Preparing for the Knowledge Era

by Onno van Ewyk

The Information Age is giving way to the Knowledge Era. The hypothesis is that in the future everything about the way an organisation functions will be so flexible that the only unique and truly valuable asset the organisation has is its 'knowledge'. Its knowledge of its markets, customers, products, services and processes that will allow it to continuously adapt and succeed.

What is Knowledge Management?

The term Knowledge Management began to be bandied about around two years ago. It is fairly typical of most buzz-words that crop up from time to time in that it has enough Zeitgeist to spark immediate interest and enough implied meaning to promise a radical new insight into some area of intransigent difficulty. In this case, managing organisations in the 21st century. The problem with the term, as with many buzz-words, is that trying to dig into it to find out what it means in practice is difficult. The main purpose of this paper is to explore what Knowledge Management actually means in practical terms and the specific issues faced by managers in general and IT managers in particular. But first some background and defining of terms.

The term 'Knowledge Management' seems to have had its genesis in the concept of the 'Knowledge Worker' developed by Peter Drucker¹ and his contention that this type of worker will rapidly become dominant in organisations. Why? For two main reasons, manual work is disappearing as people are replaced by increasingly clever and flexible machines, and the business environment now changes so rapidly that remaining employees must be able to constantly think and re-think what they do in order for the firm to survive and prosper. Why is the business environment changing so rapidly? Well, that takes us back to those clever machines again.

Technology is turning entities into commodities which once required large permanent infrastructures of technicians, bureaucrats and workers. For example, manufacturing plants are becoming commodities, even very high-tech ones like chip-making plants. Intel² can create a plant anytime it wishes, anywhere in world according to one detailed blue-print that covers everything from machinery to management processes. Banking has become so commoditised that Banks are in danger of losing their whole traditional market to Insurance companies, Telecommunications suppliers, and Retailers.

If the 'nuts and bolts' of what organisations do is increasingly being packaged-up into off-the-shelf machines, processes or systems, then the only way that organisations can add value and prosper is to use whatever they have remaining that is unique and leverage it. In most cases, what remains is what an organisation 'knows'. What it knows about its products, its customers, its markets, and about the way it does business that is special and different - its policies, procedures and processes.

At this point it is worthwhile making a distinction between 'information' and 'knowledge'.

The difference between 'information' and 'knowledge'

Currently 'Knowledge Management' still suffers from its buzz-word origins in that nobody can agree on a definition for it. All the prominent commentators have their own, different definition determined by their particular perspective and the particular axe they wish to grind. I intend to add to this confusion by providing my own definition.

First, it is difficult to distinguish between 'knowledge' and 'information'. 'Information' has a passive connotation. It is something which is 'just there'. Sure, you have to take the trouble to collect it, but, once you do, it is available for use whenever the need arises. Knowledge, on the other hand, tends to be seen as an active thing associated with an entity of some sort, typically a person. To illustrate the subtle difficulty here, consider the problem of finding out the price of a product you wish to buy. If you can look it up in a price list you would probably call this bit of data 'information'. But if you ask someone what the price is, you would say that the person you asked 'knows' or 'has knowledge of' the price.

You may ask at this point, why it is necessary to make a distinction between 'information' and 'knowledge' at all if it is so difficult. The reason is that it is crucial to identifying the dynamics of 'Knowledge Management' and the things which organisations need to do in order to benefit from it. The concept of 'Information Management' has been around for a long while. If it is the same as 'Knowledge Management' then we really have nowhere to go.

My view of 'knowledge' is that it is a step beyond information. It is based on information in that it is produced by considering and interpreting data, facts, figures, other interpretations of data, facts and figures, and even other knowledge. In other words it is interpreted information, and it is interpreted in order to achieve or support a specific action, decision or end-result.

Therefore, knowledge is any information which is immediately useful. Immediate in both senses of that word. That is, it does not need to be mediated by way of further analysis, processing or interpretation in order for it to be useful. And it needs to be readily available or accessible, and understandable. 'Knowledge management' then is the system or set of systems used to process, refine, capture, analyse, interpret, organise, express, and control information in order to make it immediately useful as knowledge.

We can explore this definition, and hopefully clarify it somewhat, by constructing a model to identify where knowledge is located and the issues associated with managing it.

From tacit knowledge to explicit knowledge and back again

Having got some sort of a handle on what knowledge and knowledge management are, we need some way of teasing out the issues which organisations face. We can do this by trying to identify the sorts of entities in which knowledge resides, what forms knowledge takes and what sorts of interactions occur between these.

