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Thursday, March 25, 2004

Towards a knowledge network economy
Here is a reflection about knowledge management on which I am currently working. Comments are welcome!


Towards a knowledge network economy

Introduction
It has become obvious for business people that today’s environment is in constant evolution. That explains in part the increasing interest of businesses for technological tools such as Customer Relationship Management (CRM), Enterprise Resources Planning (ERP) and Knowledge Management (KM). By helping organizations get in touch with their environment and by building new communication structures, these tools promise to better align and adapt the business strategies of a changing world. CRM and ERP became popular at the end of the 1990s and KM followed a few years later. All these new technologies were supposed to improve competitiveness and profitability, but all have since become the central point of many harsh critics. Knowledge Management, as the newest trend, should have benefited from what was discovered with CRM and ERP. Unfortunately, it was not the case.

This paper offers a point of view on mitigated success of Knowledge Management and proposes a new approach where people play the main role and where technology is used as an enabling tool, like it should be. First of all, we will demonstrate that the common interpretation of KM is flawed because software companies have misguided it and because a review of business processes has not been integrated in the concept. Then, a new framework of knowledge networks for knowledge creation and dissemination will be proposed. Finally, the consequences that this model might impose on organizations will be considered.

The Knowledge Management Illusion
A lot has been said about the pitfalls of Business Process Reengineering (BPR). The major mistake made by companies that suffered failures from BPR is that they put too much emphasis on technology and not enough on people . BPR has to be considered an organizational project enabled by IT, not an IT project enabled by the organization. A change always has systemic consequences, especially when it modifies the way people work. We do not hear much about BPR these days. Has it died? No. It has been renamed. The purpose of CRM is to align business processes with external clients and to make them the focal point of the organization . The purpose of ERP, on the other hand, is to align business processes with internal clients . They basically constitute the same exercise, but they have different focuses. The term strategic planning, widely used in today’s business environment, is so close to what BPR meant at the time of its creation that they could be considered synonyms. Strategic planning certainly encompasses both CRM and ERP.

With such a strong relationship between the concepts, one would have thought that organizations would have avoided BPR’s pitfalls in their CRM and ERP initiatives. Unfortunately, it has not been the case. Companies are still buying CRM and ERP “software solutions” and they ask their Chief Information Officer to implement it. Where do the employees fit in all that? It’s not very clear. They are considered at best a facilitator and at worst, a change resistance generator. Managers are well aware of the problem but they still avoid it. Do not get fooled, most managers do have good intentions. The problem is that dealing with people is costly and risky because we never get a complete picture and we never know how individuals will react to change. In the best case scenario, we can try to anticipate. Higher costs and risks don’t fit well in a Return On Investment analysis and are therefore often omitted in order to make sure higher management accepts a particular project.

Knowledge Management is very close to CRM and ERP. It’s still Business Process Reengineering but in this case the focus is not put on clients, but on knowledge. That is a significant difference because people do not know much about their knowledge, especially at the organizational level. While people are used to cliché formulas such as “think client” or “the client is the most important person in this building” they are not used to consider the knowledge that they own as being of critical importance.

Where does the need to manage knowledge come from? Knowledge is seen as the key to adaptability and innovation, which are considered critical success factors in today’s business environment. There is an important obstacle to face. It is very hard to get to a common understanding of what knowledge is and how it should be “managed”.

First attempt: knowledge capture
Management does not like costs and risks. It likes to possess, control and exploit. KM software companies are well aware of that. By offering turn key KM software products, they give management the assurance that costs will be controlled and that the risks will not be higher than they are for any other software project. That is very appealing for organizations and it has convinced many of them to undertake KM software implementation. The main function of such software is to organize knowledge in a database and to allow people to contribute and retrieve information when it is required. Later versions include collaborative functions such as chats, forums and access to experts in a number of fields. Unfortunately, this model is not working very well because people do not like to contribute their knowledge.
Gareth rightly points out that people’s power in their work environment is related to what makes them valuable in terms of knowledge. For instance, one’s ability to apply a given procedure correctly without having to refer to the 100-page manual makes him a very valuable employee within his department. Employees are respected and recognized for their unique knowledge. And this is exactly the kind of knowledge that KM initiatives try to capture. Would this employee be willing to share his knowledge with the rest of his organization? Not likely since sharing his knowledge would mean giving away his organizational power. A major downfall of KM is that it is fighting against this power distribution problem all the time. People do not like to give away their power of influence. Hence, even if they did, we would still need to represent and index knowledge in a meaningful way for heterogeneous categories of users. Downes argues that indexing an object is highly related to the use we want to make of it. It then changes according to the context in which it is used. This illustrates how complex and demanding knowledge representation can be.

The knowledge capture approach is rather problematic because of the human factor and the representation difficulty. Therefore, organizations need to invest more money than they first thought was needed in order to maintain a KM initiative over time, when using such an approach. They should constantly motivate their employees to keep an acceptable level of use. What is often worse is that the costly knowledge base that is produced is static. It has to be manually updated, with a delay most of the time, while the purpose of Knowledge Management is to help organizations become more flexible in a dynamic environment. This approach definitely seems to miss the point.

Second attempt: knowledge capture with communication tools
Knowledge Management experts, recognizing that people needed to be included in the loop, have added communication tools to their software (chat, discussion boards, weblogs…). In addition to e-mail and the telephone, these tools can improve the quality of communication between people. In best case scenarios, individuals will share more knowledge because it really corresponds to the way people learn: by interaction. It’s a move towards the right direction but it’s not enough. The knowledge capture model is still the central point here and leads us to two fundamental questions: Does knowledge exist by itself if it is not linked to someone? And how can an organization benefit from KM if people are not fully integrated in its process?

