Accelerators of KM maturity: Part 1

But documenting a KM strategy and roadmap is statistically linked with an even more meaningful outcome: the ability to leverage knowledge assets for competitive advantage. In our experience, almost every modern organization wants to compete on knowledge—to put its collective know-how to work to get to market faster, deliver superior products and services and earn customer loyalty. That is an elusive goal for most organizations: Only 17 percent without formal KM strategies and roadmaps can prove they demonstrate that capability. However, when a KM strategy is documented, the percentage of organizations leveraging knowledge assets for competitive advantage rises to 53 percent—increasing the likelihood by a factor of three (see Figure 2).

A classic example of this capability in action comes from Fluor, a global construction and engineering firm that has participated as a best-practice organization in numerous APQC studies over the past decade. According to Fluor representatives, customers perceive a direct benefit from the organization’s KM systems, which enable employees to tap into expertise anywhere in the world and identify new solutions to emerging customer problems. For instance, by leveraging easy access to design manuals, discussion forum responses from experts and past project references, one Fluor design team was able to make recommendations that saved a client one million euros. That spectacular result prompted the client to award Fluor a similar subsequent project. Because customers now recognize Fluor’s KM capabilities as an added perk, client proposals sometimes include a special provision for a consultation by Fluor’s KM group to assess the customer’s knowledge strengths and gaps at a high level.

Obviously, few organizations can achieve that type of direct impact from their KM capabilities. For most, KM exhibits its benefits behind the scenes, and customers reap the rewards without distinguishing the role played by better, faster access to institutional knowledge. But regardless of whether customers see your superior KM processes or they just know they’re getting something better from you than from your rivals, the ability to leverage knowledge for competitive advantage is a goal worth striving for. And according to our data, documenting your KM strategy and roadmap is a vital first step to achieving that outcome.

Estimate impact

The final—and perhaps most powerful—accelerator of KM maturity related to strategy development involves analyzing the financial and other benefits your organization can expect from implementing the proposed KM tools and approaches. Although that may entail estimating a hard-dollar return on initial KM investments, it does not have to. But regardless of the nature of the benefits on which an organization focuses, your KM team must get specific about the projected impact (on productivity, quality, safety or other key performance indicators) and articulate a set of measures that can be tracked to compare reality against the forecast.

According to the assessment data, only 24 percent of organizations take that critical step. But those that do are paid back in spades in the form of reliable funding, leadership and business unit support, program resilience and return on investment (see Figure 3., page 20, KMWorld, Vol. 26, Issue 1, or DOWNLOAD CHART 3).

First, financial analysis and documentation of benefits almost guarantee the allocation of a KM budget, with 94 percent of organizations that perform those estimates receiving initial funding (compared to 34 percent of those that do not). Even more impressively, organizations that document KM benefits are over five times more likely to procure flexible KM budgets that expand in response to increased demand for knowledge assets and competencies. This relationship is logical because leaders are more prone to loosen their purse strings—and to be forthcoming with additional capital as needed—if they feel confident that their funds will yield tangible results.

A clearly articulated business case and projection of value are also instrumental in engaging and retaining business unit support. Among organizations that perform documentation of benefits, business units are more than four times more likely to allocate resources for KM capability and knowledge asset development, as well as a stunning eight times more likely to assume some ultimate accountability for knowledge flow processes and approaches. There is no more crucial enabler of KM sustainability than solid business unit backing. Your KM core team can only accomplish so much on its own, and without the business dedicating resources and assigning people to support KM processes and approaches, KM’s scope is destined to remain limited.

Solid business unit support goes hand in hand with opportunities to expand and enhance the KM program, so it is not surprising that financial analysis and documentation of benefits are statistically linked to outcomes. For example, KM groups that perform the analysis are over three times more likely both to enhance KM capabilities across business units or disciplines and to expand focus from initial areas to other areas of the business. They are also eight times more likely to be able to develop a formal business case for expanding KM to new domains based on predicted gains and impact to the organization.

But the most compelling reason to perform financial analysis and documentation of benefits is its strong link to return on investment. Although many KM programs achieve success without measuring ROI, those that rely purely on anecdotal evidence and success stories to justify KM investments may find themselves on shaky ground if the business environment changes or a more skeptical CEO takes the helm. Some clear measure of business impact—whether ROI or another outcome in keeping with the goals laid out in the KM strategy and roadmap—is required to ensure sustainable KM development over the long term.

Conducting financial analysis and documentation of benefits during KM strategy development is highly correlated with an ability to show that type of tangible result. Whereas only 15 percent of organizations can demonstrate ongoing evidence of business impact from their KM efforts, firms that estimate those benefits from the outset are seven times more likely to achieve that elusive goal than their counterparts who jump into KM implementations without analyzing the expected outcomes. KM programs reap what they sow, and those that establish clear milestones and measures of success upfront are much better positioned to substantiate claims of value down the road.