This model is a fairly simple attempt to start to come to terms with an admittedly very large subject.

In the model, I have started by making a fairly bold, but I think reasonably safe, proposition that knowledge resides broadly in two places; in individuals and in the world. Individuals have knowledge at their disposal as result of years of practical experience, research, training, information gathering, and personal study. Individuals also have a store of information at their disposal via their memories and their memory aids which they gather around themselves in the form of books, diaries, files, personal organisers, and bookmarks in their web browsers (boxes 1, 2, and 3 in the diagram). The individual's knowledge is tacit. That is, resident 'in the person' and is not accessible to others unless it is communicated in some way.

Codification and Diffusion

To communicate knowledge it must be codified, that is, translated into symbols which other people can understand. This means, quite simply, putting it into words, pictures, sounds or actions. Having codified knowledge it is then capable of being diffused which means broadcast or published. The reason I am using the words 'codification' and 'diffusion' is because there is a whole body of research centred on these two concepts which is worthwhile investigating if you are interested in knowledge management³.

Once codified, knowledge is in the world and available to share. It exists in the world transiently when it is spoken or acted, and more or less permanently when written down or recorded. This stage appears in the diagram as box 4 and as you can see by the number of arrows pointing to and from it, it is pivotal to the picture of Knowledge Management that I want to develop.

Once knowledge has been codified and recorded within an organisation it 'belongs' to that organisation. It becomes Corporate Knowledge and is capable of enduring separately from the individuals who make up the organisation at any particular time. This is an important point because individuals' knowledge does not 'belong' to the organisation. At best, the organisation rents an individual's knowledge during their employment. One of the main objectives of Knowledge Management is to leverage individuals' knowledge by converting it into Corporate Knowledge. And if it is not codified it cannot be leveraged. I will elaborate on this a little latter when we look at the objects and issues associated with knowledge in organisations.

Levels of knowledge encapsulation

To complete our model we need to consider what happens beyond codifying knowledge. There are levels of encapsulation beyond this. One is the creation of software. A great deal of knowledge is implicit in software code, effectively transforming knowledge into extraordinarily powerful tools. Beyond this, knowledge is transmuted into entities which actually perform physical (as opposed to data handling and calculation) tasks and even do our 'thinking' for us.

Everyone knows this, but the important point here is that, in terms of knowledge management, there must be a loop back to codified knowledge for software, expert systems, machines and robots. Otherwise we lose control of these entities and literally 'create monsters'. Some examples:

· In the 1980s, Geneal Motors spent $US30 Billion on manufacturing automation with very little productive gain. This was due to their lack of understanding of their own overall processes and systems⁴.

· The US Health Care Financing Administration, concerned about the level of Medicare fraud, tried to upgrade its payments administration software; after spending $US41 Million (an initial budget of $19.4M was raised to $102 Million) its IT Consultants GTE gave up, citing "lack of documentation" as an insurmountable barrier⁵.

· It is estimated that the Year 2000 bug will cost $US600 Billion⁶ worldwide to fix; how much less would this be if legacy systems were better documented?

· The stock market 'correction' in the early 90's which wiped out billions of dollars of market value overnight was allegedly triggered by expert systems all automatically carrying out "stop-loss" commands for investors.

· HAL

The problem is that many organisations go from box 3 (Tacit personal knowledge) to box 5 or even 6 (Transformed and Transmuted knowledge) without ever visiting box 4 (Codified knowledge). This has the effects that,

1. users of the software or systems /machines are ill-equipped to use them well (or at all, in some extreme cases)

2. they are difficult and expensive to update

3. they are difficult and expensive to maintain

4. they can cause disasters

Ultimate control must devolve back to people and this is done by ensuring that people have access to the knowledge required.

Objects and Issues

In the model, I have identified lists of objects associated with the types of information and knowledge shown in the boxes. Thus, records and databases appear next to box 2 (Explicit information) and software appears next to box 5 (Transformed knowledge), and so on. The reason for this is to get some concrete view of what has to be 'managed' in Knowledge Management, or at least what some of the outputs are. I do not mean to imply by this that Knowledge Management does not include a whole lot of intangible elements. It does. But it is easier to come to grips with these if you start with some tangible things.

Let us take a look at some of these objects.

