Supplemental Slides to Chapter 3

Knowledge Strategies

Knowledge Markets

January 21, 2004

Review from Last WeekTypes of ISWhat is KM?Drivers of KMWhat is Knowledge?

DataInformationKnowledge

“The medium is not the message”“The thing delivered is more important than the delivery vehicle.”

Strategy for Managing Knowledge

HBR, 1999

Hansen, Nohria, Tierney

Codification StrategyExtracted from a person, made independent of person, reused. Create “knowledge objects” from interview guides, work schedules, benchmark data, market segmentation analysis, presentations, estimates, programming documents, technical specs, training material, change management documentationAchieve scale in reuseErnst and Young, Accenture

Personalization Strategy

Focus on dialogue between individuals not knowledge objects

Knowledge that hasn’t been codified and probably couldn't; brainstorming, one-on-one

Bain, BCG

McKinsey: fosters networks of people between offices, consultants are expected to return calls from colleagues quickly, directories of experts.

How Consulting Firms Manage Knowledge

Codification: codify and store knowledge so it can be accessed and used by anyone in the firm

Competitive Competitive StrategyStrategy

Personalization: provide creative, analytically rigorous advice on high-level strategic problems

Reuse Economics: invest once in a knowledge asset and reuse it many times; similar problems; saves work, reduces communication costs

Economic Economic ModelModel

Expert Economics: charge high fees for customized solutions to unique problems; rich in tacit knowledge

People-to-Documents KM StrategyKM Strategy Person-to-Person

Invest heavily in IT; goal is to connect people with reusable codified knowledge

Information Information TechnologyTechnology

Invest moderately in IT; the goal is to facilitate conversations and the exchange of tacit knowledge

Hire new college grads, train people in groups, scenarios, reward people for using and contributing to document database.

Human Human ResourcesResources

Hire MBAs who like problem solving and can tolerate ambiguity; train people through mentoring, reward for sharing with each other

Choice?

Most firms use both but to be successful, firms focus on one and use the other supportively

KM strategy should support competitive strategy - how the firm creates value for customers.

Dell vs. HP

Dell: strategy is to assemble inexpensive PCs made(build) to assemble inexpensive PCs made(build) to order.order. Sophisticated KM system; 40,000 possible configurations (100 for competitors) each configuration is used 275 times. Reuse allows lower costs.

HP:Strategy is to develop innovative products.develop innovative products. Technical knowledge must get transferred to development teams. Company uses person-to-person exchanges; don’t limit travel budgets for engineers.

Which Strategy is Right for You?

Do you have a standardized or customized product?

Do you have a mature or innovative product?

Do your people rely on explicit or tacit knowledge to solve problems?

Knowledge Markets

Knowledge Markets

Knowledge is exchanged, bought, bartered and moved by market forces

Knowledge is the most sought after remedy for uncertainty

Knowledge market transactions occur because they provide utility

Knowledge MarketsBuyersBuyers want insights, judgments, understanding

What is this client like? How did we win that sale? 15-20% of manager’s time is spent in knowledge search and request

SellersSellers have an internal market reputation for knowing about a process or subject

Some aren’t skilled at articulating knowledge, some have specialized knowledge, some like to hoard

Brokers Brokers are the gatekeepers, boundary spanners. Understand the big picture

Managers, librarians

The Pricing System

How are value exchanges efficiently rendered

We can purchase knowledge externally (consultants, lawyers). Internally, money doesn’t work as well.

Internal Pricing System

Reciprocity: “the favor bank”

Repute:Reputation seems intangible but it can produce tangible results: bonus, promotion, reward of guru, security

Altruism: “nice guy”

Passionate about my knowledge, mentor

Knowledge Market InefficienciesIncompleteness of information

Where do we find knowledgeLack of explicit information for pricing

Asymmetry of knowledgeKnowledge “feasts and famines”Knowledge at the top may not be available to middle managers

Localness of KnowledgeKnowledge markets depend on trust and we trust the people we knowSatisfice: we’ll take the knowledge of the person next door rather than incur cost of finding better knowledge

Developing Effective Knowledge Markets

Use Information Technology Wisely

Build MarketplacesPhysical and virtual spaces dedicated to knowledge exchange; talk rooms; knowledge fairs. Texas Instrument's Share Fair.

Creating and Defining Knowledge Market ValueProvide evidence of recognition, reward, promotion

Higher workforce moraleMy expertise is valuable, less wasted effort, better communication, less uninformed decision making, less employee cynicism

Greater corporate coherenceShared awareness of corporate goals

Richer Knowledge StockEver sell increases total stock of knowledgeNewly acquired knowledge interacts with existing knowledge to create new ideas

Stronger Meritocracy of ideasTest official beliefs and expose the flaws of the faulty ones. Ken Olsen at DEC

The Peripheral Benefits of Knowledge Markets