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On the KM Midway

On the KM Midway

Read this overview of knowledge management consultants to learn How the big names in consulting approach KM The philosophical difference between IT and management consultants Where to look for particular services Pundits touting the present as "the knowledge era" could be lulling companies into a false sense of confidence. Though it's a broadly accurate portrayal of a new business environment, it's a bit like the per capita income figure of a developing nation - it can mask the huge inequalities underlying a reassuring average. A look behind the lively facade of the knowledge economy would likely reveal a minority of knowledge-rich and knowledge-skilled companies and a ponderous majority of knowledge-clumsy businesses that need some help entering the fray.

Much of corporate America eagerly seeks that help, or intends to soon, judging by the activity of consultancies and the stunning profusion of KM-related conferences. "We think next year there will be an enormous boom for knowledge management," says Richard J. Stuckey, a Chicago-based partner for Andersen Consulting (AC), who coordinates approximately 75 knowledge management consultants within the technology group he leads. As corporate attention turns from Y2K to KM over the next year, Stuckey expects the number of his knowledge Management consultants to rise to 170. At Ernst & Young LLP, KM partner Peter Novins concurs. "A lot of [KM's dramatic growth] has to do with early adopters having sufficient data to make the second-wave companies feel there is real benefit to be had." Descriptions of successful KM projects given at conferences and in the press have increased awareness and client inquiries, Novins says.

PricewaterhouseCoopers LLP's (PWC) annual survey of CEOs at the World Economic Forum's annual meeting this year found that 97 percent of senior executives believe knowledge management is a critical issue for them. In Europe, KPMG LLP canvassed 100 executives at the largest companies, and 87 percent said their companies were either considering or actually engaged in knowledge management projects with consultants. Stephen Cranford, a partner in charge of KPMG's newly developed KM Solutions practice in Annapolis, Md., predicts, "Within the next three to five years, I would say almost all businesses will be engaged in knowledge management initiatives." Yet knowledge management is still subject to dozens of definitions. Most, however, contain as a common thread the objective of enabling an organisation to improve its results or operations by developing a framework, discipline and IT-supported practice for collecting, vetting and sharing enterprise knowledge.

Some executives approach consultants with requests to create knowledge-sharing environments, hoping that professional service firms that live and breathe by sharing expertise can transfer some of their own lessons to clients. Other business people, returning from a conference on the booming field of knowledge management, want to adopt some of the practices they've just seen other companies crow about. And some have heard vendor pitches of knowledge management products and wonder about their value.

The first question for most companies should be what sort of business problems can knowledge management address? The sweep of activities consultants offer under the KM label is enticingly and frustratingly broad. Systems integrators and the consulting arms of the Big Five accounting firms increasingly offer KM services in conjunction with the IT implementations they are known for, such as ERP. But KM leaders at those firms insist that they too provide clients with a battery of strategic consulting skills, not standalone IT. The traditional strategy firms tend to look askance at KM when it is packaged as a set of technology tools for accessing information. They argue that they have long coped with knowledge as a strategic issue and will continue to do so.

Role Models

We're finding a significant pool of clients coming to us and simply asking: Let's share what you are doing and what you're learning," says Dorothy Yu, leader of PWC's global KM practice in Boston. The requests for PWC to show clients how it shares and makes use of its own knowledge does have a certain logic. Professional services firms are classic knowledge-based enterprises, low on physical assets and high on widely distributed intellectual capital. Plus, PWC is grappling with a knowledge problem facing many large corporations today: how to assimilate and reorganise knowledge after a merger. Not surprisingly, KM services has been made a top priority by senior management at PWC following the July 1998 merger of Price Waterhouse with Coopers & Lybrand.

