Improving the Deal through Knowledge Management

Knowledge management (KM) has been defined as "the process by which an organization creates, captures, acquires and uses knowledge to support and improve the performance of the organization" (Kinney, 1998). More and more companies are realizing that KM is essential to their long-term organizational effectiveness, because it deals directly with the creation and transfer of company information. Knowledge management is simply necessary to any organization that deals with documents and correspondence in any way and wants to tap into all the knowledge stored therein.

Due to the fast-paced and competitive nature of the investment banking industry, these organizations need to leverage knowledge collection and transfer in order to maintain a competitive advantage. The dealnegotiation process demands that organizations adopt an intuitive and customized workspace for investment bankers to leverage the organizational knowledge for faster deal closing and higher deal throughput.

In addition to the competitive element, the financial services industry is facing a demanding regulatory environment. KM addresses the knowledge capture and retention requirements placed on the industry. The best KM tools will provide a flexible easy-to-use interface that will not interfere with—but will increase—the efficiency of the investment banker.

What KM Can Do
KM helps organizations tap into and control the documents and information that are created throughout the deal-negotiation process. Deal-related content includes contracts, customer correspondence and due diligence. These documents possess the detailed information that the knowledge worker requires on a daily basis.

Knowledge management supports investment-banking teams by providing an integrated work environment to build relationships, win business, close deals and support post-transaction activities. Teams can work across multiple organizations, in multiple geographies and around the clock, resulting in faster and more deal closings. Customized workspaces provide a secure collaborative environment for internal and external participants to work together throughout the deal-negotiation process.

Supporting this process with KM tools provides a platform upon which organizations can create, manage and share documents associated with clients and deals. Investment banks can capture and secure deal-related client correspondence, leverage deal-management experience by repurposing knowledge, provide an executive overview of deal-related information and satisfy regulatory record retention requirements.

The biggest hurdle to the success of any solution is user adoption. If users do not accept the system and put information into the knowledge repository, the results will be flawed, and the data will not be harvested. Therefore the system must be intuitive and easy to use. A user interface must be customized to work the way deal teams work. The knowledge workspace is a tailored work environment in which each user sees different information and documents with different levels of access. The key is that the investment banker sees only what he/she needs to see and is given the tools with which to improve the efficiency of his/her work, without being overburdened by an excess of information.

Knowledge management can improve the efficiency of an organization. But if used incorrectly, the integrity of the knowledge can be compromised. Investment banks need to clearly structure the solution to ensure appropriate information is created, captured, acquired and used to support deal teams during the negotiation process. Further to this, organizations need to ensure system procedures are documented and users are trained appropriately, especially in such a fast-paced user environment.

Tailoring Knowledge Management
The capture and use of the organization's collective knowledge is important, but so is focusing on how people work and helping them to do their jobs more efficiently. In the case of deal-related KM, organizations should integrate available structured data with the unstructured content such as documents and e-mails. Deal teams are prompted to perform tasks based on activities from the transaction database and can access details about those tasks from their knowledge workspace. Employees only see the deals and transactions that have been allocated to them and are on their work list.

Investment bankers need the system to be flexible. One of the ways workers are afforded this flexibility is in the way knowledge can be saved to the knowledge repository. Documents and other dealrelated content can be created the following ways:

• Knowledge may be automatically imported from a transaction-based system; 
• Information may be imported from the desktop or shared file system;
• Documents and spreadsheets may be saved to the repository directly from the native application, and
• Content may be created from within the workspace by using templates or repurposing a previous piece of work.

The use of templates can help the organization ensure consistency for a document or set of documents.

Documents are obviously associated with deals, but they are also associated with one another. Therefore, ensure they inherit some of the properties of the deals, such as the deal name, the account identity, the account name, the system identity, the main business contact and the credit contact.

Searching for Knowledge
Search and retrieval capabilities are the strongest component of any knowledge management system. Organizations must offer user-flexibility in this area also. By providing tools that best suit the knowledge of the workers and the material they are looking for, optimum search results can be achieved. Different knowledge workers search in different ways. By providing structured searches that are tailored to the way a group of users work, users are able to find deal-related content faster and more easily. Giving users a free-text search option also provides users with a tool that yields more appropriate results to the needs of the user.

Organizations that get the most out of KM create reports that serve their business most effectively. Some practical examples include performance reports, status reports and time-related reports. Investment banks can monitor their organization performance using business intelligence tools and determine what areas need improvement.

