Being Smart About Knowledge

Knowledge management might be management’s current buzz phrase, but there is great deal of confusion out there about what it means exactly. Just don’t confuse knowledge with information.
A survey of 40 companies in Europe, Japan and the United States by the McKinsey consultancy shows that many executives think that knowledge management begins and ends with building sophisticated information technology systems. First mistake.
Some companies do go further and link all their information together and build models that increase their profitability by improving processes, products and customers’ relations. These companies understand that true knowledge management requires them to develop ways of making employees aware of the links and goes beyond infrastructure to touch almost every aspect of business.
Given that knowledge management is an increasingly essential component of innovation and value creation, the McKinsey survey focused on two tasks – product development, and order generation and fulfilment – as ways of identifying which companies in the survey were good knowledge managers. These tasks are, according to McKinsey, major contributors to the value company generates.
Successful companies cut throughput time by an average of almost 11 percent from 1995 to 1998, compared with an average of 1.6 percent at the less successful companies. Development time at the successful companies fell by 4.6 percent in the same period, compared with just 0.7 percent at the less successful.
McKinsey then compared the knowledge management practices of the more and less successful companies to understand how their practices contributed to their success. The survey’s findings can be summarised simply: successful companies build corporate environment that fosters desire for knowledge among their employees and that ensures its continual application, distribution and creation. Less successful companies tend to take top-down approach: pushing knowledge to where it is needed.
Successful companies, by contrast, reward employees for seeking, sharing and creating knowledge. It requires effort to develop what the consultants call “knowledge pull” – grassroots desire among employees to tap into their company’s intellectual resources. Creating databases or virtual team rooms isn’t enough, since many employees resist using knowledge generated by other departments, for example. Worse still, many people believe that the hoarding of knowledge is power, philosophy that may help individuals but hurts organisations.
Partly to overcome barriers of this kind, successful companies tend to establish clear goals that promote knowledge pull by forcing employees to reach beyond themselves. Instead of wasting resources by avoiding knowledge that was “not invented here”, employees at these companies use all available resources, including the corporate knowledge base, to improve their chances of reaching their goals.
Almost all of the successful companies McKinsey analysed set ambitious goals for product development and pro-cess innovation, while only 33 percent of the less successful companies did so for product development and only 27 percent for process innovation.