Arthur D. Little (ADL), a Cambridge, Mass.-based management consultancy, also helps clients manage knowledge the way a professional services organisation does. ADL combines its traditional strength in IT for business strategy with its background in organisational learning (boosted by its acquisition of Peter Senge's Innovation Associates in 1995). "We train clients to maintain the process: We work with them on learning how to deal with their knowledge rather than just capturing it for them and putting it on a database," explains Karin Bergmann, global leader of ADL's KM methodology, in Weisbaden, Germany. For example, a client might request help setting up a database to store customer complaints, says Bergmann, "and then you find out they want to make sure these complaints get into the production of product, and then it's about the whole process." So ADL insists on a holistic approach: Identify strategic knowledge, foster the creation of "knowledge circles," define an infrastructure for knowledge exchange and address the cultural barriers to it.

Capturing Best Practices

The ideal situation would be for us to go in and work directly for the CEO or CKO [chief knowledge officer] and start off with a top strategic-planning issue," Andersen's Stuckey says. That should include a five-year plan for KM that targets a small number of quick, early wins during the first year to build support across a large company. This approach requires the commitment of senior management with "lots of vision and deep pockets," he says, but it assures the best results. This was the case, for example, with AC's work with Mobil Corp. on developing best practices for Mobil's oil refineries. The project, which has been underway for two years, identifies employees who are best at certain practices, creates metrics so that other refineries can compare themselves and creates repositories to track the improvements. More typically, however, a client will come to Stuckey saying, "I don't have that big a budget," hoping to begin with a narrower project. Then AC will work on, say, a best practices project for a single department or small business unit.

PWC also discourages clients from starting with low-level initiatives or a tactical agenda in knowledge management. "We feel very strongly about what we call a knowledge agenda, shaping an agenda at the CEO or the COO level," says Yu.

KPMG similarly argues that knowledge management cannot succeed without the cooperation of the CEO and begins a KM engagement with an awareness seminar to win the commitment of top management. "You are really talking about changing the face of an organisation - a total transformation in terms of how it is run, how it is managed. You have to have the CEO involved," Cranford says. In contrast to many other firms, however, KPMG does believe that knowledge management can be tackled area by area. But not along the usual lines. "We are not talking about traditional functions like sales or distribution; we are talking about customer management, supply chain management, financial management. It's a whole new way of looking at business," says Cranford. At a Fortune 1000 company, developing knowledge management across the enterprise would be a multiyear project.

Growing KM from Technology

The role of specific technologies in knowledge management is a matter of controversy that has created philosophical lines in the sand among theorists and practitioners. Technology sceptics point out that many software vendors are repackaging themselves as KM providers. But some consultants had the background in technology to become believers.

Cranford's KM practice at KPMG grew from his observations about the convergence of new technologies. He had been in charge of data warehousing but says, "We saw that we really needed to work with the document-management practice, with our Internet practices, with our groupware practices - we needed to start to bring unstructured data content into the warehouse." A fast-growing IT integrator, Cambridge Technology Partners of Cambridge, Mass., likewise has built its KM offering around a collection of IT applications, but its philosophical foundation is as strategic and behavioural as it is technological. Explicit knowledge such as technical and business expertise can be organised in repositories, but a company's vision, values, behaviours and the context of information must be supported with collaborative technologies, argues Kirk Klasson, Cambridge's director of knowledge management solutions. True to its fast-delivery business model, Cambridge will spend three to six weeks identifying KM opportunities with a client, six to eight weeks developing applications and three to six months refining a prototype with the client. But Klasson insists that coaching a company to get the most from KM is more important than the technology. "A lot of folks are saying, just give me the new shoes and I'll run faster. It's more the case that you coach the organisation as to how it might run differently, and that helps it win races." Better known as a systems integrator, Computer Sciences Corp. (CSC) is pioneering a novel approach to knowledge management engagements. CSC, which is headquartered in El Segundo, Calif., began developing its own informal networks of experts a decade ago and has been formalising and expanding them in the last four years. Now it offers three KM options: consulting to clients who want to build their own knowledge-sharing IT environment; actual construction of a client's KM environment (which may involve CSC-licensed products); or hosting of the client's knowledge environment at CSC. DuPont Co. is one client choosing the last and still unusual option.