Records and Databases: Individuals decide what data needs to be recorded, they arrange for this to be collected, put it into databases, analyse it to some level, and report on it. This is Information Management, and knowledge management has two things to add to this process. It asks the questions,

"Is your data collection focused on problem-solving, innovation and process improvement?", and,

"Are you structuring your key data records so that they can be accessed and analysed flexibly?".

Records and databases are major inputs to individuals' personal or tacit knowledge. Encouraging and enabling the use of data for problem-solving, innovation and process improvement, and providing an environment in which these things can happen, are key management issues associated with the implementation of Knowledge Management.

Manuals, Reports, Papers, and Articles: these objects are used to retain Corporate Knowledge. Without these you have no Corporate Knowledge, only a collection of (perhaps) knowledgeable employees. These objects, and the issues associated with them are the core of what Knowledge Management is about. Their principal use is to gain leverage, and they do this in a number of ways:

1. by securing proprietary knowledge such as patents, formulae, technical details, etc which are unique to the organisation

2. by recording and communicating how the organisation's 'systems' work (ie all methods of operation, not just computer systems) so that everyone knows how to play their part; this apples to all Manuals, including those covering policies and procedures, applications software, and systems documentation

3. by creating a 'library' or stock of information which reliably reflects how the organisation works; this enables employees to improve the organisation at the margin and not waste their creative energy fighting fires and reinventing wheels.

Leverage is the key word here, and the ways in which you codify and diffuse knowledge in these forms is the key to getting maximum leverage. The issues involved are:

Accuracy - if codified information is wrong or not relevant, it is not knowledge.

Readability - if manuals, for example, are not well written and well structured, people will not read them. Effort put into creating the documents will be largely wasted if readability is poor.

Accessibility - if people cannot get access to the knowledge they need, when they need it, effort put into its creation will again be largely wasted.

Authority - knowledge must be credible, otherwise it will be ignored.

Currency - knowledge must be up-to-date. Yesterday's solutions only apply to yesterday's problems.

Security - if the knowledge is valuable to competitors, it must be hidden from their eyes.

Controllability - the systems used to handle authority, currency and security

Media - critical to readability and accessibility.

If these issues are handled well, the pay-offs for organisations are substantial. The sources of these pay-offs include better decision-making, lower operating costs, improved software utilisation, improved software development, lower training costs, better and cheaper compliance management, improved customer responsiveness, and faster service delivery. Here are some documented examples.

· A very profitable high-tech company invested in setting up a central library of technical information for its engineers, managers, marketers, and scientists. A survey of users found that times savings alone achieved a higher ROI on this investment than the company was achieving overall⁷.

· A number of studies of the quality of software user manuals found that the better ones reduced the amount of support calls by as much as 80-90%. Direct savings were calculated from tens of thousands of dollars per year to millions for very widely used software. These figures also pointed indirectly to much better general utilisation of the applications⁸.

· A study carried out on employees in the low-tech occupation of parcel-delivery estimated the cost of ignorance at between $2500 and $5000 per employee per year. Better codification and diffusion of policies and procedures information had the potential to save the organisation millions of dollars per year⁹.

· Starting on the software user manual early in the software development cycle led to the early identification of problems and errors. These were much easier and cheaper to fix during the development and beta testing stages than after. In fact the relative costs were $100-$300 pre-release as opposed to $3000 post-release¹⁰.

· A regulatory organisation whose main task was to disseminate critical knowledge to the Airline Industry improved its communications effectiveness and the time-utilisation of its engineers by employing professional technical writers¹¹.

All these examples underscore the importance of good knowledge management. In the past, however, one of the biggest barriers to addressing the issues identified above has been the fact that organisations have been tied to paper-based systems for codifying and diffusing knowledge. Paper-based systems are, as we know, cumbersome, expensive and inflexible. They have been a fat target for some form of 'killer application' for some time now and this has arrived in the form of the World Wide Web and the complex bundle of technologies associated with it.

Would Knowledge Management exist without IT?

Would Knowledge Management exist as a corporate issue apart from IT - the short answer is no.

A survey¹² of Web users in the US asked respondents to review a list of web-based activities and specify their usage on a scale from "very often" to "never". The highest scoring activities were 'Research' (50% nominated 'very often') and Education (37% 'very often'). People go to the Web for knowledge and they do this because,

a) they are hungry for it, and

b) getting access electronically is infinitely easier than via paper.

The Web has proved that people are enthusiastic to share their knowledge, at least on subjects which interest them personally. This enthusiasm has been so great that Web use has grown explosively despite slow and patchy accessibility, poor security, questionable authority, and wide variation in the quality (readability and structure) of the knowledge recorded.

