch4:Knowledge Codification and Coordination • Codification means converting knowledge into accessible and applicable formats • Basic principles to codify knowledge: • What goals will be served • Identify appropriate forms to reach goal • Evaluate utility and appropriateness for codification • Identify an appropriate medium for codification and distribution

39. Major challenge: Codifying Tacit Knowledge • Tacit knowledge • Internal to the knower; difficult to articulate • E.g. the distinctive style of a master musician • Codification • Usually limited to locating someone with the knowledge and interacting • This method is more efficient than trying to capture it electronically or on paper.

40. Mapping Knowledge • A knowledge map is a picture of what exists and where it is located • Developing a knowledge map involves • Locating important knowledge in the org • Publishing a list or picture showing where to find it • Can be used as a tool to evaluate the corporate knowledge stock • Reveal strengths… and weaknesses!!

41. Assembling the Map • Every employee has a piece of the map in his/her head • Creating an org wide map is a matter of combining these individual “mini-maps.” • Technology can be useful for mapping • “Yellow-pages” • Continuously updated  better than paper • Common tools: Lotus notes/intranet systems • Word of caution • Politics of mapping knowledge! • Knowledge matters

42. Back to Capturing Tacit Knowledge • As mentioned earlier, very difficult, but tacit knowledge has substantial value  worth the effort • Narratives very useful • Knowledge communicated most effectively through a convincing narrative delivered with elegance and passion • Recall AAR program: “war stories” that convey “ground truth”; very effective to communicate knowledge • Embedded Knowledge • Some tacit, internal knowledge can be externalized in a company’s products or services • Knowers use their expertise to develop a process or product

43. Codifying Knowledge in Systems • History of AI: excessive claims of ability of computers • Bounded, unambiguous, rule-based knowledge can be embedded in an expert system. E.g. Deep-Blue • Evaluating Explicit Knowledge • Some forms of knowledge already codified and explicit: patents • Evaluating codified knowledge and making it available is integral to the codification process

44. Continuing Codification Challenge • Challenge is to codify knowledge and still leave its distinctive attributes intact, putting in place codification structures that are as flexible as the knowledge itself. • Stories and rhetoric provide the richest and most flexible approach to this task • For the near future: this is more art than science

45. Ch4: Summary • Difficult, not impossible to codify knowledge • Explicit knowledge codification • Usually possible to document • Implicit/tacit knowledge codification • Difficult • Utilize narratives • Develop knowledge maps (of where the knowledge is) • Utilize electronic communication resources to keep the knowledge fresh.

46. Cross Cutting Themes • Knowledge resides within people • Intangibility and fluidity of knowledge pose new challenges for organizations • Organizations should be willing to pay the price for an intangible asset - knowledge • Organizations must be aware of what they know/don’t know • Effective knowledge management is the key to success in today’s economy

47. Comments • Authors present well rounded view of the subject • Plenty of examples • Illustrates authors’ expertise in the field • Use their own experiences as examples • Convincing argument for effective knowledge management

48. Reviews and References of “Working Knowledge” • “Knowledge management is a business issue for competitive advantage, not just an information technology issue. It will become increasingly important, especially for large enterprises needing to create, share, and reapply knowledge on a global scale. Working Knowledge is as thorough and complete a book on this subject as exists today.” --Todd A. Garrett, Senior Vice President and Chief Information Officer, Procter & Gamble • News article in the Financial Times, The challenge of managing knowledge, that references “Working Knowledge” • http://www.sbs.ox.ac.uk/html/news_article.asp?ID=62 • Presents the practical challenges that arise in trying to implement a system based on “Working Knowledge” and other similar books • “Building a Knowledge Culture” – Whitepaper by A. Andrew Anderson • http://www.robbinsgioia.com/library/whitepapers/KnowledgeMgmt.pdf • Presents practical steps in implementing a KM system

49. Additional Resources • Interview with the authors: • http://www.brint.com/km/davenport/working.htm • Davenport’s website with list of latest books, articles • http://www.tomdavenport.com/

50. Questions?