Evolving KM Ideas

One irony of the expanding activity of consultants in knowledge management is that determining exactly what department or person heads the discipline is not easy for clients. KM is an evolving field that cuts across many traditional consulting areas, including IT, strategy, business process engineering and organisational change. In some cases the people who lead knowledge management still work behind the scenes, marshalling their firm's KM experts into client engagements. In others, KM isn't really owned by any area of the firm, and a client company could encounter several variations on the KM theme depending on where it looked. This is certainly the case at IBM Corp., where a KM unit resides within IBM Global Services but also within the Lotus subsidiary in Cambridge, Mass. "My father's house has many rooms," IBM's Laurence Prusak says with a philosophical smile. Prusak, executive director of IBM's recently established Institute for Knowledge Management, says IBM is developing somewhat of a coherent story regarding knowledge. "We want to sell technology with the understanding of how it works in an organisation. And to do that you had better understand the nature of work, the nature of knowledge, how things are evolving, the global economy. All these things are deeply interwoven," Prusak says. The KM practice Prusak began when he went to IBM two years ago now numbers about 50 consultants.

Ernst & Young, one of the pioneers in the field, has about a dozen partners focused on KM and has distributed them across several service areas. But, Novins says, "KM is a very ill-defined term, and we're working very hard to get away from it in our practice. We have to use it to some degree because the market recognises it." At CSC, management has debated for two years whether to declare a distinct knowledge management practice area, says Carol Bothwel, vice president of the corporate knowledge program. The company has a core staff of about 100 consultants to provide KM services, she says. CSC had completed about 10 KM engagements as of February 1999, with another 6 ongoing.

It's About Strategy

If consultancies closely associated with IT can sound tentative about selling KM, some of the more traditional management consultants are downright reluctant to acknowledge the field called knowledge management. "Using knowledge as a source of competitive advantage has been there all along," says Nathaniel Foote, a principal at McKinsey. A company's ability to use knowledge is so deeply embedded in its strategy, its approach to customers, its hiring and career development techniques, that it can't be separated. Creating a separate KM practice would be akin to a physician removing and working on a person's blood supply or nervous system, Foote says.

"A lot of what knowledge management is about is actually saying 'what do we need to do to drive our core capabilities.' And then you're back into some things that look like very traditional issues that businesses think about," Foote explains. In other words, what kind of organisational structure, processes, support and incentives are needed to support a KM culture. Indeed, some examples Foote cites as the bread and butter of management consulting sound much like the work others are doing under the KM label: helping purchasing managers share best practices or creating a community within a sales force to make it more effective.

A.T. Kearney Inc. echoes that argument. "We haven't put together a so-called KM product and taken it to market. It's not really revolutionary new thinking; it's doing things companies have always done but at a greater level of sophistication," says Stephen Mecklenburg, vice president and global knowledge officer at Kearney headquarters in Chicago. Although the firm has no KM practice, it has several dozen consultants who work on KM within the context of broader projects, and Kearney consultants regularly speak about KM on the conference circuit. One client, for example, approached Kearney after working for years on a KM project that was not delivering all the client had hoped. "It starts with understanding what you need to know for business results - that's what people miss by thinking about data and systems," Mecklenburg says.

Some new thinking about knowledge management is taking place at Monitor Co., a strategic management firm in Cambridge, Mass. One of the company's cofounders and director, Thomas Craig, is leading the development of a new business unit that will combine the firm's traditional strong suit of helping clients analyse their business problems, make choices and take action with some of the IT-related components of knowledge management. "It's linking the tangible side - the hardware and software - with the behavioural, cultural, commitment building, action-taking side," he explains. Monitor is already using prototypes of this methodology with clients. One of the greatest challenges is capturing what transaction-based systems cannot - what's in people's minds, Craig says. "We are very hopeful that a lot of these informal or more sloppy external knowledge sources can be harnessed in a more systematic, focused way," he says.