It is not the goal of this paper to discuss the definition of knowledge. Nonetheless, we can state that economically speaking, a piece of information that is not used by someone is useless. Therefore, knowledge gets its value from the use that is made of it. Knowledge is produced by and for people. Not to include people in KM process is nonsense. The next section proposes a model where knowledge itself is not managed, but where the way by which it gets created and disseminated is indeed managed.

Managing knowledge through people
People are the natural owners of knowledge. They create it, share it, filter it and make it evolve. In order to store knowledge and help communicate it, they create artifacts. A theory like emergence states that knowledge results from the interaction between people . No matter if one agrees with it or not, a fact remains:

Knowledge is a human construct (and most of the time a social one).

Such a statement is of extreme importance, because if we agree with it, we should abandon the idea of capturing knowledge, which is the main idea behind most current KM projects. KM would then have to focus on a different idea: enable knowledge creation by people. Technology would also have a different role to play in that context, but still a critical one. It has to become the communication infrastructure that allows social networks to create knowledge.

As mentioned earlier, organizations like to control and possess knowledge, which they consider to be an asset, in order to better manage risk. In a people-based approach, they wouldn’t need such control over knowledge because they could access information through a powerful and intelligent medium, a person or a group of people. Let’s have a look at what such a corporate social network would look like.

(image1)

In this model, black dots represent people and coloured squares represent different networks of knowledge. The coloured connections therefore link people together by fields of knowledge, or by fields of interest if you prefer.

Within a network people are aware of each other and are communicating through a suite of tools that could be made of discussion boards, e-mails, chats, weblogs… In order to identify other people within a network, it will be necessary to represent their profiles in some way. But the true personification of people in a field would occur through their contribution to the network. Participants in a network could then produce artifacts when they find it relevant.

The true strength of this model resides in internetworking. Individuals would participate in a number of networks, which would be reflected in their profiles. By representing how people belong to different knowledge networks, we would be able to draw the knowledge map of an organization. This map would be an extremely powerful tool allowing the identification of key individuals to select according to their profiles, for example to achieve a new highly complex project.

A knowledge network model acts precisely where KM is failing, it gives people power instead of stealing it away from them. People are the nodes of the knowledge networks and therefore their foundation. It is true that knowledge is not necessarily explicitly captured, but it becomes accessible, alive and dynamic. Maps of such knowledge networks are constantly evolving as people get in and get out of networks, as they make contributions, as networks appear and disappear. This dynamic knowledge mapping of organizations is not possible at the present time but would be feasible with the knowledge network model.

A Network of Knowledge Networks
We have seen how knowledge networks can empower people in organizations with knowledge creation and dissemination. The thing that was not mentioned though is that there are no reasons why the networks of an organization could not be comprised of external networks as well. Today’s business often requires to access external knowledge when dealing with complex issues. Through its internal and external knowledge networks, an organization would be able to increase its own knowledge pool by allowing its employees to interact with people outside its boundaries. This sounds a lot like the true spirit of the knowledge economy…

(image2)


The Individual as an independent knowledge worker
An organization is at its core a group of people working together on common objectives. As products and services are increasingly being built with knowledge, access to this resource becomes as critical as getting access to metal for an automaker. The difference is that flexible organizations need very diverse kinds of knowledge in their activities. Employing such a diverse workforce on a permanent basis is costly and inflexible. That might explain in part why outsourcing is getting increasingly popular. The knowledge worker, whose main task is to participate in the knowledge creation process, can therefore be considered as an independent production unit that is employed on demand by organizations. An organization that has strong enough knowledge networks could then outsource most of its activities to individual knowledge workers employed in real-time according to a matrix structure fluctuating according to needs. This may seem a little farfetched, but this extremely flexible structure is attainable for organizations that understand their knowledge flows.

One may argue that such a structure would destroy the traditional employer-employee link and that the concept of employment security would disappear. The employer-employee link would be very different indeed and be more of a “client-employee” link. The vertical production chain would be made of a very large number of small value-creation units (individuals) oriented towards the needs of the client. The employment security concept would also evolve and it would be defined by an individual’s ability to contribute knowledge within this vertical production chain.

Conclusion
Moving from the industrial era to the knowledge era has big implications for organizations. They need to shift from a production-based paradigm to a knowledge-based one. Present organizations who undertake KM software projects often do not realize how deep the changes to implement are in order to truly become knowledge organizations. Knowledge cannot be managed in an organization if its business processes are not adapted and its people are not established as the foundation of its knowledge architecture. The new framework of knowledge networks could very well be the missing element that allows organizations to really become knowledge-based. Good news, it could be done now.

Reference
Brynjolfsson & al. (1997). The Matrix of Change: A Tool for Business Process Reengineering. MIT Sloan School of Management.

Davenport (1996). The Fad That Forgot People. The Fast Company

Editors of the CRM Magazine (2002), Destination CRM. What is CRM?. Retrieved from the web on February 19, 2004:
http://www.destinationcrm.com/articles/default.asp?ArticleID=1747

Koch (2002), The ABCs of ERP. CIO.com. Retrieved from the web on February 19, 2004:
http://www.cio.com/research/erp/edit/erpbasics.html#erp_abc

Gareth (1998), Images of Organizations, Berrett-Koehler Publishers

Downes, S. (2003). Resource Profiles. Retrieved from the web on Novwember 30, 2004 : http://www.downes.ca/files/resource_profiles.htm

Kakihara & Sorensen (2002), Exploring Knowledge Emergence: From Chaos to Organizational Knowledge. Journal for Global Information Technology Management, Vol 5, 2002

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