The World Wide Web phenomena has created de-facto standards and a plethora of cheap technology to support knowledge-sharing. Without this burgeoning technology it is doubtful whether there would be the same interest in 'Knowledge Management' as a corporate issue as there is today. The advances in software, networking, and telecommunications, making them cheaper and more powerful daily, are the driving forces behind 'Knowledge Management' and this places the IT Manager squarely on the centre-stage of corporate change.

But the difficulty is that the IT Manager, who strictly speaking should only be responsible for the enabling technology, becomes, by default, responsible for a raft of difficult management issues. In fact, all those issues listed above - accuracy, readability, accessibility, authority, currency, security, and controllability.

Cheap diffusion and bad codification

The main focal point of Knowledge Management within organisations has been the Intranet. It has been taken up enthusiastically by many organisations but most have encountered significant problems. The main ones relate to content. The codified knowledge in the organisation available to put directly into the Intranet is often found to be,

· of questionable accuracy

· badly structured

· poorly written

· poorly presented

· out of date, and

· of doubtful or obscure authority.

These things were not obvious while the information concerned was kept on paper because of the shortcomings of that medium. Putting them on the Intranet, however is like shining a very strong light on them, and discovering that they look none too pretty.

None of these problems are related to IT (unless, of course, the knowledge concerned involves IT activity). They are problems which result from a prior lack of emphasis by managers on the importance of getting their tacit or personal knowledge into explicit form (usually words) and communicating it well - not just once, but continually revisiting the knowledge they are responsible for and updating or reclassifying it as circumstances change.

This has been something of a chicken and egg problem. Because the medium (paper) was so limited, managers and employees have relied mostly on direct communication (face-to-face, phone and more lately, email) as means of communicating and developing knowledge. However, these are expensive, time-hungry and transient. They do not support anything like the degree of leverage available through the higher levels of codification that good manuals, papers, articles etc provide. Now that the medium available (electronic) is so much better, managers, and organisations, need to change their orientation to take full advantage of it.

How to prepare for the Knowledge Era

Changing the organisation's orientation towards codifying and diffusing knowledge is the key to preparing for the Knowledge Era. All the main elements of Knowledge Management are already familiar to organisations (that is, the objects of Knowledge Management and the issues associated with them) but, because of the limitations of paper-based communication, they have been handled in sporadic and isolated ways which have limited their effectiveness.

The main challenge that this creates for organisations is to lift the emphasis which they place on a number of key skills and technologies in order to create systematic and well-integrated approaches to generating, codifying and diffusing knowledge. The areas which need to be addressed have been cogently summarised by Thomas Davenport of the University of Texas¹³:

1. Knowledge capture, ie, creation of documents and moving them onto computer systems

2. Adding value to knowledge through editing, packaging and pruning

3. Developing knowledge categorisation approaches and categorising new contributions to knowledge

4. Developing information technology infrastructures and applications for the distribution of knowledge

5. Educating employees on the creation, sharing, and use of knowledge

By building capabilities in these key areas, the organisation will gain maximum advantage in a coming age when 'what you know', rather than 'what you have' or 'what you do' will be the key to competitive advantage.

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1 Drucker, P "The New Realities", Mandarin 1990

2 see reference to 'Copy Exactly' concept in "Intel's dreamers make way for a details man", International BusinessWeek, 19 May 1997

3 see Boisot, M "Information and Organizations", Harper Collins 1994

4 Drucker, P "The New Realities", Mandarin 1990

5 "Bug of the Month: Your tax dollars at work", Byte magazine, December 1997

6 "Year 2000: The Meter's Running", International BusinessWeek, 29 December 1997

7 Redish, J "Adding value as a professional technical communicator", Technical Communication, First Quarter 1995

8 Blackwell, CA "A Good Installation Guide Increases User Satisfaction and Reduces Support Costs"
Technical Communication, First Quarter 1995 and Spencer, C et al "General Electric Information Services", Technical Communication, First Quarter 1995

9 Gordon, J, "Measuring the 'goodness' of training", Training August 1991

10 Cover, M et al, "Estimating the Cost of High-quality Documentation", Technical Communication, First Quarter 1995

11 DeMarco, R J "Technical Writers in a Federal Regulatory Agency", Intercom Magazine November 1995

12 "A census in cyberspace", International BusinessWeek, 5 May 1997

13 Davenport, T H "Some principles of Knowledge Management", University of Texas