Employing KM Throughout the Deal
Incorporating KM good practices helps organizations get the most out of KM and balance the demands of their clients with regulatory compliance and good governance. Using KM wisely supports the deal process and helps to:

1. Establish and build relationships. Deal management helps teams strengthen relationships with clients and solidify their role as a trusted advisor. Organizations capture and share the knowledge they have about their clients in the deal-management repository and are able to use that information throughout the relationship-building process.
2. Win more business. Deal teams can rapidly respond to opportunities. Rather than spend time managing the materials used to present and win the deal through a series of e-mail threads and fileservers, teams can work securely in a content-based collaboration environment.
3. Improve investment deal execution. Deal teams need to create filings, manage pricing, raise capital, govern negotiation and ensure closing. Knowledge management can provide a repository to collect, manage and store all of the required documents, including e-mail communications, involved in the execution of an investment deal.
4. Prepare post-transaction. The closing of the deal does not end the needs of the organization. Investment banks need to retain records, manage invoicing, create product/idea case studies and be prepared for client debriefs. Once the documents are finalized, they are saved as records according to the organization's retention schedule and in accordance with compliance requirements.

The ROI of Knowledge Management
The current and future role of KM in the financial services industry, like every other management paradigm, depends upon its ability to contribute to stakeholder value. There is not yet a great deal of substantive data available on how managing something as intangible as "knowledge" directly impacts the bottom line of a company. However, there is a large body of anecdotal evidence that suggests that managing knowledge in a systematic way matters and that it will continue to matter as long as organizations rely on:

• The ability of their employees to make good decisions;
• The ability of the organization as a whole to meet customers' needs more efficiently, with greater accuracy, and with better quality than its competitors; and 
• The ability to continuously innovate process and product to create new sources of shareholder value.

Investment banks leveraging KM throughout the deal negotiation process consistently report faster deal throughput and shorter deal cycles.

The key to corporate survival is knowledge —how to access it, create it, manage it and use it to produce innovative solutions for an increasingly sophisticated and demanding consumer. It plays a predominant role in defining the production and success of an organization, and managing these intangibles has been a primary competitive strategy in organizations around the world. Using sound KM practices, groups of users can create knowledge-centric workspaces around any line of business, but like many companies operating in increasingly competitive markets, financial services companies are recognizing the importance of managing knowledge in a predominantly knowledge-intensive industry. While there is a wide disparity of knowledgemanaging practices emerging in this industry, we can also find similar strategies, techniques and tools for growing and leveraging knowledge across the organization.

How Knowledge Management Helps
Every organization generates vast amounts of information while conducting business, yet few organizations are able to leverage it all to generate new opportunities or capitalize on collective knowledge assets. Millions of documents, e-mails, memos, charts and Web pages—not to mention the tacit information that employees possess—remain undiscovered and their potential untapped. Organizations that let such valuable information languish are in danger of missing competitive opportunities or even losing the information forever.

Knowledge management helps to link people looking for knowledge with those who have it. It focuses on capturing this information, whether it is explicitly held in a document or database or exists tacitly in the forms of knowledge and experience in the minds of employees. This tacit information is exceedingly hard to preserve. Industry analysts estimate that without knowledge management practices in place more than 80% of the information that employees have is lost to the organization.

Knowledge management can optimize on search, categorization and information retrieval capabilities to provide knowledge workers with fast, extremely precise results for queries against enterprise content repositories—no matter where that content resides.

For users, knowledge management can:

• reduce the time required to complete knowledge-intensive work; 
• increase the "trust level" in information accuracy and timeliness; and
• ease the burden on subject "experts," since users can get answers and guidance to their questions on a self-serve basis.

For organizations, knowledge management:

• improves ROI of knowledge asset management by reusing information instead of reinventing it;
• improves organizational agility, since product and service "time-to-innovation" can be cut with better, more reliable, more complete access to relevant information; and
• reduces cost of retaining intellectual capital and transmitting it to new employees or successors.

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Hummingbird Ltd. is a leading global provider of enterprise content management (ECM) solutions, enabling organizations to manage the lifecycle of enterprise content from creation to disposition. Hummingbird Enterprise™ solutions enable organizations to address critical business needs, such as information management, business continuity, compliance and risk mitigation. Please visit www.hummingbird.com.