Booz, Allen & Hamilton Inc. in McLean, Va., another strategic consulting firm, has been a pioneer in the field but is not happy about the way KM has evolved. "We feel the whole KM thing has been co-opted by Big Five and IT firms that want to do low-level, bottom-up work," says Jan Torsilieri, one of Booz's experts on knowledge management. "There are a tremendous number of programs that say 'if we share our thinking we will drive performance improvement,' but it really doesn't work that way. As KM has evolved it's become a narrow tool set." She describes her firm's take on KM: "Enabling companies to create and systematically use the very best knowledge they could get internally and externally. We tell our clients that the best way to do this is in a series of pilots, the first one in three months. If there are not results within 18 months to 2 years, you've got a problem." Coming Soon (to a Mind near You) Since knowledge management is very much an evolving concept, the approaches and services in the marketplace will be changing and adapting to new ideas.

Consulting firms have an incentive to stay ahead of the curve, and several are devoting significant time and money to the future of KM. Possibly the most established think tank in the KM field is run by Ernst & Young, whose Centre for Business Innovation in Cambridge, Mass., has studied KM projects at many companies. Arthur D. Little, which has approached KM from its expertise in the organisational learning field, is now exploring the idea of valuation of intellectual capital, a potential new area for its KM engagements. IBM weighed in early in 1999 with the opening of the Institute for Knowledge Management.

CSC says it is also forming alliances with academic, government and private sector organisations to expand its understanding and offerings in knowledge management, while its internal KM program is working on measurement of the business value of KM.

The number of attractions at the KM carnival won't be falling anytime soon, and it may become hard to distinguish the attractions from the distractions amid the din and flashing lights. When venturing into the knowledge management tumult, companies must stay focused on their own business goals and the problems they need to solve.

Customer KM

Knowledge to face the outside world

Executives may not think of it as knowledge management, but the consultancies report they consider customer relationship management as fertile ground for KM.

Most of KPMG LLP's work will be in using techniques for capturing structured and unstructured data to improve a company's relationships with its customers, says Stephen Cranford, partner in charge of KM Solutions. This customer focus was the top priority among executives at client companies queried on behalf of KPMG's KM practice.

The same emphasis can be found at Ernst & Young LLP too. A recent KM engagement, undertaken to help a large bank pull together what its employees knew about Europe's single currency, the euro, was initiated so that its executives could better respond to clients' problems. Another project helped the sales force at a manufacturing company get faster and more detailed information about new product releases, leasing options, compatibility and so forth. Peter Novins, principal who leads E&Y's KM practice, says that although the Notes-based environment created for the project was crucial, more time was spent "on the organisation and process side" than on technology: figuring out how to convince the different departments - product development, legal, marketing, finance - that sales depended on them for information to feed the system.

An example of the type of customer KM work PricewaterhouseCoopers LLP (PWC) does is a customer service project for Tele Danmark Mobil, which began in 1996 and is ongoing. The project's objective is to figure out what the customer reps need to know about products, consumers and the market, and then design the business process, training and technology to improve the service that they deliver. Dorothy Yu, leader of PWC's global KM practice, says PWC helped the company develop and use a Notes database and Web-based tool so that reps can both access internal information and capture the customer's input for reuse by other customer reps. In 1998 the client saw the results: Customer retention rose.

Living with ERP

Knowledge through the enterprise

One of the most popular business process systems, and among the most lucrative for IT consultants, is enterprise resource planning, or ERP. At several consultancies, ERP is a new growth area for knowledge management. "What we see as the future direction of KM, for example, is when we do SAP, not only will we build a relational database, but we'll also put in an integrated knowledge system," says Richard Stuckey of Andersen Consulting.

The usual role of SAP in accessing data and creating reports across business functions could be expanded to bring in, say, competitive intelligence information that would make it clear when to cut prices or capture and distribute customer suggestions for a new product, Stuckey says. In addition, an ERP implementation might benefit from a best practices section on its use.

At PricewaterhouseCoopers LLP, Dorothy Yu leads the global KM practice and says about half the KM engagements involve knowledge transfer to support system implementations such as ERP. For example, one European client's five-year, US$ 150 million ERP implementation includes a US$ 5 million companion KM project to capture best practices for living with ERP and developing and accessing an expertise network.

Senior Writer Gary Abramson can be reached at gabramson@cio.com.

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